Earnings call transcript: NORDEN raises full-year profit guidance in Q2 2025

NORDEN reported its second-quarter 2025 earnings, highlighting a significant increase in its full-year net profit guidance to between $70 million and $130 million. The company achieved a Q2 net profit of $52 million and noted a 10% return on invested capital. Despite challenges in freight services and trading, NORDEN’s stock saw a decrease of 3.95% in early trading, bringing its price to $228.6, down from the last close of $238. According to InvestingPro analysis, the company currently trades at an attractive P/E ratio of 8.01, suggesting potential value for investors. The stock remains above its 52-week low of $22.40, showing resilience despite recent volatility.

Key Takeaways

• NORDEN raised its full-year net profit guidance significantly.
• The company is investing heavily in green initiatives, including biofuel technologies.
• Freight services and trading faced negative margins, but asset management showed strength.
• The stock price dropped by 3.95% following the earnings release.

Company Performance

NORDEN’s overall performance in Q2 2025 was marked by strategic asset transactions and a focus on green initiatives. The company completed 38 asset transactions, including the sale of 20 vessels, and distributed $20 million to shareholders through dividends and share buybacks. Despite a challenging market environment with declining spot rates, NORDEN maintained resilient asset prices and a flexible business model. InvestingPro data reveals strong financial health with a "GOOD" overall score of 2.94, supported by robust cash flow metrics and moderate debt levels. The company maintains a healthy current ratio of 1.48, indicating strong liquidity position.

Financial Highlights

• Q2 Net Profit: $52 million
• Return on Invested Capital: 10%
• Full Year Net Profit Guidance: Raised to $70-130 million
• Freight Services and Trading EBITDA: -$8 million
• Asset Management EBITDA: $68 million

Outlook & Guidance

NORDEN anticipates negative margins in its freight services and trading segment for 2025 but expects improvements in 2026. The company is optimistic about its tanker operator segment and foresees potential market tightening due to an aging fleet and limited shipyard capacity. InvestingPro analysis indicates the company’s strong market position, with revenue growth of 8.77% in the last twelve months and a solid return on equity of 11%. For deeper insights into NORDEN’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 12 additional ProTips and extensive financial metrics.

Executive Commentary

CEO Jan Renpo emphasized NORDEN’s position to deliver strong returns on invested capital, stating, "We are well positioned to continue to provide best in class return on invested capitals." CFO Martin Berstel highlighted the industry’s challenges, noting, "We see a fairly low order book, an aging fleet that needs to be scrapped."

Risks and Challenges

• Declining spot rates in the freight and tanker markets could pressure margins.
• Market volatility and geopolitical tensions may impact global trade routes.
• The transition to green technologies requires significant investment and carries execution risks.
• Supply chain disruptions and limited shipyard capacity could hinder fleet expansion plans.

Q&A

During the earnings call, analysts focused on NORDEN’s vessel divestment strategy and its alignment with share price and asset values. Questions also addressed the resilience of the used vessel market and the company’s commitment to biofuel and emission reduction initiatives.

Full transcript - Dampskibsselskabet Norden AS (DNORD) Q2 2025:

Webcast Operator: Good morning, and welcome, everyone, to this webcast with a presentation of the q two twenty twenty five report from NOAN that was published this morning. In the first part of the presentation, you’ll be in a listen only mode, which will which will be followed by a q and a session. During this session, you’ll be able to ask questions by pushing the pound key or hashtag followed by file on your phone’s touchpad. If you’re watching this webcast online, you can ask your questions in the chat below. With that, I’ll hand over to CEO, Jan Renpo and CFO, Martin Berstel from Novo Nord.

Please go ahead.

Jan Renpo, CEO, Norden: Thank you very much, and also a warm welcome here from my side, and thanks for joining us on this presentation of our q two results. So let me just start by sharing some of our group highlights. So we have, in the second quarter, delivered a group net profit of $52,000,000 and a return on invested capital of 10%, and this is driven by sales gains combined with profitable contract cover in what has been weaker markets. And these weaker markets have been challenging for ship operators, but we’ve, at the same time, seen pretty resilient asset prices that has been favorable for ship owners, and that is also reflected in the diverging results for our two business units. We raised the lower end of our full year guidance, and we are now guiding for a full year profit of between 70,000,000 up to a $130,000,000.

The NAV has been been pretty stable when you correct for exchange rate, and we are now reporting an NAV of 337 Danish kroner here at the end of the second quarter. In the second quarter, we have been extremely active, also continuing all the asset transactions that we’ve done. And year to date, we’ve now had 38 transactions. We have sold 20 vessels realizing a lot of value in the portfolio, but at the same time also taking in new lease agreements with purchase options. And we continue to pay out our profits, distribute our profits to our shareholders, we have $20,000,000 here in the second quarter, which will be through a dividend of 2 Danish kroner per share and a share buyback of $10,000,000.

Martin Berstel, CFO, Norden: Diving a little bit more into our business units, starting here with our freight services and trading. We made an EBITDA of minus $8,000,000 in Q2, which was on par with the period from last year. And there was a little bit a mixed bag actually with improvements year over year in the dry operator activities and also in logistics, but somewhat weaker numbers in the tanker operator. So in tanker operator, we made minus $2,000,000 mainly as a result of the much lower spot market compared to last year, but also because we still have some high charter costs from vessels taken in at the when the markets were higher. Logistics made $6,600,000, also a big improvement over last year.

Some of it was related to reversal of provisions from prior periods. So not all of it can be expected to be recurring, but still good performance there. And we actually also landed a small new logistics project in Australia with an existing freight client, helping them with parts services in their internal supply chain. In the dry operator, let me start out by saying that we’ve made a small adjustments to the way that we report our dry operator activities. So we have decided to merge our handysize activities with the projects and parceling activities under the new header, dry operator small vessels.

And the old dry operator is now called dry operator large vessels and then includes the remaining Supramax, Panamax and Capesize activities. And you can see in dry operator, we made a loss of small in the small vessel segment, we made a loss of $5,000,000 mainly as a result of fairly high period rates in the Handysize activities. In dry orbiter large vessels, we lost $7,000,000 as the new activity that we are generating is both low in volume, but especially also low on in terms of contribution margin, which actually fail to cover all costs. It does show that, as Jan was alluding to, it is a tough market for operators with the tonnage costs as expressed by TC rates is fairly high compared to the spot rates that you earn from actually transporting cargo, making it tough to generate acceptable margins. When you add these two together, generating minus $12,000,000 in the two dry operator segments, that is a big improvement over last year, but of course, it’s not satisfactory.

So we have taken a number of steps to ensure improved performance from 2026 and onwards. We have, for instance, appointed Anna Jensen as new COO to drive performance and profitability in the FST business unit. We have in implemented a new profit center structure with clear p and l, accountability and commercial focus. And as I mentioned before, we have merged Handysize and MPP activities to drive commercial synergies within that space. Turning to asset management.

It was a good quarter for asset management. We were very active, as Jan said, in managing the portfolio. So we have made 20 vessel sales year to date, of which 13 were from declared purchase options. But importantly, we also actually made 18 new lease agreements year to date for high quality vessels, including 10 MPP vessels. So that just goes to show that we are actually also still building the portfolio to position for future upside.

EBITDA increased to $68,000,000 in q two, both as a result of higher sales gains, but also due to good contract cover, especially on the dry owner side, and slightly better tanker spot rates, which actually also benefits the tanker owner. By the end of q two, Norton had still 67,000 extension option days and 85 purchase options, meaning that we’re actually at the same level of purchase options that we were at the beginning of the year. And 33 of these are still in the money and can be declared within the next two years. Turning to markets which were, in general, quite challenging. You will see from the graph on the top here that Supramax spot rates were down significantly over last year, down 33%, in fact.

And surprisingly, asset prices actually remained quite firm. Driving the spot rate weakness was quite weak demand growth with total tons transported up only 0.5%. With some distance effect, the ton mile effect was a little bit better, but still. And this was driven by rest of the world, while China was actually negative in the period. Especially weak was the coal trade during the first half, but that turned around at the beginning of q three.

And, obviously, the bauxite trade was super strong at the first half, but was actually stalling towards the end of the first half. Near term, we see actually a market that is quite tight based on stronger coal and bauxite trade and not least the upstart of cement do iron ore exports at the end of the year. In the longer term outlook, we still believe that it is quite attractive to be in dry bulk shipping based not least on favorable supply dynamics. We see a fairly low order book, an aging fleet that needs to be scrapped and fairly limited yard capacity. On the tanker side, tanker spot rates were down 38% versus last year, but actually coming from a very high level.

It was actually still a decent level in q two. There’s continued support to the overall market balance from global fleet inefficiencies, mainly driven by a combination of sanctions, safety concerns and an aging fleet. For the second half of the year, we do see stronger crude trade based on OPEC plus volume increases for exports, and that will add support also to product rates in the near term. However, looking beyond 2025, we do see some rate weakness expected from gradual increases in newbuilding deliveries, mainly in LR2 and in MRs.

Jan Renpo, CEO, Norden: Alright. Well, let’s have a just a quick look at our business model. And in Norden, we have four key drivers in our business. We have dry bulk and tankers as our two segments. And then we have asset heavy, which is represented in asset management, and then the asset light, which is more the on the operating side in in freight services and trading.

And having these four drivers in our business means that we can adjust exposure between all four, and that enables us over time to generate superior returns. When you look at Norton’s performance compared to, other industry peers, we see that over time, we are able to deliver a higher return on, invested capital. Looking at our current position, we are, for the rest of this year, more exposed towards the product tanker market where we have a long position. We are neutral in in dry bulk. But when we look longer term, then we have more exposure towards the the dry bulk market.

And here, of course, an important value driver for us is the purchase options that we hold because they represent great upside in in strong asset markets, whereas, of course, with an option, we don’t have to own the vessels if asset prices are declining. So it gives us a lot of flexibility and ability to constantly optimize our markets between these four different drivers. Turning to guidance. We are raising the lower end of our full year net profit guidance from $50,000,000 to 70,000,000 so that the new range is 70 to a $130,000,000, and this includes sales gains from already agreed transactions of $70,000,000. In freight services and trading, we do expect margins to be negative here in the 2025 squeezed by the challenging market conditions that also Martin explained earlier.

In as management, on the other hand, we expect to continue to benefit from the high and profitable earnings coverage that we have both in dry cargo and tankers at at profitable levels. And that brings me to the key takeaways. We’ve had a good first half year with a group net profit of $85,000,000, a return on invested capital of 10%, and that is despite, you know, weaker markets as we explained earlier. We’ve had a very, very busy year so far with 38 asset transactions. So on one hand, we are realizing significant values from our portfolio, but we are also optimizing with new deals that are coming in.

And we actually have more purchase options now than than we had at the 2024. We are looking at additional actions to improve our performance in FST from 2026 and onwards. And then we see strong long term fundamentals in our industry. We see a aging fleet towards 02/1930. We see yards that are full.

If you order a vessel today, you have to wait three or more likely four years. And that actually creates a very, very interesting outlook when you look in the long term for for the business. And with our business model combined with this outlook, we are well positioned to continue to provide best in class return on invested capitals and, of course, return to our shareholders over time. So that concludes our presentation. We are now looking forward to the q and a session.

So back to the operator.

Webcast Operator: Thank you very much. Yes. We are now ready to commence the q and a session. To repeat, you can get in line to ask questions by pushing the pound key or hashtag followed by five on your phone’s touchpad. Should you wish to withdraw from the line, you can push the pound key or hashtag followed by six.

If you’re watching this webcast online, you can ask your questions in the chat below. These questions will not be published, but will be asked to management by the operator. We have some questions here from from the online audience from the chat. There is one here. How do you see the market for used vessels?

Jan Renpo, CEO, Norden: Yeah. I can I can take that? So we have seen in the second quarter when you compare year on year, take the Supramax vessels for us as an example, that the asset prices are down 5% year on year. It’s a little bit weaker, but actually quite resilient when you compare to the spot market, which is over 30%, lower. So there is this underlying strength in the asset markets despite weaker spot rates.

And I think this ties in with this longer term outlook where we see full shipyards, high newbuilding prices and this aging fleet. So that is very supportive of asset prices.

Webcast Operator: And a question here. You continue divesting vessels. Is that an indication that you remain cautious on the market going forward?

Martin Berstel, CFO, Norden: Yeah. If I can comment a little bit on that. No. Actually, I wouldn’t say it that way. I think it’s a it’s a reflection of the way that prices are aligned at the moment with our share price being significantly below our net asset value, which makes it, we think, attractive to actually realize the high asset values that we see now, buy back our share and also keep some gunpowder ready, if you will, for reinvesting later on into what we call a long term attractive market outlook.

Webcast Operator: And another question here. Full year guidance is still quite a wide range. What assumptions are included for both the top end and low end of this guidance range?

Martin Berstel, CFO, Norden: Yeah. So first and foremost, I would say we have, of course, based our guidance on the prevailing spot market and future market rates. And a big assumption here is, of course, to what extent we can generate new activity in the dry operator segments in the remaining part of the year. As I said, and and Jan also said that it is a challenging market environment where the difference between what Jokson can earn from transporting cargoes and what the cost to actually get the control of the ship does not leave much to cover additional costs. So that is a big assumption that we can continue to generate some positive contribution margin there.

And then I would say another uncertainty here is, of course, the variability of the Tanger spot rate, where the market has seen some tightness here in the beginning of Q3, perhaps falling back a little bit now. But we base our forecast on forward curves, which is sort of in the middle of the road, and that can, of course, change both up and down.

Webcast Operator: And another question here. How much do you think you can expand the logistics units without impacting its margins?

Jan Renpo, CEO, Norden: Well, I think here, are in still in a in a buildup phase. We’re still investing in we have just hired a, you know, an an industry expert, William Wallace, to lead this business. He has a lot of experience in in this part of the business. We have two projects that we’re now running. One of the highlights, I think, of of the first year was that we did secure a new project in in Australia, and we have a we we see a pretty promising pipeline because this really connects our freight business with the logistics.

It’s it’s part of our strategic ambition of becoming more relevant to to our customers. So there is a bit of an upfront investment. We have to build the organization as we have now and and then, you know, start building more projects. So we have two projects now and and hope to obviously add more projects in the future. We we we do see this as a has the potential to be a very profitable addition to to the business.

But these projects are not projects you just secure every every every day. You know, it takes time to to land these projects. There are not that many of them, but our hope is that over a period of time that we are building a solid portfolio of of logistics projects that are not just stand alone projects, but that also connect and support our freight business.

Webcast Operator: Thank you. And another question here from the online audience. Why keep zero dry bulk exposure for the second half of twenty five given your rather positive commentary?

Jan Renpo, CEO, Norden: Well, I I think, first of all, we have actually if if you look at our our numbers over time, we’ve been quite cautious also in the first half of the year, which is actually done as well. The the contract cover we have also in asset management has also protected us from from the downside on the dry cargo rates we’ve seen in the first half. So we have been running a a business where we’ve had more cargo than tonnage that we have now neutralized. So in a way, that is a signal that that things may be picking up here in the second half of the year. We have a long position when you look out further on the curve.

So the increases that we are seeing currently in the dry bulk market is actually overall benefiting our portfolio. It may not benefit our P and L as much right now in 2025, but in 2026 onwards, both on the asset prices or the NAV value of Norton, but also, of course, on our P and L, this is positive when we look up further on the curve.

Webcast Operator: And the new question here. How do you expect a possible Ukraine peace agreement to influence your markets?

Martin Berstel, CFO, Norden: Well, that’s a that’s a very good question and a very important one, actually. So first of all, let me say, we attach a fairly low likelihood that we have sort of a peace agreement right around the corner in between Ukraine and and Russia. If it were to happen, I think the next big question would be what happens to sanctions? Because it is really the sanctions that is impacting our markets very substantially. And there, we think it’s even more unlikely that they would be removed in in the near term.

If it all came to a peace agreement and removal of sanctions, that would net net be fairly negative for the markets since that that would immediately enable a boost to the global fleet efficiency. But that is not what we expect in our base case.

Webcast Operator: Thank you. And another question here. EBITDA in the tanker operator segment was negative in q two. Could you share your outlook for the second half of the year and when you anticipate a potential turning point in the performance?

Martin Berstel, CFO, Norden: Yes. So if you if you think about the business model of tanker operator, if you make it very simple, it is to a large extent to charter tonnage in at prevailing TC rate and then employ them mainly in the spot market. And what we can see from our cost base, if you just look at the one year TC rate, that that is coming down. And on the other hand, spot rates are actually firmer than we had expected. So you did see significant tightening, especially in The Atlantic in the start of q three.

So so we do think that there’s good possibility to actually to actually improve performance in the tanker operator going forward.

Webcast Operator: Thank you. And another question here goes, can you comment on the expected negative margins in the trading unit? Is this driven by tankers or bulkers? And what can be said about 2026?

Jan Renpo, CEO, Norden: Yeah. So this is primarily driven by the dry operator segments in the business. And so so a bit of a continuation of what we’ve seen also in the second quarter. So so clearly, with a fairly weak market during the quarter, you know, some of that negativity is carried over into the second half of the year in in that unit. Now when we look into 2026, well, we we certainly have no sort of legacy contracts that will impact us negatively into next year.

So and as we said earlier, we are working hard to improve the margins in this part of the business. It is, you know, performing below our own expectations. So as mentioned during the presentation that we’ve already made some fairly important changes in in our organization, in in our structure, and we expect that to have impact from 2026 onwards.

Webcast Operator: Thank you. And the next question here, there’s more questions in this one, so I’ll try to divide them. How do you see the latest development with The U. S.-China tariffs and tariffs more generally impacting the market? Over what time horizon do you see demand from China picking up?

Martin Berstel, CFO, Norden: Well, that is a very, very big question. I would say, overall, the whole tariff threat from The US is not a big driver, I would say, of the markets that that we are in. I think the main sort of source of of impact here would be the general weakness that may come to the global economy if trade slows down and if people sort of stop interacting with each other as as a result of this. So it’s more general macro uncertainty that I think is cast over the whole thing from all these tariff talk back and forth. As with China, there is a few caveats to that statement because one thing that we can hear that is being discussed is purchase obligation of US soybeans into into China.

And if that were to materialize, that could actually have a fairly significant positive effect, at least in the short term, because China is already a big exporter or importer of soybeans, but much of it coming from down in South America. So so that could be a very specific point that could impact our markets. But other than that, I think it’s mainly the overall macro picture.

Webcast Operator: Thank you. And another question from this viewer was that if you could give any updates on the Red Sea and the impact of a potential reopening.

Jan Renpo, CEO, Norden: Yeah. I think it’s fair to say here that that our assessment right now is that a sort of a reopening or an increase in transit through the Red Sea is not really on the cards. We are seeing no indications of that happening. So you can say, unfortunately, this is turning into become sort one of the sort of longer term conflict zones. I think by now, world trade and and shipping has adjusted to this new reality.

And and and that you you could speculate that even a a sort of a resolution of some kind and and maybe a slow increase in transcripts over time may also open up for other sort of trading other other trades again. So so in that sense, we are not you know, it it probably has less significance now than than it had at the at at the beginning. Because in in the beginning, it it it had sort of this sort of more of a, you know, panic panic impact on the markets, and that’s when markets sort spike up. I think by now, we we have sort of all gotten used to it and and found ways around it.

Webcast Operator: Thank you. It seems like we lost the picture. You’re back here again. Sorry for that. And we still have the sound on.

There’s one last question here, a little a little bit more broad character. It’s how green is no one?

Jan Renpo, CEO, Norden: Yeah. That that’s a bit open ended question. So we’ll we’ll try and answer that sort of I I think the the way we think about this, at least, is that we when we talk about green and and the the whole transformation that we are part of, I think it’s important that we look at this relative to our industry. And I think relative to our industry, Norton is quite a a front runner. We’ve been one of the well, we were the first company that were operating ships 100% on biofuel.

And for our segments, dry bulk and tankers, where ships are running more like a taxi service, which means that we’re servicing, you know, many, many ports around the world. And that means that the refueling is actually quite challenging. So to replace current fuel oil with a alternative fuel is actually something that is a major, major task for for the industry. That will definitely take take take some time. But we think biofuel is a viable option here because it is a fuel that can be used on existing vessels.

And that is why we’ve, you know, now for years have been focusing on on this. We even have investments in in a in a biofuel producer. What we’re seeing sort of in in in the short run here is that we are actually increasing the biofuel use in our fleet quite dramatically, but it’s coming from a very, very low base. But but we are more than doubling our biofuel use in our fleet currently. And and we think that this will be an important part of of of the solution going forward.

And, of course, biofuel is a more expensive fuel than than than fuel oil. But with the proposed IMO regulations that that are supposed to take place from 2028, actually not that far from now, we see that gap closing. And we also see because the fuel component is becoming more important because it’s more expensive, Fuel efficient vessels is becoming even more important now in the future. And this is where when we invest in new vessels that this this is a big driver. And and and that’s why, you know, there are different sides to this.

There’s one one focus, obviously, for us to reduce our emissions overall for the fleet. But there’s also a business opportunity in this we we see where our customers, we think, increasingly will ask for greener solutions. And we have a number of projects with customers right now where we’re looking at different technologies on on some of our vessels today to reduce emissions together with with our customers. So perhaps it’s a bit difficult to sort of grade how green is Norton, but I think that that we certainly feel that we are part of of the front runners in our industry. And we think that this will be a major transformation.

We think also we’ll bring for the companies that are prepared for this like Norton. It will bring business opportunities as well. So we’re quite happy with everything that we’re doing. But it also, like many other things, requires some upfront investment and and that we are doing.

Webcast Operator: Thank you. And there seems to be no further questions. So by that, we’ll conclude today’s presentation. Thank you very much.

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