Torm PLC

CSE:TRMD A

Earnings Call Transcript 2021-Q4

[Operator]

Ladies and

gentlemen,

thank

you

for

standing

by.

I'm

Natalie,

your

Chorus

Call

operator.

Welcome,

and

thank

you

for

joining

TORM

plc

Fourth

Quarter

2021

Results

Call.

Throughout

today's

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.

Please

go

ahead.

[Andreas Abildgaard-Hein]

Thank

you,

and

thank

you

for

dialing

in

and

welcome

to

TORM's

conference

call

regarding

the

results

for

fourth

quarter

of

2021.

My

name

is

Andreas

Abildgaard-Hein,

and

I

am

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'll

open

up

for

questions.

Please

turn

to

slide

2.

Before

commenting,

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

over

to

Jacob.

[Jacob Balslev Meldgaard]

Yeah.

Thank

you,

Andreas,

and

good

afternoon.

Thank

you

all

for

dialing

in.

I'm

pleased

to

be

here

today

as

we've

now

published

our

results

for

the

fourth

quarter

of

2021.

And

although

the

market

is

still

challenged

due

to

the

continued

stock

draws,

we

did

see

signs

of

the

market

recovery

already

here

in

the

fourth

quarter

of

2021,

and

we

ended

with

an

EBITDA

of

$42.9

million

and

we

had

a

loss

before

tax

of

$8

million.

The

return

on

invested

capital

ended

at

0.8%.

The

product

tanker

piece

here,

we

realized

an

average

TCE rate

of

close

to

$14,000

per

day.

Our

largest

segment,

the

MR

segment,

achieved

rates

of

$13,329

per

day,

whereas

LR1

and

LR2

segments

obtained

rates

above

$15,500

per

day.

Here

now

looking

into

the

first

quarter

of

this

year,

we've –

at

this

stage,

we've

seen

a

further

recovery

and

the

progress

we've

secured

is

around

$15,500

per

day.

And

here,

once

again,

we

have

outperformed

peers

in

the

largest

segment

in

the

MR.

Now,

earlier

part

of

this

year,

we

did

close

the

last

of

the

sale

and

leasebacks

of

nine

MRs

that

we

entered

into

late

in

Q3

last

year

on

attractive

terms

and

thereby

we

have

been

securing

a

solid

liquidity

base,

and

obviously

also

optionality

during

and

at

the

end

of

these

leasing

periods.

In

the

fourth

quarter

of

last

year,

we

also

increased

our

scrubber

commitment

to

57

scrubbers,

thereby

increasing

our

access

to

lower

fuel

prices

in

the

current,

quite

volatile

and

uncertain

market.

Now,

kindly

turn

to the

next

slide

to

slide

5.

The

product

tanker

market,

as

I

said,

remained

challenged

here

in

the

fourth

quarter.

Oil

supply

remained

insufficient

to

keep

pace

with

the

demand

recovery,

and

therefore,

logically,

inventories

continued

to

grow.

The

market

here

in

the

western

hemisphere

was

nil,

nevertheless

reported

by

US

Gulf

refiners

that

they

came

back

from –

after

the

outages

related

to

Hurricane

Ida,

and

it

also

coincides

with

strong

import

demand

from

South

America

and

West

Africa.

On

the

other

hand,

we

did

see

the

market

in the

eastern

hemisphere

were

negatively

affected

by

low

product

exports,

especially

from

China.

Here,

at

the

start

of

the

first

quarter,

we've

seen

that

there

was

a

disconnect

between

the

traditional

rates with LR

rates

especially

in

the

East

falling

actually

below

the

MR earnings,

and

this

mainly

reflects

that

there

has

been

a

lack

of

trade

on

the

traditional

interface

in LR routes

as

a

consequence

of

tight forward

balances

in

both

East

and

West,

while

what

we

experienced

on

the

MR rates

is

that

they

had

continued

support

from

robust

trade

flows

within

the

Atlantic

basin

and

also

with

port

flows

into

especially

Australia.

Slide 6,

please, clearly, we're looking at market that last week has been an extreme weak. And

when we look more at the current prices caused by the Russian inflation of Ukraine and the consequent sanctions on Russia,

this has increased uncertainty on

[indiscernible]

(00:05:35) there is a price of crude as we all can see to the highest level now in 14 years.

Now, sanctions themselves enforced so far by Western

countries are not directly targeting the oil trade, but the uncertainty and reluctance to transport

and

also to

trade

Russian

oil

has

sent the

crude

ranker freight

rates

in

the

European

market

to

the

highest level

seen

since

the

beginning

of

the

COVID-19 pandemic

back

in

spring

of 2020.

On

the

product tanker

market, we've

also now

over

the past

48

hours

started

to

see

increased

demand

for

middle

distillate

moving from

the

Middle

East

to

Europe

and

activity

in

the

US

Gulf

has

been

increasing

over

the

past

days.

So

right

now,

MR

earnings

have

climbed

in

the

US

above

$20,000

per

day,

and

in the

Middle

East, LR

rates

looked to

have

taken

a

step up

from

the

low

$10,000

per

day

to

around

$30,000 today

if

you

have

a

modern

scrubber fitted

vessel

in

the

trading window

right

now.

Giving

the

proximity

of

Russia

to

Europe, any

rerouting

of

trade flows is

most

likely

to

involve

oil

flows

over

longer

distances,

so

increasing

the

ton mile

demand

for

tankers.

For

example,

if

we

look at

Northwest

Europe

import

diesel

from

the

Middle

East

instead of

Russian

Baltic

ports,

it

would increase

the

ton

mile

for

the

same

amount of

fuel

by

around

3

times.

Obviously,

right

now,

the developments

are

unfolding.

There

is

a high

complexity

around

this

very

unfortunate situation.

It

is too

early

to

say

what

the

impact it

will be

in

the

medium

term,

but

right here

and

now,

clearly,

the

markets

are

up.

In light

of

the Russian

invasion

on

Ukraine,

we

have

decided

in

TORM

not

to enter

into

any

new

business that

involves Russian

ports and

we

have also

decided

not to

enter

into any

new

agreements

for

Russian accounts.

Please

turn

to

slide

7.

We've

been

discussing and

underlying for

some time

that artificially

low crude

oil supply

and

the resulting

inventory

drawdowns

have kept

tanker markets

rate

at

these subdued

levels throughout

the

past

18

months if

we

look

away

from

the

events

of

the

last

week.

The

recovery

in

global

oil

demand

has not

been

met by

a

corresponding

increase

in oil

supply,

and

this

has resulted

in

a

situation where

oil

inventories

have

simply

continued

to be

drawn

down and

in

some

regions

to levels

which

are

below

pre-COVID

lows.

With

seasonal

slowdown

in

oil

demand

at the

same

time

as

OPEC

continues

to

add

barrels

to

the

market,

the

supply

demand

balance

is

expected to turn

over

the first

quarter

of

this

year

if

we

assume

that

the

Russian

oil

output if

not

materially

affected

by

the

current

crisis.

Further, the Russian-Ukraine

crisis and

the

consequently record

high crude

oil price

reflecting oil

supply concerns

could

potentially also

accelerate

a

nuclear deal

with

Iran.

And

as

a

consequence,

up

to

1.3 million

barrels

per

day of

Iranian barrels

could

be

added

to

this

market, all

potentially

travelling

longer distances

than

any

lost

Russian

European oil

flows.

At

the

same

time,

the lifting

of sanctions

on

Iraq could

and,

in

our

opinion,

would

accelerate scrapping

of older crude

tonnage which

is

currently used

to

transport sanctioned

Iranian

crude,

hence

affecting

the

tonnage

supply

side positively

as

well.

You

may please

turn

to

the next

slide,

slide 8.

And

here,

let

me

sum up

the

main demand

drivers influencing

the tanker market.

We

can

see

that

significant

progress has

been

made

not

only

from

the

peak

of

the

COVID-19

crisis,

but

also

from

where

we stood

a

year

ago.

And

although in

many

cases we're

not back

to

pre-COVID-19

levels

yet,

the

outlook

for

the

next

12

months

indicates

further

improvements,

not

least

due

to

the

continuing

oil

demand

recovery. Although

at higher

oil

price,

this

environment could

potentially

destroy

some

of

the

demand that

we're

seeing if

prices

on

oil will continue

to

increase.

Now, in

addition

to

all

of

this,

OPEC

has

decided

and

are

continuously sticking

to

their

plan

of

increasing

the crude

supply,

and

we

expect

that

this

will

also support

global

refinery

runs

that

large in

the

coming

months. Here,

it

should

also

be

mentioned that

with

inventories

now

being drawn

down

to

these

low

levels,

they

need

to

be

built

up

again

at

some

point

and

which

then

will act

again

as a

tailwind

to

tanker

demand

in

addition

to

some

of

the

other

factors I

mentioned,

more normal

trade

flows

and

potentially

longer ton mile for

the

substitution of Russian

oil.

Please

turn

to

slide

9.

If

we

turn

to

a

more medium

and

long-term

demand

drivers,

the

COVID-19

pandemic

has accelerated

the

pace

of

refinery

closures

with more

than

2

million barrels

per

day

of

refining

capacity

already

having

closed

down

permanently

and

a

further

almost

0.5

million

is

scheduled to

close

down

during

this

year

and

the

next

year. On

top of

that, another

1

million

barrels

per

day

of

capacity

could

risk

being

shut down. Most

of

the

closed

capacity is

located

in

regions

which are

already large

importers of

refined oil

products

such as

Europe, US

West Coast, US East

Coast, Australia,

New

Zealand

and

South

Africa.

At

the

same

time,

more

than

4

million

barrels

per

day

of

new

capacity is scheduled

to

come

online,

mainly

in

the

Middle

East

and China,

regions which

already

today

are large

exporters

of

oil

products. Both

these developments

are positive

for

trade

flows

and

ton mile

in

the

coming years,

with

only

a

few projects

which

are

less

positive

for

trade.

Here,

Australia

is

a

good

example

of

a

country

where

two

out

of

the

four

refineries closed

down during

2021 and

refined

oil

products

export

for

the

year

averaged

already

13%

higher

than

in

2019

even

though

oil

demand in

the country

stayed

at

11%

below

the

2019

level

at

the

same

time.

And

here,

kindly turn

to

slide

10,

and just

for reference,

kindly utilize

the presentation

that

is

available

on

our

website,

rather

than the

presentation

going

live

here. And

in the

presentation

on

our

website,

please

turn

to

slide

10.

The

positive

outlook

for demand

for

product

tankers

in

the

next

three

to

five years coincides

with

the

supply

side,

which

is

the

most supportive

for

at

least the

past 25

years. With

record

high

newbuilding prices,

limited

shipyard

availability,

tanker

ordering

remains muted

here

in

the

fourth

quarter

of

2021.

Consequently,

the

order

book

to

fleet

ratio

for

product

tankers

is

continuously

at

a

historically

low

level

of

6%,

further supported

by

similarly

historically

low

7%

order

book

to

fleet

ratio

for

crude

tankers. Further,

we've

seen

surging scrap

prices.

This

has incentivized

scrapping

of

product

tankers

with

the highest

level

of

tonnage removed

from the

market

in

2021

since

2010.

These

two

drivers

support

the

case

of

a

very

modest

fleet

growth over

the

coming

two

to

three

years,

which

we

expect to

be around

2%

a

year,

only

half the

pace

seen

in

the

past

five

years.

Now, to

conclude

my

remarks here

on

the

product

tanker market,

we expect

volatility

on

the

market

now

to the

Russian

invasion in Ukraine,

with

the potential

for

ton

mile

increases

due

to

crude

and

oil

products trade

rerouting,

continuing

improvements

in

the

global

oil demand,

increasing

OPEC

supply,

as

well

as

the

need

to

rebuild

depleted

crude

and

product

inventories

support

the

tanker

market

here.

And

over

medium

and

long-term,

the

refinery

dislocations,

the

lower

order

book

add

an

extra

support

for

our

markets.

Slide

11.

Now,

looking

at

our commercial

performance here,

I'm

proud

that

once

again

TORM

has

outperformed

the

peer

average

in

26

out

of

the

last 28

quarters

in our

largest

segment, the

MRs,

and

here in

the

fourth quarter

of 2021,

we

achieved

rates

of

$13,929

per

day.

And

again,

I

can

only

congratulate everybody

on

the

One

TORM

platform

in

our

organization,

whether

on boat

or

ships

or

in

our

offices

that

we continue

to

deliver these

outperformance on

a

day-to-day

basis.

Please turn

to slide

12.

One

of

the

deciding

factors

for

us

when

we

are

achieving

our

above-average

[indiscernible]



(00:16:22) this

is

driven by

our

continued

focus

on

the

positioning

of

our

fleet

in

the

basins

where

we

have

the

highest

earning

potential. And

here

in

the fourth

quarter of

2021,

we

had

in

TORM

an

overweight

west

of

the

Suez, where

we

also

saw

an

outperformance when

looking

at

the

full

quarter.

Now,

with

that, let

me

hand it

over

to

you,

Kim,

further

elaboration here,

cost

structure,

the

liquidity

position

and

also

our balance sheet.

Over

to

you,

Kim.

[Kim Balle, Chief Financial Officer, TORM Plc]

Thank

you

very

much,

Jacob. So

please

turn

to

slide

13.

At

the end

of

2021, we

have,

as Jacob

mentioned,

seen

a

recovery

in

tanker

market with

rates

reaching

at just

below

$14,000

a

day

in

the fourth

quarter

of

2021 and

a

further

increase

going

into

Q1

of

2022, where

we

faced

85%

of

our

days

at

$15,559.

In

the

fourth quarter

2021 and

in

2021 – 2021 as

a

whole,

our

operating

expenses increased

mainly due

to

COVID-19-related

expenses.

So

when

we

correct

for

these

expenses, our

OpEx

was

slightly

lower than

the

pre-COVID-19

levels of

$6,354

a

day, compared

to $6,371

day

in

2019. We

will maintain

our

focus on

cost optimization

without jeopardizing

quality

and customer

focus.

Please

turn

to

slide 14.

Early

in 2022,

TORM

reached

the

largest

fleet ever

with

85

vessels

across

the

main

tanker

segments.

A

total

of

$320

million

was

invested

in

new

and

second

hand

vessels

in

2021, whereas

we

sold

one

vessel

which was delivered

to

the buyer

in

2021.

We

recently

sold

two

older

vessels

with

expected

delivery

in

the

first

half of

2022. They

were

sold at

attractive prices, so

our

expansion

of

the

fleet

was

done

while

maintaining

a

conservative debt

structure

and keeping

a

strong

cash

position. Early

in 2022,

we

ended

our

newbuilding

program by

taking

delivery

of

the

last

of

the

two

outstanding LR2

scrubber

fitted

vessels. So

we're now

ready

to

take advantage

of

a

potential

market

recovery.

Please

turn

to

slide

15. As

of

end

2021, TORM

has

available liquidity

of

$210 million,

cash

total

$172

million

and

we

have

on

top

of that

the

undrawn

credit facility

of $38

million.

The

total

cash

CapEx commitments

related to

our newbuildings

and scrubbers

were $48

million

as

of

31st

December, 2021.

With

a

strong

liquidity

profile,

the CapEx

commitments

are

fully funded

and

we

have

a

significant

liquidity

reserve.

Please

turn

to

slide

16. Looking

at

our

debt

maturity

profile,

we

have

no

major

refinancing

until

2026,

which combined

with

our

strong cash

position, provides

TORM

with

financial

and

strategic

flexibility

to

pursue

value enhancing

opportunities

in

the

market

should

they

occur.

At

this

stage, we

do

not

have any

major repayments

until

2026.

Further,

in

the

fourth

quarter

of

2021

and

in

early 2022,

we

have

increased our

interest

rate

hedges to

90%

in

the

coming

three

years

and

85% from

three

to five

years. Thereby,

we

have prudently

taking

out the

potential interest

rate

risk

caused

by the

increases we

have seen

in

inflation levels

recently.

Please

turn to

slide

17.

Regarding

metrics

such

as

net asset

value and

loan-to-value,

the

value of

TORM

vessels, including

newbuildings, was

approximately

$1.9

billion

by

the

end

of the

fourth quarter. Outstanding

gross

debt

amounted

to

$1.148

million –

$1.148

billion

as

of

31

December

2021. As

mentioned, TORM's

sale

and

leaseback of

nine MR

vessels

ended

up

adding

$74

million

to

the

outstanding

debt.

With

limited

committed

CapEx and

a

solid cash

position,

we

have

a

net

LCV

of

52%.

So

all-in-all,

we

have

a strong

and

attractive

price/debt

structure

with reputable

banks

and

leasing institutions,

and

we

have

hence

demonstrated

our strong

access

to diversified

funding

sources

in

the

market

and we

are very

satisfied

with

our debt

situation. The

net

asset

value

was

approximately

$1

billion

as

of 31

December 2021,

and

that corresponds

to

$12.5

or

DKK

82

per

share

or

Danish

krona

per share.

And

I just

think,

before

we

started

this call,

where

TORM share

is,

I'm

sure

you

all know

it

and follow

it

was

at

DKK

52.

But

I'm,

in

conclusion, pleased

that

our

conservative balance

sheet

supports

our

strategic

flexibility

as well

as

our

financial strength.

With

that,

I

will

let

the

operator open

up for

questions.

[Operator]

Ladies

and gentlemen,

at

this time,

we

will

begin

the

question-and-answer

session.

[Operator Instructions]



And

the

first

question

is

from

the

line

of

Jon

Chappell

from

Evercore.

Please

go

ahead.

[Jonathan Chappell, Analyst, Evercore ISI]

Thank

you.

Good

afternoon.

Jacob,

if

I

could

start

with

you kind

of

a

two-parter

on

the

market.

Want

to

re-ask

the

question

I

probably

asked

three

months

ago,

which

is

we

lay

out

such

a

favorable

inventory

situation,

such

a

favorable

supply

side,

demands

recovering,

OPEC's

producing,

just kind

of

your

views

on

why

we've

yet

to

see

a

eventless

increase,

a

substantial

increase

in

the

markets.

And

maybe

my

second

part

to

that

is,

it

is

noteworthy

to

me

that

you

called

out

Iran

and

OPEC,

the

Russian-Ukraine,

a

lot

of

things

that

impact

the

crude

markets.

So

do

you

feel

that

you

really

need

a

crude

market

recovery

before

the

product

or

even

at

the

same

time

as

a

product

tanker

recovery

or

can

one

do

better

without

the

other?

[Jacob Balslev Meldgaard]

Okay.

Thanks,

Jon,

and

good

morning.

So

I

think

we

probably

need

to

like

pretend

that

we

have

a

world

where

the

current

crisis

is

not

affecting

the

market.

We

fundamentally

are

sitting

last

Wednesday,

where

we

had

a

discussion

with

our

board

about

low

likelihood

of

a

worsening

crisis

in

Ukraine,

which

within

24

hours

after

that

discussion

proved

to

be

wrong.

But

let's

just –

if

we

pause

and

sort

of

set

the

time

there,

then

I

will

say

that

what

we

experienced

until

that

time

is

that

inventories

were

actually

still

growing

rather

than

building,

and

that

OPEC

were

under-delivering

on

the

needs

of

world.

And

clearly,

oil

prices,

even

without

Russian

invasion

of

Ukraine,

have

been

creeping

up

over

the

past

12

months,

of

course,

also

because

of

this

subdued

answer

in

terms

of

ramp

up

production

by

OPEC.

Now,

that

all

leads

me

to

that,

what

we

have

been

experiencing

is

that

crude

tankers

have

still

up

until

this,

let's

say,

week

ago

been

cannibalizing

into

the

product

tanker

space,

leading

also

to

what

I

described

before

around

you

actually

had

this

rather

unusual

situation

where

the

largest

ships

burning

significantly

below

in

the

spot

market

[indiscernible]



(00:24:27)

significantly

lower

than

MRs

also

because

of

this

cannibalization.

I

believe

that

fundamentally

we

need

that

situation

to

change

before

you

will

see

a

real

recovery

in

product

tanker

rates.

That

is

my instinct.

Now,

fast

forward

now

one

week

later,

the

world

has,

I

think,

dramatically

changed

because

the

whole

ecosystem

of

crude

and

also

refined

oil

price

is

right

now

under

change

because

of

that

[indiscernible]



(00:25:01)

oil

traders

and

end

users

in

general

are

taking

a

position

generally

to

be

very

careful

or

even

shying

away

from

trade

with

Russian

oil

and/or

transportation

of

the

same

oil

and

that

is

changing

the

landscape.

And

as

we

speak,

freight

rates

for

crude

tankers

have

been

going

up

and

it

is

also

spilling

into

our

segments, LR,

MR and

the

rate

environment

is

today

higher

than

what

we

have

seen

since

early

part

of

2020.

And

it

is

also

raising

the

forward

curve

significantly.

So

let's

say,

a

week

ago,

an

LR2

could

make

probably

$5,000

per

day.

Today,

what

is

being

discussed

is

a

rate

environment

in

the

low-20s.

And

if

you

add

the

scrubber

premium,

which

is

clearly

going

up

and

is

probably

around

$8,000

on

LR2

today,

then

you

add

$30

and

it

was

$5.

So

it's

a

significant

step

change.

[Jonathan Chappell, Analyst, Evercore ISI]

Yeah.

That's

true.

On

that

scrubber

premium,

you're

right,

that's

something

that

some

good

optionality.

Super

quick

one

for

you,

Kim,

I

was

looking

at

the

debt

repayment

schedule

on

slide 16.

The

$188 million

kind

of

stood

out

to

me.

So

I

went

back

to look

at

your third

quarter

presentation

and it

was

only

$133

million,

so it's up

$55

million

for

this

year,

$12

million

of

that

is

the

lease

financing,

which

makes

sense,

given

the

closing

of

the

remainder

of

the

sale

and leaseback

transaction,

but

the

debt –

mortgage

debt

went

up

about

$33

million

as

well. What

was

the

reason

for

that

kind

of

reset

of

the

repayment

profile

in

this

year?

[Kim Balle, Chief Financial Officer, TORM Plc]

Yeah. You are sharp

as

always,

Jon.

It

is

–

we

simply –

we

have

the RCF

that

we

had

undrawn

and

we

simply

just draw

it,

it

is

basically

equal

to

cash,

but

we

decided

to

draw

it.

So

it

is

cash

at

hand

and

we

can

have

it

there

or

we

can

redeem

the

RCF

once

again.

So

that's

the

reason.

[Jonathan Chappell, Analyst, Evercore ISI]

Okay.

And

then

just

the

final one,

if

I

can

slip

one

more

in,

you

announced

two

more

vessel

sales,

it

makes

sense,

asset

values

keep

going

up

while

the

market

remains

relatively

nailed

to

the

bottom.

Any

more

thoughts

of

kind

of

playing

that

asset

arb

so

to

speak

monetizing

today

with

probably

some

of the

older

vessels

before

the

rate

environment

kind of

takes

off?

[Kim Balle, Chief Financial Officer, TORM Plc]

Yeah.

Good

point

again,

and

we

would

subscribe

to

that,

currently

that

arb

is

open

and

then

we

are

pursuing

a

couple

of

similar

deals

like

the

ones

we've

just

done,

so

yeah,

that

is

definitely

high

on

the

agenda.

[Jonathan Chappell, Analyst, Evercore ISI]

Okay,

great.

Thank

you,

Jacob.

Thanks,

Kim.

[Kim Balle, Chief Financial Officer, TORM Plc]

Thanks.

Have

a

good

day.

[Jacob Balslev Meldgaard]

Thank you.

[Operator]

The

next

question

is

from

the line

of

Anders

Karlsen

from

Kepler

Cheuvreux.

Please

go

ahead.

[Anders Redigh Karlsen, Analyst, Kepler Cheuvreux]

Yes,

good

afternoon,

gentlemen.

Just

a

little

bit

back

to

the

market.

I

mean,

rate

levels

are

moving

up,

but

are

you

seeing

actual

fixtures

yet

or

is

it

just hearsay

numbers?

[Jacob Balslev Meldgaard]

So

in

the

clean,

that's

a

good

question,

and

as

I

say,

it's –

it

has

already

proved

to

be

real

fixtures,

especially

in

the

crude

Aframax

segments.

And

there

we

are

seeing

elevated

fixtures

being

concluded,

of

course,

also

in

the

lager

segments

in

Suez

and

[indiscernible]



(00:28:46).

But

so

far,

this

is

what

is

driving

up

also

the LR2

rates

that

is

being

quoted.

But

it

is

within

the

last

24

to

48

hours,

so

it's

pretty

new.

Let's

see

where

it

settles.

But

there

is

a

strong

push

on

rates

being

quoted

right

now,

but

nothing

concluded.

[Anders Redigh Karlsen, Analyst, Kepler Cheuvreux]

Okay.

All

right

that

is

interesting.

In

terms

of

– if –

and

I don't

know

this

is,

ifs

and

when

and

how

things changes

every

moment,

but

now

if

you

were

to

replace

the

Russian

use

of

volumes

to

Europe,

is

there

sufficient

capacity

in

other

regions

to

fully

replace

that

on

a

quick

note

or

do

you

think

there

is

going

to

be

a

time

lag to do

so?

[Jacob Balslev Meldgaard]

Yeah.

So

that

is

a

very

good

question

that

we

are

also

obviously

looking

into

because

for

the

refined –

or

Russia,

the

impact

on

Russian

oil

is,

A,

crude

and

then,

B,

diesel.

And

we

would

say

that

Russia

would

need

to

find

new

markets

for

the

products

that

they

are

currently

exporting

into

Europe

and,

let's

say,

the

countries

that

are

currently

shying

away.

So

if

I

take

it

in

a

simple

manner,

if

we

start

with

crude,

clearly,

today

the

biggest

buyer

of

crude

from

Russia,

one

of

the

biggest is

China.

And

you

could

expect

what

we're

seeing

is

China

is

publicly

articulating

that

they

will

not

put

sanctions

on

Russia.

They

have

also

taken

some

of

the

Russian

controlled

tonnage

on

[indiscernible]



(00:30:49)

clearly

signaling

that

they

will

continue

the

trade

flow

on

crude

between

Russia

and

China.

And

I

think

that

there

is

a

relatively

high

likelihood

that

it

will

increase

from

what

it

was

a

week

ago.

There's

nothing

that

would

indicate

anything

different.

Then

the

question

is

obviously

what

will

happen

then

with

the

volumes

of

diesel

that

is

currently

produced

in

Russia

and

being

exported

to

Europe?

What

is

the

new

home?

And

I

don't

have

the

answer

yet,

but

our

opinion

would

be

that

some

of

it

would

flow

to

South

America,

and

other

part

of

it

would

flow

to

West

Africa.

And

that

would

sort

of

make

room

for

other

diesel

volumes

that

would

normally

go

into

those

areas

to

then

go

into

Europe.

For

instance,

US

volumes

that

would

no

longer

go

to

South

America

or

West

Africa,

but

they

would

be

incentivized

to

sell

into

Europe,

to

have

a

redistribution

with

longer

ton

mile

of

the

same

volumes.

That's

our

main

– that's

how

we

think

that

it

could

play

out.

[indiscernible]



(00:32:04)

that

Russian

refiners

are

no

longer

producing,

I

don't

think

that

is

– that

seems

to

be

somewhere

down

the

road

because

it's

not

in

their –

I

mean,

their

motivation

would

clearly

be

even

if

they

need

to

sell

at

a

discount

to

other

market

participants

would

be

to

continue

the

flow.

[Anders Redigh Karlsen, Analyst, Kepler Cheuvreux]

Yeah.

All

right.

I

think

it's

along

the

lines,

thing

myself. So

one

last

question,

it's

on

the

refinery

shutdowns.

You're

not

listing

any

refinery

shutdowns

in

China,

but

my

understanding

is

that

some

of

the new

refineries

may

replace some of

the

old

ones,

and

is that in

line with

your

thinking

or do

you

think

it's

just

going

to be

all

refiners

are

going

to continue

as

they

do

today?

[Jacob Balslev Meldgaard]

Yeah.

Good

point.

So

the

way

we

have

described

it,

rather

than

having

the

gross

new

and

the

gloss

closure,

we

have

netted

it

out

in

the

description

that

we

have

on

this

slide.

So

you

see

there

that

we

have

said

that

the

refinery

additions

for

the

year

2022-2023

in

China

is

about

1

million

barrels

per

day,

and

that

is

net.

So

there

you

have

more

additions,

but

you

also

have

closures.

So

that's

the

net

addition.

[Anders Redigh Karlsen, Analyst, Kepler Cheuvreux]

Okay.

Thank

you.

That's

all

from

me.

[Jacob Balslev Meldgaard]

Thank

you very

much.

[Kim Balle, Chief Financial Officer, TORM Plc]

Thanks.

[Jacob Balslev Meldgaard]

Good

questions.

Let's

see

where

it

ends.

[Operator Instructions]

[Operator]

The

next

question

is

from

the

line

of

[indiscernible]



(00:33:52).

Please

go

ahead.

Good

morning.

You

conducted

several

acquisitions

during

2021.

So

could

you

provide

some

commentary

on

your

appetite

to

continue

expanding

the

fleet?

Are

you

seeing

any

attractive

opportunities?

[Jacob Balslev Meldgaard]

Yes.

We

are

constantly,

obviously,

following

the

opportunities

that

is

in

the

market

and

let's

see.

It's

a

very

volatile

market

that

we

have

entered

into.

So

time

will

tell,

but

we

are

always

open

for

the

type

of

opportunities

that

we

saw

last

year.

So,

one,

as

you

point

to,

we

did

a

share-based

transaction

to

acquire

chemical

tankers

from –

in

cooperation

with

TEAM

Tankers

and,

B,

we

did

enter

into

an

agreement

to

buy

not

new,

but

relatively

new

tonnage

in

the

LR2

segment.

So

these

type

of

deals

would

be

examples

of

some

that

we

are

still

interested

in

adding

to

the

portfolio.

I

have

nothing

concrete

at

this

stage.

All

right,

makes

sense.

The

current

environment

is

exacerbating

the

positive

impact

[indiscernible]



(00:35:04)

scrubbers

had

a

relative

performance,

what

kind

of

premium

are

you

able

to

secure

in

your

moderns

assets

versus

the

older

ones?

And

regarding

Q1

guidance,

could

you

approximately

quantify

the

positive

effect

of

scrubbers?

[Jacob Balslev Meldgaard]

Yeah.

So, A, on the

modern

versus

old,

actually

we

have

old

tonnage

in

our

fleet

that

have

scrubber

where

the

economics

is

the

same

as

a

modern

vessel.

So

I'm

not

really

seeing

a

discrepancy

in

terms

of

this

–

it's

more

of

the

characteristics

around

cubic

and

other

things

relative

to

whether

it

is

young

or

old

that

is

dictating

the

earning

potential.

Now

on

the

scrubber

currently,

as

I

mentioned,

the

scrubber

premium

right

now

in

Singapore,

the spread

is

close

to

$300

on –

between

high

sulfur

and

low

sulfur.

This

is

only

at

the

very

beginning

of

the

IMO

2020

implementation

back

in

the

early

part

of

2020

that we

have

seen

this.

And

if

you

use

that

as

your

calculation,

then

we

estimate

that

LR2s

are

currently

right

now

in

that

area

of

the

world

having

benefit

of

around

$7,000

to

$8,000

and LR1

$5,000

to

$6,000

and

MR

$3,000

to

$4,000

higher

earning

potential.

But

this

is

very

lately

that

we

have

seen

this,

only

over

the

past

week

has

the

level

gone

to

that.

Great.

That's

helpful.

And

final

question

from

me,

you

have

a

dividend

policy

of

distributing

25%

to

50%

of

net

income

as

dividends.

But

as

you

outlined

TORM is trading

at

a

substantial

discount

to net asset

value.

Are

share

repurchases

something

you

would

consider

in

the

current

environment?

[Jacob Balslev Meldgaard]

No,

so, we

are

not

contemplating

share

repurchases

at

the

world

is

right

now

that

has

not

been

part

of

our

discussions

internally.

All

right.

That's

all

for

me.

Thank

you

for

taking

my

questions.

[Jacob Balslev Meldgaard]

Thank

you

very much.

Have

a

good

day.

[Operator]

There

are

no

further questions

at

this

time.

I

would

like

to

hand

back to Andreas

Abildgaard-Hein

for

closing

comments.

[Andreas Abildgaard-Hein]

Thank

you.

We

have

one

more

question

on

the

webcast

from Danske

Bank, Håvard Sjursen. It's for you, Kim, can

you

comment

on

the

sales

price

of

the

two

vessels

you

have

sold

and

the

net

cash

effect?

[Kim Balle, Chief Financial Officer, TORM Plc]

The

two

divestments

we've

made

is

part

of our

ordinary

replenishment

focus.

So

it's

older

vessels,

one

handy,

one

of

them

a

handy

that

we

have

divested.

We

do

not

usually

comment

on

the

precise

price

that

we

have

sold

them

for.

But

our

reference

point

is,

of

course,

the

recent

values –

market

values

of

the

vessels

and

we

are

very

satisfied.

Regarding

proceeds,

net

proceeds,

net

liquidity

additions,

I

can

disclose

there

that

it's

in

the

level

of

$13.5

million.

[Andreas Abildgaard-Hein]

Thank

you, Kim.

[Andreas Abildgaard-Hein]

There

are

no

further

questions, so

this

concludes

the

earnings

conference

call

for

the

fourth

quarter

2021

results.

TORM's

annual

report

will

be

released

on

23rd

of

March

2022.

Thank

you

for

participating.

[Operator]

Ladies

and

gentlemen,

the

conference

is

now

concluded.

You

may

disconnect

the

telephone.

Thank

you

for

joining

and

have

a

pleasant

day.

Goodbye.