DHT Holdings, Inc. (NYSE: DHT) announced in its Q3 2024 earnings call robust financial results, with CFO Laila Halvorsen reporting revenues of $92.6 million, EBITDA of $70.4 million, and a net income of $35.2 million, equating to $0.22 per share. The company's balance sheet remains solid with a financial leverage of 17.6% and total liquidity of $264 million. DHT also declared its 59th consecutive quarterly cash dividend of $0.22 per share.
Key Takeaways
- DHT Holdings reported strong Q3 2024 earnings with revenues of $92.6 million and net income of $35.2 million.
- The company maintains a robust balance sheet and will distribute a quarterly cash dividend of $0.22 per share.
- Average Time Charter Equivalent (TCE) rates for spot market vessels under 15 years reached $52,800 per day.
- President and CEO Svein Moxnes Harfjeld discussed stable ship values and the potential for market recovery driven by policy changes in China and the U.S.
- Fleet modernization plans include divesting older ships and scheduling new builds for early 2026.
Company Outlook
- The estimated P&L break-even for the fleet in 2025 is $26,500 per day, with a cash break-even of $20,000 per day.
- DHT is focused on maintaining strong customer relations, competitive cost structure, and robust cash flow management.
Bearish Highlights
- Limited activity in the tanker sale and purchase market has been observed.
- The Russia-Ukraine conflict has negatively impacted Very Large Crude Carriers (VLCCs) relative to smaller tankers.
Bullish Highlights
- Anticipated economic policy changes in China and the U.S. could increase oil demand and positively impact freight markets.
- The company is confident in asset values, citing low acquisition costs and attractive time charter rates.
Misses
- There was no mention of any specific misses or underperformance in the earnings call.
Q&A Highlights
- Harfjeld addressed the limited risk posed by the shadow fleet due to older ships lacking approvals and insurance.
- Developments concerning Iran and a potential peace deal in the Russia-Ukraine conflict could positively affect the market, though Europe may be slow to resume Russian oil imports.
In summary, DHT Holdings presented a strong financial picture during its third-quarter earnings call, emphasizing its consistent dividend payments and a healthy balance sheet. The company's outlook remains cautiously optimistic, with plans to modernize its fleet and capitalize on potential market recoveries. Despite current geopolitical challenges, DHT's leadership expressed confidence in the resilience and future prospects of the tanker market.
InvestingPro Insights
DHT Holdings' strong financial performance in Q3 2024 is further supported by data from InvestingPro. The company's market capitalization stands at $1.74 billion, reflecting its significant presence in the tanker market. DHT's P/E ratio of 10.91 suggests that the stock may be undervalued compared to its earnings, which aligns with the company's robust financial results reported in the earnings call.
One of the most striking metrics is DHT's impressive dividend yield of 10.09%, which underscores the company's commitment to shareholder returns. This is consistent with the announcement of the 59th consecutive quarterly cash dividend mentioned in the earnings call. An InvestingPro Tip highlights that DHT "Pays a significant dividend to shareholders" and has "maintained dividend payments for 17 consecutive years," reinforcing the company's strong track record of rewarding investors.
The company's profitability is evident from its EBITDA of $293.15 million over the last twelve months, with an EBITDA growth of 1.74%. This aligns with the positive financial results discussed in the earnings call, including the reported EBITDA of $70.4 million for Q3 2024.
Another InvestingPro Tip notes that DHT "Operates with a moderate level of debt," which is consistent with the company's reported financial leverage of 17.6% and strong liquidity position. This prudent financial management supports DHT's ability to navigate market fluctuations and invest in fleet modernization as outlined in their strategic plans.
For investors seeking more comprehensive insights, InvestingPro offers additional tips and analysis. Currently, there are 11 more InvestingPro Tips available for DHT Holdings, providing a deeper understanding of the company's financial health and market position.
Full transcript - DHT Holdings Inc (NYSE:DHT) Q3 2024:
Operator: Good day, and thank you for standing by. Welcome to the Q3 2024 DHT Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, CFO, Laila Halvorsen. Please go ahead.
Laila C. Halvorsen: Thank you. Good morning and good afternoon, everyone. Welcome and thank you for joining DHT Holdings' third quarter 2024 earnings call. I am joined by DHT's President and CEO, Svein Moxnes Harfjeld. As usual, we will go through the financials and some highlights, before we open up for your questions. The link to the slide deck can be found on our website, dhtankers.com. Before we get started with today's call, I would like to make the following remarks. A replay of this conference call will be available on our website, dhtankers.com, until November 20th. In addition, our earnings press release will be available on our website and on the SEC EDGAR system, as an exhibit to our Form 6-K. As a reminder, on this conference call, we will discuss matters that are forward-looking in nature. These forward looking statements are based on our current expectations about future events as detailed in our financial report. Actual results may differ materially from the expectations reflected in these forward-looking statements. We urge you to read our periodic reports available on our website and on the SEC EDGAR system, including the risk factors in these reports for more information regarding risks that we face. As usual we will start the presentation with some financial highlights. Our balance sheet remains in excellent health with low leverage and significant liquidity. At quarter end financial leverage was 17.6% based on marked values for the shifts and net debt was 13.9 million per vessel very below estimated residual shift values. The third quarter ended with total liquidity of 264 million consisting of 74 million in cash and 190 million available under our revolving credit facilities. Now, over to the P&L. We are pleased with the results for the quarter. We achieved revenues on TCE basis of 92.6 million and EBITDA of 70.4 million. Net income came in at 35.2 million equal to $0.22 per share. Vessel operating expenses for the quarter were 19 million and G&A for the quarter was 4.2 million. For the third quarter, the average TCE for all vessels in the spot market was $43,700 per day or less spot vessels under 15 years of age achieved earnings of $47,600 per day. The vessels on time charters made $38,800 per day while the average combined TCE achieved for the quarter was $42,400 per day. Net income for the first nine months of 2024 was 126.7 million equal to $0.78 per share. For the first nine months, our spot vessels achieved $50,100 per day while the average combined TCE came in at $47,400 per day. The spot vessels under 15 years of age achieved earnings of $52,800 per day for the first nine months. And now over to the cash flow, the cash flow for the third quarter of 2024 was stable and we started the quarter with 73 million in cash. We generated 70 million in EBITDA, ordinary debt repayment and cash interest amounted to 15 million and 43.6 million was allocated to shareholders through cash dividend, while 2 million was used for maintenance CAPEX. We paid second installments for two of the new buildings amounting to 25.8 million, while 15.3 million was related to positive changes in working capital and the quarter ended with 74 million in cash. Switching to capital allocation. DHT has a well-defined capital allocation policy and in line with our policy, we will pay $0.22 per share as a quarterly cash dividend equal to 100% of ordinary net income. The dividend will be payable on November 29th to shareholders of record as of November 22nd. This marks the 59th consecutive quarterly cash dividend and the shares will trade ex-dividend from November 22nd. On the left side of this slide, we present an update on estimated P&L and cash break-even rates for 2025. P&L break-even for the full year is estimated to 26,500 per day for the fleet, while the cash break-even is estimated to 20,000 per day with a projected $6,500 per day per ship in discretionary cash flow of the dividend. So assuming the vessel's own P&L break even, this means about $56.5 million in discretionary cash flow for the year. On the right side of the slide, we illustrate the quarterly cash dividend we have returned to shareholders since we updated the dividend policy in the second half of 2022. This amounts to a total of $2.19 per share. And with that, I will turn the call over to Svein.
Svein Moxnes Harfjeld: Thank you, Laila. Following up on Laila's capital allocation slide, we here present an overview on how our balance sheet has developed over the past 10 years in combination with accumulated quarterly cash dividends we have paid for the same period. Importantly, the company has also invested in its fleet in this period, including new buildings, second hand acquisitions, and an exhaust gas cleaning system program for the entire fleet. Sale for the ships [ph] for shares transaction in 2017 when we acquired BW's VLCC fleet, which proved to be an excellent investment. We have not issued equity in the market since the fall of 2014. The leverage level is illustrated by the yellow line and measured in percentage of book values. It was 48% at the start of this period and went up to the mid-50s in 2018, following the mentioned fleet expansion in 2017. The general freight market in 2020 enabled us to reduce the debt level by about half to some 28%. The green bars present the accumulated quarterly cash dividends for each year in which the quarterly cash dividend was paid. Again, you will note that 2020 was a generous year, with substantial profits resulting in significant dividends. Stating the obvious, we paid out significant dividends and invested in the balance sheet at the same time. Over the 10-year period, we have paid out a total of $750 million in quarterly cash dividends. The last two periods, 2023 and 2024 year-to-date illustrates how the present capital allocation policy implemented during the fall of 2022, with 100% of ordinary net income being paid in quarterly cash dividends has played out. Here with the updated bookings to date for the fourth quarter for the company. We expect to have 596 time charter days covered for the fourth quarter at $40,000 per day. This rate assumes the base rate and profit sharing for October and November for the two time charter contracts that have this feature and the base rate only for December. We assume 1,610 spot days in this quarter, of which 64% have been booked at an average rate of $41,000 per day. Our ships that are younger than 15 years of age have been booked at 44,800 per day. You will note that we have improved the rates on the bookings when compared to our business update on October 9th, an excellent effort from the DHT team given the general market softened during this period. The spot P&L breakeven for the quarter is estimated at $21,500 per day, a number that should assist in estimating the net income contribution from our spot fleet. Now some market commentary. Everyone is of course waiting for the seasonal upturn. We note that during the last two years, the first quarter offered the highest rates. Chinese economic growth and oil demand have year-to-date not met projections. While China is deploying various inducements to its economy, we are yet to see whatever it takes levels of economic policy changes and stimuli. The stimuli announced last week focused on resolving debt levels. It did not address a needed boost consumption. Chinese officials indicated that the next step would be significant and endeavor to amongst others address lackluster consumption. It has been suggested that China will, to some extent, seek to tailor the next step in response to anticipated policies to be implemented by the incoming Trump administration. As the world's second largest economy, we do think it's reasonable to expect efforts from China, which should revitalize the economy and lead to increased consumption, including an uptick in oil demand. The result of the U.S. election leads us to expect certain policy changes that we think will be constructive for our business. Tightening of Iranian sanctions that should reimpose pressure on Iranian oil exports, barrels that could be replaced by other Middle Eastern producers. Should this play out the transportation work which shifts from the shadow fleet to the compliant fleet. Reversal of current de-carbonization regulations implying higher medium-term demand for fossil fuels in general towards 2030. And pro-drilling policies should further stimulate U.S. production growth and exports. By restraining production, OPEC Plus aims to balance the market and support prices, especially in the face of increasing competition from Atlantic Basin producers. This strategy also includes targeting Asian customers' inventory levels of crude oil below the five-year average, creating a tighter market for when economic conditions improve. However, limited transparency in China's crude oil inventory data complicates assessment of actual levels. If Chinese inventories are indeed low as indicated and as vessel inventories are relatively higher than in Asia, one should expect Atlantic-based barrels to increasingly go east. Additionally, recovering refinery margins in Asia in combination with increasing Chinese crude oil import quotas heading into next year should shift the dynamics in favor of a stronger freight markets. Based on positive feedback and encouragement from our key stakeholders, namely shareholders, customers and lending banks, we believe we have an appropriate strategy tailored to the structure of our markets, focusing on solid customer relations, offering safe and reliable services, maintaining a competitive cost structure with robust cash breakeven levels, a solid balance sheet, and a clear capital allocation policy. The whole DHT team appreciates the encouragement, and continues to work hard and operate with leading government standards and a high level of integrity. And with that, operator, I'll turn it over to you.
Operator: Thank you. [Operator Instructions]. And your first question comes from the line of Frode Mørkedal from Clarksons Securities. Please go ahead.
Frode Mørkedal: Thank you. Hi Svein, I wanted to ask you about what you see in the physical sale and purchase market. Secondhand value specifically and the reason for asking is when I look at the stock price developments, given huge discounts to NAVs, the stock market seems to be factoring in quite a large decline to ship values. So basically what are you seeing actually happening in the market today?
Svein Moxnes Harfjeld: There's very limited activity to be frank. So the last sort of transaction we have for modern ships was when Marinakis, a Greek ship owner sold its fleet to Bahri, the ship-owning arm of Saudi Aramco (TADAWUL:2222). And that transaction was, for what we know or expect, was around $1 billion, which would sort of price the five-year-old ship at around $114 million, $115 million, $116 million, depending on how you sort of differentiate the different age groups. So since then, no sort of modern ships have changed hands and no real sellers out there either. I'm not so sure that, that many buyers at those levels also, but there could be a couple out there. So -- but I think in general, the people that sit on these assets, they own them with very low acquisition costs and they are also very constructive on the market. So I don't think there's a reason for those sort of -- those prices to change meaningfully. What could change that, of course, if people really lost faith in freight market, but I don't think there's any reason to do that. In the older end, say ships that are between 15 and 20, it's a bit sideways, I would say. You had a 2007 built ship sold some 10 days ago at about 45. This was a Japanese seller, shipped without scrubber. So a ship of similar vintage with scrubber 2007 built should probably then be worth 48, just bigger number. In between that, it's a long time since we've seen any transactions. And again, there are limited proper ships on offer. Again, I think supporting the statement that people are constructive or at least holding out for what is expected. Time charter rates are also quite attractive. So the alternative, I think, for at least some of those systems and of course to secure time charter contracts for years, to buy time if they want to sell at a later point in time.
Frode Mørkedal: Okay. That's good color. Good to hear. The second question is you mentioned a lot of good supporting factors on the, let's say, supply/demand picture here. But what do you think about inventory buildup, we've been through like a fairly steep backward dated market. Now it seems more flattish, and people expect will come back to a contango [ph] situation quite soon, right, so what is the impact on the tanker market from that developments in year-over-year?
Svein Moxnes Harfjeld: I think when you look at inventory levels, the levels in OSCD is a bit different to some of the key economies in Asia. So -- but there's more data available on OSCD and then, of course, people tend to look at that, what's available. From what we gather from people that watch this very closely is that inventories in China are indeed not very high. And as we talked about on our prior call, inventory levels on gasoline and diesel did increase, and that was really kept a lid on crude oil inventories as run sort of very reduced in response to very tight or lower refining margins. So I think it doesn't take much change in demand side to really make quite a dramatic change on how the market will respond. And I guess this is OPEX game in a way. Also when we say -- I think they really have inventory levels in Asia, strong focus on that and how they manage supply now and why is postponed [ph]. So let's see what the next meeting on December 1st will bring. But I think the longer this lasts, the stronger recovery you will likely have. That's my sort of two cents on it.
Frode Mørkedal: Good, it is perfect. Thank you.
Operator: Thank you. Your next question comes from the line of Jon Chappell from Evercore. Please go ahead.
Jonathan Chappell: Thank you, good afternoon. Svein, first time I recall you specifically calling out your sub 15-year-old vessels in the chartering activity, I think you did it twice. Clearly, a couple of older ships left in the fleet. You just talked about asset values, maybe it's a bit more squishy for vessels at that age. But given maybe that the cycle is a bit longer than the two, if you're seeing a differentiation in the rates you can earn based on the ages of those vessels, is there a plan to modernize the fleet and maybe use proceeds for some of those older ships to help finance those new builds you have in order?
Svein Moxnes Harfjeld: So I think the number one observation is that when you are in sort of soft patches in the freight market, then the older ships, they suffer more than a more modern ship. So you do get the sort of deltas, and part of the third quarter was certainly softish. But keep in mind also that this summer, we fixed out one of these older ships for a one-year time charter at $49,500 per day. And at that point, the freight market was a bit more balanced. So I would not -- certainly not rule out good freight opportunities for these ships, but you need the sort of sentiment to be at the right time. And these older ships, they are in technically very, very good conditions. They have hardly any depth, very low book value. So in a way they would sort of contribute meaningfully if they were to be sold at some point. As you know, as we mentioned, we do have the new buildings coming in the first half of 2026, so we think sort of that delivery schedule drives well with sort of when these older ships close in on 20. So it might be that we will elect to divest a couple of them in the next few months or one year. And that capital can, of course, be used to the new buildings, can also be used to other things. So it's part of our plan, but it has to be the right opportunity, and there could also be other good opportunities to charter out these ships. So let's see what makes more sense when the decision time is up.
Jonathan Chappell: Okay. And also, I mean you mentioned the time charters, not only did you get the 49.5 [ph], but for the line you got 55,000. I understand it was different market sentiment again. But given the little softness right now, have you seen a vast change in the rates you're available -- that are available for time charter? And again, would you look for other opportunities, like which you after the line to lock in more given maybe some of the greater volatility in the spot market today?
Svein Moxnes Harfjeld: I would say that the bid our spread has widened a bit. So the ask is probably unchanged, but the bids are lower, reflecting the spot market. But I think increasing customers be going, they recognize the demography of the fleet, whereby its aging quite quickly and that significant portions of the fleet are controlled by state-owned entities that service their own needs. So if you want to sort of go for the VLCC for that matter, to go through a ship owner who has a sizable fleet that can service them with many types of services, not just spot voyage or on time charter, I think they recognize the need to engage more with customers. And that's something we are working closely. And it's -- our stated ambition is to build more fixed income for the company, and we will spend some time in doing that. But we expect that the next sort of, call it, a year or two will offer interesting opportunities to build more fixed income for the company. And that, again, we think will be well suited given our capital allocation policy and offer more predictability on earnings in the longer term. So that's our sort of lifting the beams or is how we think about continuing to build the business.
Jonathan Chappell: Great, thank you Svein.
Operator: Thank you. [Operator Instructions]. And your next question comes from the line of Omar Nokta from Jefferies. Please go ahead.
Omar Nokta: Thank you. Hi Svein. A couple of questions -- just a couple of questions from me on more on the geo macro and geopolitics side of things. And you mentioned outcome of the U.S. elections and the potential for tougher sanctions on Iran. How do you think the -- potentially the -- if those volumes from Iran, export volumes diminish and get replaced by OPEC, clearly, that sets up a positive backdrop for tankers or at least, say, the free market tankers. Is there a risk you think on your side, kind of how you see things in terms of the shadow fleet following those barrels into the free market barrels, is that a risk?
Svein Moxnes Harfjeld: I think it's an academic risk, but I don't think it's a real risk. Almost all the ships in that business is older than 20 years of age. And when they transport oil today, they either load in Iran or Venezuela for that matter or they do transhipments. They're not approved to enter into terminals, they lack vetting, proper insurance. There's a lot of things that has to fit the bill to get approved to do -- to operate in the compliance markets, so I think that is really unrealistic. So I think this will almost 100% certainly be a positive for the market if this plays out. And I see now people that are expected to come into Trump’s administration, they are already on making statements on how they want to approach Iran. So let's see how it plays out. But I think there is a reasonable probability of some of this taking place actually.
Omar Nokta: Okay, thanks. It makes sense. And then maybe I guess, obviously, Russia, Ukraine, it's had an impact on the broader tanker market, perhaps not so -- or clearly not so on VLCCs. But it's been a question basically is how does this tanker market look pretty much since the war broke out and you've had the surge in overall dynamics. But since the war broke out, the question is then how does this market look like without Russia, Ukraine, so I guess in your eyes, how do you think the VLCCs would act if there were a peace deal reached between Russia and Ukraine?
Svein Moxnes Harfjeld: I think the market actually did impact VLCCs, but on a relative basis, it impacted them negatively. So the smaller -- our smaller siblings to sort of enjoy the higher earnings for a good period of time. But that has sort of come down to earth after a while. I'm also sure that if there was a -- if it is a peace, it depends how it all plays out, how does it become a peace. And I'm not too sure Europe will venture out buying Russian oil sort of immediately after a peace deal has been agreed. I think the sentiment in Europe as this war goes on in the backyard of Europeans are a bit different to maybe what people might feel in the U.S., right. So I think it will be a long and winding road to get those barrels back into the market, that's how I would think it will play out. So it's not an immediate change.
Omar Nokta: Okay, thanks. And maybe just a quick just follow-up on that. You did mention that it was perhaps a negative development for VLCCs. So is it conceivable then that it could be a positive if the war ends?
Svein Moxnes Harfjeld: Yes, I think so because -- and refiners, in general, what they care about is the most cost-efficient way of transport, and there's nothing that can beat the VLCC in that regard.
Omar Nokta: Yeah, okay, thank you.
Operator: Thank you. There are currently no further questions. I will now hand the call back to CEO, Svein Moxnes Harfjeld, for closing remarks.
Svein Moxnes Harfjeld: Thank you to all for listening in on DHT and following our company. Have a good day.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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