Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining TORM plc Six Months Ended and Second Quarter 2022 Results Call. Throughout the recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Andreas Abildgaard-Hein, Head of Investor Relations. Please go ahead.

Thank you for dialing in, and welcome to TORM's conference call regarding the results for the second quarter and first half year of 2022. My name is Andreas Abildgaard-Hein, and I'm the Head of Investor Relations in TORM. As usual, we will refer to the slides as we speak. And at the end of the presentation, we will open-up for questions. Please turn to slide 2. Before commencing, I would like to draw your attention to the Safe Harbor statement. Please turn to slide 3. The results will be presented by Executive Director and CEO, Jacob Meldgaard; and CFO, Kim Balle. Please turn to slide 4. I will now hand the call over to Jacob.

Thanks a lot, Andreas, and good afternoon. Thank you all for dialing in. It's really a pleasure to be – to be here today. We have published our results for the second quarter of 2022. And here, let's get into it. We achieved an EBITDA of US$153 million, and in terms of profit before tax of US$107 million. The TCE across the fleet ended just shy of 30,000 at 29,622 per day. And here, as per the 14th of August, so that's last Friday, we have then faced two-thirds of the open days here in the third quarter of 2022 at even higher rates at 45,462 per day. Here, after the end of the second quarter of 2022, we purchased 75% of the shares in Marine Exhaust Technology, reached TORM’s ME Production. ME Production, they produce solutions to reduce air balloon in connection with Marine Transportation. And TORM – we have had an extensive historical relationship with ME Production, including joint ownership of a scrub production facility. Now by purchasing our majority part of ME production, we are acquiring 70 people with R&D and with production capabilities. And here, as we see it in a world of ongoing supply disruption, the acquisitions will help us to timely secure the sourcing of the important equipment that if needed for further optimization of our fleet. During last quarter, we announced that, we changed our distribution product policy. And today, I'm pleased to announce that TORM’s Board of Directors has approved dividend of $0.58 per share, and the distribution amount would be around $47 million, and this is in line with this new distribution policy. Lastly, here, in the introduction, I'd like to put some focus on TORM's ability to utilize now the strong second-hand prices to also divest and focus seven of…

Thank you, Jacob. As Jacob mentioned, we are seeing a continuous rate increase in the tanker market in the second quarter of 2022 with our TCE rates reaching $29,622 per day. Spot rates are just below $35,000 per day for the quarter, but due to our accounting principles, part of the revenue related to the increasing rates at the end of the quarter will be recognized after -- so far in the third quarter of 2022, we have seen a further increase in TCE rates per day, and we have now fixed 67% of our data at $45,462. Due to higher repair and maintenance costs, we saw an increase in our operating expenditures during the second quarter of 2022. However, for the first half of 2022 showed opening per day was at $6,325 compared to $6,652,day in 2021. Yes, we are at Slide 14 for your information. TORM’s admin costs in Q2 2022 was $4,500. So we will maintain our growth on cost optimization without advertising quality and customer polls -- the full year normalized EBITDA breakeven is expected to be around $8,600 per day. Please turn to Slide 15. TORM continues the strong performance with EBITDA for the first six months of 2022 being at $240 million. While there is the certain of our older vessel as Jacob mentioned in the beginning and having LR2 TORM has delivered. During the second quarter of 2022, net LTV increased to 43% due to an approximately 13% increase in vessel value compared to the first quarter of 2022 and strong cash generation from our operations. While CapEx commitments are limited. Our cash position is very solid. We are now planning to install a total of 58 scrubber on our fleet -- the investment in the eight business scrubbers will be around $16…

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] And our first question is from the line of Jon Chappell from Evercore. Please go ahead.

Thank you. Good afternoon.

Good afternoon Jon.

Hi. My first question, I'm trying to recalibrate slide 7 and 8. And on slide 7, you have the ton mile at the start of 2022 -- ton mile at start of 2023 with the 7% impact from the ban in Russian oil products. But then on the next slide, you say that really hasn't even started yet, and it won't really kick in until 2023. So is this 7% that you're incorporating within the start of 2022 to start of 2023 your estimate for the full impact of this recalibration in a pro forma manner, or are you saying there's a 7% impact this year? And then once the sanctions truly kick in, in February 2023, there's the potential to be even greater?

Yeah. Thanks for -- let me clarify that. So what we are trying to describe on slide 7 is exactly to your question is to illustrate what will be the full effect between January 2022 up until January 2023 of the trade recalibration. Our estimate is that out of 7% that we model up above 2% of this is already baked into this. So there's still more to come. And then the 3% additional is also over the year, the effect of the refinery dislocation and just demand growth.

Got it. Okay. That helps. And then my second question is a clarification and then a question off the back of it. In your release you note that, your six vessels that are held for sale at the end of 2Q 2022. But if I read the timing of the vessel-by-vessel, it looks like the Ingeborg, the Valborg, Gyda -- Gyda and Moselle, would be the four that hadn't been delivered as of 6/30 because the other four were delivered before the end of the quarter. So, I'm just trying to figure out those four and how that relates to six held for sale. And then the second part of that would be, does that either insinuate, or would you kind of confirm that at this part of the market, you're still looking to liquidate some of the legacy older vessels in your fleet?

You're absolutely correct in everything that you described. And so four vessels, the ones mentioned by you, have been sold. And then there are two vessels that we're constantly potentially telling that we -- in our books quoted as vessels for sale.

Okay. And then, I guess the final one would be after the two that you're contemplating for sale, how many over 12-year old vessels would be remaining in your fleet? And would you figure at some point in this upturn, you would contemplate kind of the completion of the modernization of the fleet?

That's a good one. I don't think that we are -- I can go back to you on how many over 12, but I think what we see as a useful lifetime of our assets is actually, as you can see from the way we put it is, on average, around 18 years. We don't really have a particular strategy to lower that, especially with the earning power that we foresee for all assets irrespective of age in the current environment.

Okay. Jacob, very helpful, as always. Thank you very much.

Thanks. Have a great day, Jonathan.

The next question is from the line of Richard Diamond from Castlewood Capital. Please go ahead.

Yes. Good afternoon. If someone were to order a new ship, which has a useful life of 18 years and take delivery in 2025, what would they use for a power plant? LNG is too expensive. Ammonia is too dangerous, and methanol has half the energy density of diesel. So you'd have to either build much larger ships [indiscernible] on ships or reduce the distances that ships would be able to travel. Do you have any thoughts?

Yes. Thanks for that question, Richard. I think my current instinct is that, as you point to, if you are an investor who decided upon, let's say, in 2025 to have an asset where the useful life time goes up until almost close to 2050. And we have, at this stage, no clarity on the future fuel as such. Of course, we can say that's probably going to be within the range of what you just described. I think the true investor would purchase a vessel that has a conventional engine type, i.e., ability to efficiently burn low sulfur or high sulfur fuel with a scrubber. But what you would want is for that engine to have the optionality and flexibility to be able to already now be retrofitted for other fuel types, for instance methanol or LNG or others. And then the problem comes, that retrofitting would come at a relatively high CapEx, because the CapEx with the transformation into other fuel types is not really with the engine itself, it is with the storage of the fuel and storing of sufficient fuel in order to make transshipping workable, how can I say, methodology for that asset. That's the way I think about it currently.

This is a follow-up question. So, the cost of such a ship would have to be 15% to 20% more and given potentially the shorter life, rates would be -- have to be substantially more expensive to justify the investment, am I thinking about it correctly? : Not necessarily. Probably your line of thought. I think the additional cost from what I just described is marginal because what I just described is really, we’re preparing to make the bigger investment at a later stage. So, you are actually just making a flexible engine. And that is possible with for instance, MIM that you have an sonic engine that can already be prepared with very little modification to use different types of energy. So out of the box, your additional cost is much more marginal higher than what you described. Then of course ultimately, you will need to make the storage tanks available on board the ships. And that is where you would have the ramp-up to the probably 20% is a fair estimation of that in the current environment.

Thank you very much

You’re welcome.

The next question is from the line of Anders Karlsen from Kepler Cheuvreux. Please go ahead.

Yes. I have a question in terms of term fixtures and your view on what levels would be enticing enough for you to start fixing our chips and whether or not you have fixed out any ships for longer-term charters during the quarter?

Yes. So, the answer to that question is that, there is more interest from the type of counterparties, which we would like to engagement today than what we saw let's say, when we had our Q1 result back in May, but we've still not been enticed to engage in that. I think some of the end users are only starting to look at strategically taking tonnage for let's say, three-year charts and it could be that it will be interesting in the time to come here to look at something like that. But we have not done any deal at this stage.

Okay. And do you have any -- if you were to start fixing, is there any limit to how much of your fleet you would fix out, or do you have any preference in terms of your spot contractor exposure?

No, I think it will depend on the liquidity in this term market is not at this stage, very high. So I think it would simply be the availability of the counterparts of sufficient quality as number one and to the other side. So I wouldn't put a particular figure. We don't have a strategy that we want to be spot, we just see that so far is the strategy that has generated the highest return to the company over time.

Yes. That's fair. Thank you.

So there are no more telephone questions at this time, and I hand back to Andreas Abildgaard-Hein.

Thank you. We have a few questions on the webcast. And the first one is for you, Kim. You mentioned that the gross profit for Q2 was almost $35,000 per day, which is higher than the TCE rate. So there's a question here. Can you please just clarify the difference between the spot rates and the TCE in rate?

Yes. Thank you, Nick [ph]. You're right on your comment that you will see that it is written on our Page 10 in the quarterly report with this spot. There was the spot on the TCE, but on top of that, our revenue recognition principles are what we call low to discharge. So that means that when we fix a voice fit with the third-party until we load it that is not recognized as revenue until we load the cargo. So in a scenario where you are at an end of a quarter, for instance, and you fixed on an increasing rate you have a high spot rate, but you will -- but you have full recognition or much of the recognition of that revenue in the coming months/quarter. So in the scenario we've been in the end of the Q2 quarter, we actually saw high degree of revenue going into the next quarter. So if it's there, it's just going into the next quarter, and then we don't know what will happen at the end of that quarter, but that's how the revenue recognition is. Hope that helps.

Thank you, Kim. And the question for you, Jacob, could you talk about the downturn in MR rates, we have been seeing on the recently with the TCE report. How sustained is that downturn? And does it change the downward TCE rate for MR as well?

I can try and talk into that. And what we've seen at least is that in the Atlantic Basin, MR rates ease somewhat. My overall impression is the same as I've described earlier in our presentation in the call is that we will have volatility when we are at these levels, small changes in demand supply leads to relatively high changes in the underlying freight rate, simply because we are so high out on the utilization curve. So we've seen that trend over the last couple of weeks that the rates are a little softer for MR in the Atlantic. The specific or as I believe, is just that there has been a little less number of cargoes coming out of some of the refineries is based on the US side, and that simply takes away just the top of the market. I don't think it's an underlying trend that will lead to changes in other sectors. And I don't think that it is a trend also now we've seen at the end of this market. But it's absolutely correct. They are currently in the western hemisphere, MR has trended down from the highest. It was actually so that just in the early part of August, we fixed an MR in the US, Gulf at around 80,000. And if you did the same voice today, you will probably get something around 30 to 35, that's high volatility, I would say, because as you all understand, nothing that has fundamentally changed in our market. So I think we're going to see this tendency to a very high volatility, continue I don't see it as something that will lead into the other sales.

Thank you, Jake, and a final question. What are the risks that the EU Russian embargos on Russian oil and oil products are missing ports?

Yes, that's a very good question. I think it's more for politicians and diplomacy to give the answer. But inside our thought is that let's just play out the war in Ukraine, comes to an end abruptly very, very soon. That could be my personal hook that suffering in Ukraine stops. And in turn what will then be the decision-making process in the EU around fixed sanction package and other sanctions on the regime in Russia. Personally, I can say that I would be disappointed if the war comes to an end and that we then see that we turn everything back to normality being as the world was before the 24th of February 2022. However, of course, that is something that politicians would be capable of deciding. That's not my intent that, that is the undercurrent when I listen to diplomats and politicians in the EU. But it is, of course, something that one should think about as a risk. I think it's unlikely.

Thank you, Jack. No further questions. So this concludes the earnings conference for the second quarter and first half year of 2022 results. Thank you for participating.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.