TORM (NASDAQ:TRMD) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Access the full call at https://events.q4inc.com/attendee/835507019
Summary
TORM reported a strong first quarter for 2026, with TCE revenue of $286 million and a net profit of $122 million, benefiting from firm freight rates and operational efficiencies.
The company increased its full-year guidance to TCE of $1.15 to $1.45 billion, driven by positive market conditions and solid earnings visibility.
TORM continued its fleet renewal strategy by acquiring six MR resale vessels, enhancing fleet flexibility and future earnings capacity.
Management highlighted the impact of geopolitical factors, including the closure of the Strait of Hormuz, which significantly disrupted global energy flows and elevated tanker rates.
The company declared a dividend payout ratio of 58%, impacted by a working capital build-up due to increased freight rates and bunker prices.
Full Transcript
Angela (Conference Operator)
thank you for standing by. My name is Angela and I will be your conference operator today. At this time I would like to welcome everyone to the TORM first quarter 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during that time, please simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. Thank you. I would now like to turn the call over to Mr. Jacob Melgard, CEO. You may begin.
Jacob Melgard (CEO)
Thank you and welcome to everyone joining us today. We started 2026 with a very strong first quarter, delivering results that demonstrate both the earnings power of our platform and the strength of our execution in a supportive freight market. This morning we released our Q1 2026 results and we are pleased with the performance. However, before I go into the details of the quarter, I would like to take a step back and briefly talk about TORM and the foundation that underpins these results then continues to differentiate us in the market. Again, our performance was driven by a combination of strong freight rates, disciplined execution and a one TORM platform. While we remain attentive to global developments, we continue to align ourselves with market changes and believe we have a unique ability to react quickly to movements in spot prices. This is something we are often asked about. The answer is that it represents a quantifiable advantage over our peers. What we refer to as the one TOM advantage. It is now embedded in the way we operate and is a capability our competitors would undoubtedly like to replicate. Importantly, this advantage is the result of a journey over many years journey that continues to evolve. We are able to track this across a range of performance indicators. For example, over a three year period, our MR Fleet generated TCE revenue that exceeded the peer average by approximately US$200million, reflecting the strength and efficiency of our operating model through higher utilization, disciplined cost control and strong commercial execution. This culture of operational excellence is supported by our centralized management platform that coordinates and accelerates our decision making. This is good news for our investors because it means we are now extremely well placed for the complex landscape ahead and we remain confident that the shifting sense of geopolitical uncertainty continue to to present opportunities for us. Thus, it’s no surprise to us that TORM Share are currently in focus among the investment community as a route to unlock value from this uncertainty. And now please to slide number four. As always, I’ll start with the key financial outcomes for the quarter to give you a clear picture of how the business is developing. During the first quarter we delivered TCE of US$286million, representing a clear continuation of the positive earnings trajectory seen over recent quarters. This was significantly higher than the same quarter last year, driven by consistently firm freight rates throughout the period, which strengthened further towards quarter end. These conditions reflect a value chain currently characterized by abnormal trade flows and structural inefficiencies, resulting in elevated margins not only for tanker companies like us, but also for our customers who are capturing strong profitability across the trading and refining segments. That such dynamic performance translated into an EBITDA of US$201million and a net profit of US$1,122 million, reflecting both the strength of the market environment and our ability to convert rates into earnings through disciplined commercial execution and operational leverage, supported by the continued strength we see across our markets and the solid momentum entering the remainder of the year. We are therefore increasing our full year guidance to US$1.15 to 1.45 billion, underscoring our confidence in sustaining profitable growth. Also, we continued active fleet renewal, adding younger secondhand vessels and committing further acquisitions while divesting older tonnage after quarter end. And we also agreed to acquire 6 MR Resales with expected delivery of 4 in 2027 and 2 in 2028. These acquisitions further enhance fleet flexibility and earnings capacity while preserving a prudent age profile. As of quarter end, our fleet consisted of 95 vessels. Once all the before mentioned transactions are completed, the fleet will increase to 103 vessels on a fully delivered basis. Please turn to slide 5 before moving to the broader market, let me briefly address our current operating status. Safety remains our highest priority. We currently have one vessel inside the Persian Gulf and I’m pleased to say that the crew are doing well, morale is high and provisions are not an issue. As we will describe on this call, the market impact has been significant, tightening effective supply and contributing to the sharp increase in freight rates. Bunker prices have also moved higher. Although availability remains secure throughout this period, our approach has been clear and unchanged. We take a safety first approach in all operating decisions. Please turn to Slide 7. Following a strong close to 2025, product tanker markets entered the first quarter of 2026 with rates stabilizing at levels well above historical averages. This strength was supported by broader momentum in the crude tanker market which benefited from record volumes of cargo underwater as well as a return of Venezuelan exports to the compliant fleet and generally more cautious use of sanctioned vessels globally. And on top of this, the development was further Supported by the consolidation of the ownership in the VLCC segment, the outbreak of the U S. Israel Iran war in late February and the subsequent closure of the Strait of Hormuz marked a further and unprecedented escalation in tangle rates. This is clearly reflected in our commercial performance with Q2 average bookings to date above 70,000 USD per day across vessel sizes. Taken together, these dynamics have created one of the strongest cross segment market environments we’ve seen in several years, underpinned by both structural and event driven factors and kindly turn to the next slide. Turn to slide 8 please. The closure of the Strait of Hormuz had an immediate and profound impact on global energy flows. Approximately 14% of global clean petroleum product volumes and around 30% of crude oil movements that would normally transit the Strait was certainly constrained. Combined, this correspond to approximately 20% of global daily oil production consumption. In scale and immediacy, this represents the largest oil supply disruption the market has ever experienced. On the clean product side, the impact was uneven. naphtha and jet fuel were disproportionately affected, reflecting the Persian Gulf’s central role in global exports, accounting for 37% of global naphtha exports and 21% of jet fuel. Under normal conditions, diesel and gasoline were relatively less exposed. As the next slide will show, only a fraction of these lost volumes have been replaced so far, underscoring how structural this shock has been. Please turn to slide 9. In crude markets, part of the lost Persian Gulf supply has been mitigated through pipeline redirection from Saudi Arabia and the UAE alongside increased flows from the Atlantic basin. However, reduced crude availability at Asian refineries has forced meaningful run costs, which in turn has sharply reduced clean petroleum product exports from the region. By the end of April, global clean petroleum product trade was down by roughly 16% as incremental supply from Western markets booked insufficient to offset the loss of Middle Eastern and Asian export crude oil trades saw a decline of similar magnitude. Despite this contraction in traded volumes, product tanker rates remained elevated. Some of this reflects longer replacement voyages and urgency premiums. But the more important explanation lies on the tonnage supply side, which I’ll address on the next slide. And here please turn to the next slide to slide 10. The closure of the Strait of Hormuz caused significant vessel dislocation, with more than 200 crude and product centers stranded inside the Persian Gulf. This equates to roughly 3% of the global product Sancter fleet and 6% of the crude fleet. As vessels were rerouted toward regions where with replacement volumes, we saw higher ballast Ratios and materially increased inefficiencies. In simple terms, ships spending more time sailing empty to reach the next Cargo in the Mr. Segment increased east to west balloting was partially offset by stronger west to east cargo flows as Asian product supply tightened. At the same time, we saw an unprecedented shift of LR2 vessels into crude trading, the so called dirty ops. By the end of April, the number of LR2s trading clean products had fallen by more than 50 vessels compared with the start of the year despite the delivery of 27 new buildings. As a result, effective CPP trading fee capacity declined by around 4% even before accounting for the vessels stranded in the Gulf. Please turn to slide 11. It is however important to recognize that this migration of LR2s into crude trading began well before the Strait of Hormuz closure. Since 2025, the Aframax and LR2 segments have faced extensive vessel sanctioning largely linked to Russian crude trades. In 2025 alone, more than 200 Aframax and other two vessels were sanctioned. This has created a growing disconnect between new building deliveries and effective fleet growth. Since the start of 2025, nominal product tanker capacity is up 8%. Yet the capacity actually trading clean today is around 4% lower. The scale of sanctions is noticeable. One in four vessels in the combined airframe max LR2 segment is currently under US, EU or UK sanctions. This comes on top of an already balanced order book due to the high share of older vessels. With 60% of the sanction fleet older than 20 years. The prospect of these ships returning to the mainstream …
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