How are energy investors positioned?
Hoegh Autoliners ASA reported a robust financial performance for Q2 2025, driven by strong volume growth in Asia. The company posted a net profit of 124 million SEK and an EBITDA margin of 45%, supported by impressive gross profit margins of 51.6%. Following the earnings release, Hoegh Autoliners’ stock saw a 2.26% increase, reflecting investor confidence in its strategic initiatives and market positioning. According to InvestingPro data, the company maintains a healthy EBITDA of $635.2M over the last twelve months.
Key Takeaways
- Hoegh Autoliners reported a 7% increase in EBITDA quarter-on-quarter.
- The company declared a dividend of 137 million SEK.
- Strong growth in Asia contributed to a 47% increase in volumes.
- The stock price rose by 2.26% following the earnings announcement.
Company Performance
Hoegh Autoliners demonstrated solid performance in Q2 2025, with significant contributions from its Asian markets. The company’s strategic focus on fuel-efficient vessels and strong contract backlog positions it well in the competitive shipping industry. The sale of non-core vessels and reinvestment into newer, more efficient ships underscore its commitment to sustainability and operational efficiency.
Financial Highlights
- Revenue: Not specified
- Net Profit: 124 million SEK
- EBITDA: 166 million SEK, up 7% quarter-on-quarter
- Cash Position: 2.4 million SEK
- Undrawn Facilities: 219 million SEK
- Equity Ratio: 54%
Market Reaction
Following the earnings announcement, Hoegh Autoliners’ stock price increased by 2.26% to 113.2, indicating positive market sentiment. The stock has demonstrated remarkable momentum with a 51.2% gain over the past six months. The stock’s performance reflects investor confidence in the company’s strategic direction and growth potential, especially in the Asian markets. Trading at a P/E ratio of just 2.5, InvestingPro analysis suggests the stock is currently undervalued, with 14 additional ProTips available to subscribers.
Outlook & Guidance
Hoegh Autoliners expects its Q3 EBITDA to align with the first half of the year, anticipating continued strong performance. The company is preparing for potential increases in US port fees, which could add $30 million in annual costs. Despite these challenges, Hoegh Autoliners remains optimistic about cargo availability in 2025. InvestingPro’s comprehensive analysis rates the company’s overall financial health as "GREAT" with a score of 3.59 out of 5, suggesting strong fundamentals to weather market challenges. The company also offers an attractive dividend yield of 19.1%, significantly above industry averages.
Executive Commentary
CEO Andreas Enger emphasized the strategic divestment of non-core vessels, stating, "We have decided to actively divest non-core vessels during the peak to basically capture that value." He also highlighted the company’s commitment to shareholder returns, saying, "We believe it is prudent to basically return surplus cash to shareholders in this stage of the cycle."
Risks and Challenges
- Potential increase in US port fees impacting operational costs.
- Fluctuations in charter market rates could affect revenue.
- Economic uncertainties in key markets, such as Asia and the Atlantic.
- Competition from other shipping companies investing in fuel-efficient technologies.
Q&A
During the earnings call, analysts inquired about the company’s dividend prospects and volume growth drivers. Hoegh Autoliners confirmed a 100% free cash flow dividend policy, including proceeds from vessel sales. The company attributed its volume growth to strong Asian market support and strategic long cargo positioning.
The earnings call highlighted Hoegh Autoliners’ strategic initiatives and robust performance in the face of market challenges, positioning the company for continued growth in the coming quarters.
Full transcript - Hoegh Autoliners ASA (HAUTO) Q2 2025:
Mei Lin Wu, Head of Investor Relations, Hercotliners: Good morning, and welcome to Hercotliners’ second Quarter Presentation. My name is Mei Lin Wu, Head of Investor Relations. And with me today, we have our CEO, Andreas Enger and our CFO, Espense de Bru, who will present you with the last quarter business and financial update. As usual, we will have our Q and A session at the end of the presentation, and you can ask questions by sending an e mail to our Investor Relations mailbox at iaherhook dot com. And so without further ado, I will leave the stage to you, Andreas.
Andreas Enger, CEO, Hercotliners: Good. Thank you, Marlene, and welcome to our second quarter presentation. We are pleased to present yet another strong quarter and yet another high good strong dividend payment and also another vessel sale that was just concluded. Our quarter has an EBITDA of 166,000,000, which is up 7% on previous quarter. Net income of 124, that’s down but adjusted for the gain on the sale of Hoegh New York, it was completed in the first quarter, also net income is up.
We have a flat gross rate. We have declared a dividend of $137,000,000. We have taken delivery of two more Aurora class vessels, Hoegh Sunrise and Hoegh Moonlight, and we have a continued strong equity ratio of 54%, strong numbers across the board this quarter as well. And I’m going to go through a little bit on the market and we have this quarter I think seen a larger variation of of, you know, estimates from from analysts and it seems like our our monthly report is not fully delivering the picture. We believe that has something to do with, you know, fully understanding our capacity and market strategy and we’re going to go a little deeper into that to make sure that we get that fully communicated with the benefits, but also some of the associated costs.
We have for the last all the time since or even before the IPO had very, very strong focus on managing the cycle. It started with launching the new build program that actually triggered the IPO to basically serve the need for fleet renewal and also future proof our fleet with fuel flexibility. We went on and captured the opportunity of doing very forceful repricing of cargo and improved contractual terms when the market became tight out of the pandemic. We have built a duration and extended our contract backlog to secure earnings through the cycle. We’re going out of this cycle with a historically strong contract backlog that has further improved during the quarter.
We are and I think that is the important point, we’ve been decided to actively divest non core vessels during the peak to basically capture that value and also benefit from early deliveries of new builds. And we’ve also decided to go overweight cargo versus our carrying capacity in order to use this opportunity to create a strong backlog. And as an implication of that, we’ve also taken on short term capacity to balance out, you know, our system and in order to preserve the quality of our service to customers. And and in this quarter, that has added some costs because we’re basically selling vessels that are fully depreciated and we are chartering in at short term charter TC rates that have come substantially down, but it’s still higher than the capacity cost in our own vessels. And during this quarter and as a part of that, we have also had a fantastic growth in volume out of Asia, 47% since the 2024, while the volumes out of The Atlantic is largely flat.
We have made a conscious decision to serve that market and capture those cargo backlog opportunities in Asia, which over the cycle is normally the most attractive market in our business. And as such, we’re also accepting a larger imbalance, meaning that with more cargo coming out of Asia than out of the Atlantic, it’s basically more ballast voyages that have some impact on the capacity side. Looking at the charter market, we believe in many ways that the second quarter has, in many ways for us at least, confirmed our strategy. We expected the charter market to come down. It came from a level that was almost twice or was twice our the TCE income in our system and we haven’t chartered any vessels during that period.
We managed we did shrink, we did manage around our own capacity to maximize value. The market the charter market is normally the first to respond on the normalization of the capacity balance has come down substantially. We basically expect that market to go further down. And the second quarter has been the first quarter in this cycle where we can actually charter vessels and turn them around and cover the cost in our network, but it also means that some of our marginal capacity for the time being is basically served at a substantially lower margin. That will, in our prediction, improve when we get first delivery of further newbuilds that comes in with a substantially larger, small lower cash capacity cost than also the current charter market, but also as the as the charter market will be hit first by further new build deliveries.
So this is a, for us, a very conscious decision on and some choices on what we believe is the right way for us as a company to play the market in order to maximize value to shareholders, but also to create a more robust backlog into a different market. But it comes with some costs during a transition period until we get to new builds and until the time market fully responds to a new capacity situation. And just also to reiterate the capacity strategy, we have sold four vessels previously and I commented before, you know, those vessels are sold at a price per capacity that is fairly similar to to what we actually pay for a new build, much larger, much more efficient vessel with dual fuel capabilities and more than 50% lower carbon emissions, also substantially lower fuel emissions. We have therefore decided to continue that run. And we have we just had just decided sale of agreed the sale of Hoegh Beijing going to be delivered in September at the price of $43,000,000 That’s a mid sized vessel.
And that is a further step on that capacity management. If we summarize that, we have now sold a total of five vessels, aggregated capacity, a little less than 30,000 CEU, proceeds of almost $290,000,000 They have an average age of almost eighteen years. We have at the same time acquired, that’s lease and purchase options on leases, a large number of vessels being substantially younger with an average age of twelve years with almost 60,000 CEU and a cost of 315,000,000, which we believe is a very good exchange. And if you look at Hoegh Beijing in particular, we acquired that vessel in 2022 at 22,000,000, almost five years younger at the time, and we’re selling it now at 43,000,000 and obviously after having had a very good ride of revenue generation and profit generation with that vessel during that journey. So in a way, so just to summarize, this is a core part of our strategy, managing capacity.
We believe it has given a substantial improvement of our fleet quality, also adding know, we now have taken delivery of six new builds. It’s a dramatic modernization. We have freed up lots of capital and it has allowed us to continue to pay extraordinary strong dividends. And in that context, I think we should also reiterate that we have a dividend policy of paying out free cash flow that has included and will continue to include paying out net proceeds from asset sales. That strategy is based on the fact that we are fully invested for the cycle with new builds.
We have established a very strong balance sheet. We have a very competitive capacity cost going into the next stage of the cycle. And we believe it is prudent to basically return surplus cash to shareholders in this stage of the cycle. So just to sort of clarify that whole thing And again, that strategy comes with higher dividends. It also comes with some added costs until, as I said, we either get more further newbuilds, we get two more newbuilds delivered at the end of the year with cash capacity cost substantially below the current TCE rates.
And as I said, we do expect TCE rates to come down as more newbuilds are delivered in the months and years to come. Another issue was, I think at our last quarter, we were at a time of maximum uncertainty in terms of tariffs and port fees. In our previous presentation, we basically said that this was unclear and it was hard to make any firm decisions based on a fairly transparent and unknown process. That process have settled in many ways. Tariffs have been negotiated down and for most of our products, most of our trades is now down to 15%, substantially lower than what was announced at the time of our previous presentation.
Port fees has also come down to a level. And so that is that has in many ways stabilized the market. It has created a situation where we believe the disruption of sort of near term trade flows is going to be small or to some extent almost nonexistent, but I also think it is naive to believe that higher tariffs and higher fees, higher cost of transportation will not impact the market longer term. But right now, we are in a situation where things have stabilized and we have a strong current performance. We have a strong outlook and the system seems to be working well.
We will look closely at it. There are probably going to be changes, probably going to be deals done, but that’s one item that I don’t think we can particularly well positioned to guide on. It is a much more uncertain environment. We are working carefully on adapting our business at any time. But as we speak, the biggest change of our biggest imbalances and biggest challenges to our system is that the fact that the growth in volumes out of Asia is not fully matched with return trades out of The Atlantic creates some more imbalances in the system that we have decided to absorb in order to be able to continue to grow our contract backlog.
USTR, again, started with some very dramatic proposal, particularly for car carriers being harder hit than any other segments. There’s been lots of discussions lobbying. We have support from authorities, international industry organizations, customers and others and fees has come substantially down. But it’s still a substantial fee that we believe is not in the best interest of our American customers and the American consumers, but we will find a way to deal with it. We are working closely with customers on ways to mitigate and reduce the impact for us on those charges.
And then reiterating the contract backlog, we have further increased our contract share during this quarter. We have added additional contracts and we have, again, a very strong backlog for the remainder of this year and also into next year. And average duration in our current backlog is still three point three years. That’s a bit on our business and capacity and where we are in the cycle and how we respond. Talking about sustainability, we also see big changes.
The whole range of initiatives we have on reducing our carbon footprint has led to substantial improvements this year. It is a combination of a very focused program on upgrading, improving performance on our older vessels. It is about actually letting go of some of the weaker fuel performers. It’s about using biofuel, but I think also very importantly, is about having taken delivery of six of the most fuel and carbon and also cargo efficient vessels in the industry with the Aurora class, which has been a big contributor. So we are now seeing after some fairly stable periods, the needle starting to move on our carbon intensity, which is we are very pleased with.
And again, two more of those vessels delivered. We had a fantastic naming ceremony with customers in Japan for Hoegh Sunrise in in May. We took delivery of Herg Moonlight in June and she there we will have that vessel has been on a fully loaded voyage from Asia to Europe. We will have a naming ceremony again with customers in Gothenburg in a couple of weeks. So we are very pleased with the the program.
It’s ahead of schedule. We have two more vessels coming towards the end of the year. And we are then starting diving into the dual fuel ammonia capabilities from 2027 onwards on the last four vessels. We are also working on the entire value chain. And during the quarter at Nordschipping, we have introduced the intention to support Nordic Circle on a concept to upcycle vessels rather than melting them down.
It is something is that it is going to give, you know, economics comparable to to scrapping. It is a 97% reduction of the emissions compared to normal steel production. And are working, as I said, closely with Nordic Circle to get together the conditions to be able to take the first vessel through that new and innovative recycling process during next year. So that’s an interesting thing also dealing with the end of life issues on vessels as there will be more vessels and there will be more scrapping and there will be higher demand on scrapping yards in the time to come when newbuilds come and the legacy fleet grows older. That was my introduction, and then I’ll leave it to Espen to take you through take us through the financial updates and financials for the quarter.
Espen?
Espense de Bru, CFO, Hercotliners: Thank you, Andreas. Turning then to the financials. And our volumes in the second quarter came in at SEK 3,900,000.0. That’s the highest quarterly volumes we’ve had since we stopped sailing through the Red Sea at the 2023. As Andreas already mentioned, we’ve had strong growth from Asia over the last year.
We had a bit weaker volumes from The Atlantic in the trades loading back to Asia in the first quarter, and we’re pleased to see also volumes in return trades rebounding nicely in the second quarter. As we’ve communicated earlier, we took on some new contracts at the end of last year that started in January, and we saw our rates coming down on as a consequence in the first quarter. We are pleased to see that rates are stabilizing and marginally up quarter on quarter in the second quarter. Our second quarter EBITDA came in at SEK 166,000,000, that’s up 7% on the back of the increased volume. Our EBITDA margin is slightly down to 45%, and there are two main reasons.
One is the imbalance mentioned by Andreas. We have somewhat more imbalance in our network, causing slightly lower efficiency and some more ballast. And the second reason is that the relative cost of the added short term capacity is higher for parts of the volume growth. Net profit before tax came in at SEK 124,000,000. That’s also up 6% quarter on quarter, adjusting for the net gain of Hoegh New York in the first quarter.
Looking at the EBITDA bridge. As mentioned, we had lower rates affecting the first quarter performance. Going into the second quarter, we have an increase in the top line of 38,000,000. And the increased activity comes with higher costs related to fuel voyage and charter expenses, and we end at NOK 166,000,000. I think just emphasizing, as Andreas also covered in the beginning, but the short term capacity that we’ve taken on, it’s creating value for the long term agreements that we have taken on.
And all the short term capacity that we have taken on can be redelivered before Christmas and serves as a bridge capacity up to two more newbuilds that will be delivered at the year end. We have a robust balance sheet. We saw net interest bearing debt increase, up 167,000,000 in the quarter as we took delivery of two newbuilds in the second quarter and also paid installments on two subsequent vessels. Biko equity reduced equity ratio reduced to 54%, but still very solid. We ended the quarter with NOK $2.00 4,000,000 in cash and also have undrawn facilities of SEK $219,000,000.
So that’s another strong quarter for us in terms of cash generation. We had SEK 153,000,000 from operating activities. Seemingly, we have an increase in working capital. This is not correct. It’s related to the fact that we don’t have any short term liabilities for withholding tax at the end of the quarter.
All the first quarter dividends was paid in the second quarter. We also had NOK 16,000,000 related to dry docks and other CapEx. We had NOK 26,000,000 net proceeds from the two newbuilds delivered in the second quarter, when then we had normal payments for debt and leases and paid out SEK 158,000,000 in dividends, ending then at SEK $2.00 4,000,000. So we are pleased with the start to the year. Particularly happy with the growth we see now into the second quarter, and we’re happy to declare payment of NOK 137,000,000 to be paid in September.
We now paid NOK 84 the over the past three years. And going to give it back to Andreas for the outlook.
Andreas Enger, CEO, Hercotliners: Yes. And I think there are two things to mention on the outlook. One is that we are still in an environment where tariffs and port fees is key. It’s come into much more manageable territory, but it’s still, you know, not good for business over time. And we are looking carefully, although we don’t see much short term effects, tariffs and additional fees could result in lower volumes transported, and we’re watching that very carefully.
US US port fees will be introduced as of October 14. The gross annual cost for us could would be about $30,000,000, but we are working, you know, both on our capacity planning and management of the trades and with customers to mitigate that impact without exactly knowing the outcome of that. And we expect the Q3 EBITDA. Actually, I think we’ve said this in line with the first half, not the second quarter, but we are continuing we basically believe in a continued strong performance driven by continued good market and our very attractive contract backlog. But there will be due to our capacity management strategy that I previously said, some additional charter costs in order to serve that volume and to deal with the imbalances that we need.
We basically will try to wash away as as we can get more attractive charters and more importantly, very efficient new builds that are continuing to come on stream. So that’s that ends our presentation. So then I guess we’re open for questions. Marlene?
Mei Lin Wu, Head of Investor Relations, Hercotliners: Received a few questions from our online audience. Mhmm. And the first question is from an online audience. What would be the prospect for dividend given that now market is entering a new cycle?
Andreas Enger, CEO, Hercotliners: And the prospects for dividends is I think we have we have carefully assessed. We did a we did a thorough, you know, analysis, resilience analysis actually in the in the first quarter when when, you know, market uncertainty, I think, was at a very, very high level. And at that point, we reconfirmed our dividend policy of paying out free cash flow. And we have once again, during our discussion now, I think I said it initially, reconfirming that our dividend policy is to pay out 100% of free cash flow. And it will include proceeds from sales of vessels and we do then expect the sale of Hoegh bridging to complete during the third quarter.
So that then there’s no change to our dividend policy. It’s basically reconfirmed and will continue.
Mei Lin Wu, Head of Investor Relations, Hercotliners: Thank you, Andreas. And the second question is from analyst Frode McDonnell from Clarksons. Volume growth in q two came stronger than anticipated. What are the key drivers? And how do you see the trajectory for volumes in the 2025?
I guess for the first part of the questions, I just echo what S Pen already mentioned. We have seen good support of cargo ex Asia, and then we see a nice rebound of cargo ex Atlantic as well. And it’s really reflecting our strategy to go long on cargo. And for the second part, for cargo trajectory for the 2025, maybe you want to comment?
Andreas Enger, CEO, Hercotliners: I mean, I think we’ve said that. I mean, we have taken on additional contracts. We have gone we are going long cargo. So we expect cargo availability to be strong. We expect the original imbalances to continue.
And we are basically working on converting our backlog and capturing additional opportunities in what we continue to see as a strong market.
Mei Lin Wu, Head of Investor Relations, Hercotliners: Thank you, Andreas. I think that’s all the questions we have for now. I hope everything is loud and clear from the presentations. But thank you for watching. And of course, if you have more questions, feel free to reach out to us and to send email to our investorrelationsmailbox@iih.com.
So thank you and we look forward to seeing you next time.
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