Earnings call transcript: Royal Corpac Q4 2023 sees record EBITDA growth

Royal Corpac reported a strong financial performance for the fourth quarter of 2023, highlighted by a 9% year-on-year increase in proportional EBITDA, reaching record levels. The company’s trailing twelve-month EBITDA stands at $718.41 million, with total revenue of $1.497 billion. The company also improved its operating cash return to 15.1% and increased its proportional occupancy rate to 93%. This performance comes amid significant investments in various global projects and a proposed dividend increase alongside a new share buyback program planned for 2025. According to InvestingPro analysis, the company currently offers an attractive dividend yield of 2.88%.

Key Takeaways

• Proportional EBITDA rose by 9% year-on-year to record levels.
• Operating cash return improved to 15.1%.
• Proportional occupancy rate increased to 93%.
• Significant investments in global infrastructure projects.
• Proposed dividend increase and share buyback program for 2025.

Company Performance

Royal Corpac’s performance in Q4 2023 demonstrates its robust operational capabilities and strategic investments. The company achieved a record proportional EBITDA, reflecting its strong market position and effective cost management. The increase in operating cash return and occupancy rate further underscores its operational efficiency.

Financial Highlights

• Proportional EBITDA: Increased by 9% year-on-year.
• Operating cash return: Improved to 15.1%.
• Proportional occupancy rate: Rose to 93%.

Outlook & Guidance

Looking forward, Royal Corpac has set a 2025 proportional EBITDA guidance of €1,150-1,200 million and expects proportional operating CapEx of around €300 million. The company remains cautiously optimistic, despite facing challenges in Mexico and the AIMS Energy terminal. It continues to focus on growth in industrial gas and new energy spaces, aligning with its strategic priorities. InvestingPro analysis suggests the stock is slightly undervalued at current levels, trading at an EV/EBITDA multiple of 12.08x. For detailed valuation insights and more exclusive metrics, check out the comprehensive Pro Research Report available on InvestingPro.

Executive Commentary

CEO Dick Richel stated, "We delivered strong results with a record proportional EBITDA and high occupancy rate," highlighting the company’s operational success. He also reaffirmed Royal Corpac’s commitment to supporting customers in the energy transition. CFO Michael Hilsing emphasized the company’s dedication to generating shareholder returns.

Risks and Challenges

• Regulatory challenges in Mexico affecting terminal operations.
• Potential impacts of US tariffs on operations.
• Mixed chemical market performance, with weaknesses in Asia and the Middle East.
• Ongoing strategic review of the Vopak (AS:VOPA) Ventures portfolio.
• Challenges in the AIMS Energy terminal.

Q&A

During the earnings call, analysts inquired about the potential impacts of US tariffs and the impairment of the Mexico terminal due to regulatory challenges. Royal Corpac also addressed its LNG project developments in South Africa and Australia, reflecting its strategic focus on energy transition and infrastructure expansion.

Full transcript - Vegetable Oil Packing JSC (VPK) Q4 2024:

Conference Operator: Hello, and welcome to the Royal Corpac Full Year twenty twenty four Update. Throughout the call, all participants will be in a listen only mode. And afterwards, there will be a Q and A session. This call is being recorded. I am pleased to present Patrina Tapio, Head of Investor Relations.

Please go ahead with your meeting.

Fabiana Tocciu, Head of Investor Relations, Royal Corpac: Good morning, everyone, and welcome to our full year ’20 ’20 ’4 results analyst call. My name is Fabiana Tocciu, Head of IR. Today, our CEO, Chutcivic Richel and CFO, Minhil Hilson, will guide you through our latest results. We will refer to full year 2024 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for the Q and A.

A replay of the webcast will be made available on our website as well. Before we start, I would like to refer to the disclaimer content of the forward looking statements, which you are familiar with. I would like to remind you that we may make forward looking statements during the presentation, which involve certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to the questions during the Q and A. And with that, I would like to hand over the call to Dick.

Dick Richel, CEO, Royal Corpac: Thank you very much, Fashona, and good morning to all of you joining us in the call today. Let’s move to the key highlights for the year 2024. Starting on the left side with improve. In 2024, the need for our services remained strong across the portfolio. Very happy that resulted in a proportional occupancy of 93%.

And we did that by also continuing to serve our customers well. We reported improved financial performance, growing our proportional EBITDA. Adjusting for divestments and negative currency effect, our proportional EBITDA increased by 9% year on year to billion, the highest result on record. Also, our operating cash return improved year on year to 15.1%, driven by strong performance of the business and contributions from growth projects, as well as lower capital employed due to the divestments done in 2023. Let’s take a look at growth.

Growing our footprint in gas and industrial terminals. We made significant investments in Canada, India and The Netherlands this year. And in all these countries, construction is ongoing to support energy security, energy affordability and allowing the switch to more sustainable energy. We’re also expanding our industrial terminals in China and Saudi Arabia. More than EUR500 million have been permitted in gas and industrial investments in 2024, reaching a total of more than EUR1.2 billion on a proportional basis since we announced our strategic direction in 2022.

Looking ahead, we see solid opportunities to further grow with, for example, an open season for the storage of LNG after 2027 at AIMS Energy terminal in The Netherlands and positive developments in South Africa related to a potential LNG import terminal. Let’s move to accelerate towards new energies and sustainable feedstocks. We are focused on repurposing existing capacity for low carbon fuels and feedstocks, as we did in Singapore, The U. S, Brazil and The Netherlands during 2024. Additionally, we’re excited about the first steps of a second battery energy storage project here in The Netherlands.

Our commitment remains unchanged to support our customers in the ongoing energy transition and invest when opportunity arise at the right returns. Move on to some of the dynamics of the key markets in which we operate and how they impact the demand for our infrastructure services. To start with the gas markets, we saw continued high utilization of our LNG infrastructure and LPG demand is growing around the world, driven by petrochemical and residential demand in, for example, India. During 2024, our spec LNG terminal in Colombia had a strong performance, and that was driven by an increase of LNG imports as a result of LNG imbalances in the country. The market for low carbon fuels like SAF and renewable diesel remains in oversupply, anticipating increasing mandates.

The demand for infrastructure of these fuels and feedstocks continues to be robust, supporting the longer term prospects. New supply chains for new energy projects, such as ammonia as a hydrogen carrier and CO2, are developing at a somewhat slower pace than anticipated. As the direction of the energy transition remains unchanged, we continue to be well positioned to capture growth opportunities when they arise. Fundamentals in the energy markets remain healthy. Our oil hub terminals in Singapore Straits, Fujairah and Rotterdam continued to have strong demand.

The need for local imports are driving a stable performance in oil distribution terminals. And lastly, chemical markets continue to be oversupplied. However, the impact on our chemical distribution terminals remains limited. Our industrial terminals connected to manufacturing clusters showed a solid throughput levels, driven by new capacity that was commissioned. Continuing on to the next slide and looking further into the financial performance of our portfolio across the different product markets.

The divestment impact compared to 2023 was fully offset by growth contributions. Gas and oil markets showed firm demand for our infrastructure, especially in the oil hubs. Even though chemical market performance is mixed with the strength in The U. S. Contrasting the weakness in Asia and The Middle East, demand for our infrastructure remains healthy.

The proportional EBITDA of our existing terminals increased by EUR96 million excluding the impact of currency translation and divestment impact. The increase was mainly related to growth projects contribution of €75,000,000 and strong performance of our existing terminal, which was partly offset by increased expenses. Across the network, we were able to record an improved proportional EBITDA margin of 57%, slightly up from last year. Next (LON:NXT) up on financial performance, we have continuous focus on our sustainability performance. And to start with safety, our personal safety performance remains strong, and we keep an improving trend on our process safety event rate.

With regards to emissions, we made further steps to reduce our scope one and two emissions compared to our baseline in 2021. This was mainly driven by investments in electrification and switching to green electricity for our operations. We made progress in increasing diversity in management, where women now represent 22% of our senior management. The next slide shows this map shows the main developments ongoing around the globe. We’re proud to see our industrial terminal in Weizhou in China now fully operational, and the expansion of industrial capacity in Qinseng in China and at Chem Tank in Saudi Arabia.

Major LPG and LNG new construction projects are ongoing in Western Canada and in Netherlands. Repurposing existing capacity in multiple locations is a proof of our ability to adjust to evolving markets. We positioned ourselves well by acquiring additional land in the Port Of Alamoa in Brazil, where we can develop projects like we are doing in Volpek Energy Park in Antwerp, Belgium. Access to land in strategic locations coupled with our capabilities to develop new capacity drives growth in the future. Let’s look forward.

And looking forward, we see that we are well positioned to further grow the business while creating shareholder value and returns. Market fundamentals continue to be strong and the demand for infrastructure continues to increase. We see ample opportunity to continue our path to grow in industrial gas and new energy space. A strong balance sheet, driven by good business performance, supports the funding of these opportunities. In India, we are exploring options to fund growth via a potential local listing.

As said, we remain committed to generate shareholder returns. This is further evidenced by the proposed dividend increase to per share and the initiation of a new share buyback program of up to million in 2025, following the program we executed last year of EUR 300,000,000. To summarize, we delivered strong results with a record proportional EBITDA and high occupancy rate. We executed on our strategy to grow the business, especially in gas and industrial terminals, and our well diversified portfolio of terminals delivers healthy cash generation, supporting our growth ambition and returning value to shareholders. And lastly, we are committed to invest in opportunities that the energy transition provides.

With that, I want to hand it over to our CFO, Michael Hilsing, who will give you more insights on the financial aspects of 2024 and for the last quarter. Wilho?

Michael Hilsing, CFO, Royal Corpac: Thank you, Dick, and also from my side, a good morning to everyone in the call. Let me take you through our recent financial results in a bit more detail. I will start by giving some more insight into our financial performance in Q4 of twenty twenty four. I will then cover our strong performance in full year 2024, which is well in line with our latest guidance, as well as our strong cash flow generation capabilities and how we use this to fund attractive growth opportunities and return value to our shareholders. Let’s start with the financial performance for the last quarter of the year compared to the third quarter of twenty twenty four.

We saw solid demand for our storage infrastructure, which is reflected in the proportional occupancy rate of 93%, a one percent point increase compared to last quarter. This increase in rented capacity in combination with higher throughputs positively influenced our revenues, which grew by 3.7% quarter on quarter. Looking at the operational expenses, we saw an increase in cost in Q4. However, this increase was mainly driven by one off costs, which were million in the last quarter. These one off costs were mainly a result of currency revaluation of some receivables in addition to costs related to the EIMS Energy terminal in The Netherlands, certain provisions and other items.

This also had a negative impact on proportional EBITDA, which decreased by 5.8% quarter on quarter. When we adjust for one offs, the proportional EBITDA slightly increased in the quarter. Moving from the Q4 numbers to a full year comparison. Proportional EBITDA excluding divestment impact grew by 8%, reflecting a strong business environment and a positive contribution from growth projects. Strong demand for storage infrastructure resulted in a proportional occupancy rate of 93%, a two percent point gain compared to last year.

Delivering on our focus on cash flow generation, operating cash return improved further to 15.1%, a 1.1 increase compared to 2023. These financial results highlight the strength of our well diversified portfolio in terms of products we store, geographies we are active in and the role our infrastructure plays. If we take a closer look at the business unit’s performance, an ongoing pattern of improvement can be seen across the regions. The negative divestment impact of million was fully offset by contributions from our growth projects, mainly the added EIMS Energy terminal in The Netherlands. Strong performance in the Asia and Middle East business unit, The Netherlands and Singapore was driven by good performance of our energy hubs.

In addition, in The U. S. And Canada, chemical and industrial terminals showed strong performance. Overall, there is a strong and stable demand for our services, mainly driven by growing energy needs and ongoing adjustments in global trade patterns. Despite market fundamentals on a global level remaining strong, some of our terminals play some challenges based on the local market and regulatory environment.

For example, in Colombia, our LNG terminal spec is benefiting from increased imports to support energy imbalances. We expect that in the short to medium term, our terminal will compensate for the gas deficit in this country. These developments have led to an impairment reversal of million. On the other hand, our VERA cruise terminal sees lower imports of petroleum products into Mexico as a result of a negative market outlook that is driven by the regulatory environment in this country. This led to an impairment charge of million.

In The Netherlands, we are capturing market opportunities for waste based feedstocks by repurposing capacity in Fleidingen. While this is an attractive investment for us supporting our strong cash flow focus, there is some temporary impact on performance of the terminal due to the capacity being repurposed. And as mentioned before, AIMS Energy terminal is facing some technical challenges, while the terminal remains operational. We expect the impact of that to continue in 2025, however, not as material as in Q4 twenty twenty four. And lastly, our Vopark Ventures Fund with 19 investments will undergo a strategic review going forward and we will provide a further update on it during our Capital Markets Day in March.

Back to our global network. This slide shows more detail on the proportional EBITDA of the different terminal types we operate. Gas terminal showed firm throughput levels and the growth year to date is mainly driven by our added AIMS Energy terminal in The Netherlands. Industrial terminals, backed by long term often twenty plus year contracts had solid throughput levels and we had some contribution from the newly commissioned capacity in China. Chemical distribution terminals showed stable performance.

The individual terminals showed a mixed picture with a strong performance in The U. S. And Canada, offsetting weaker chemical markets in Asia. Oil terminals, both hubs as well as distribution terminals, showed solid performance, driven by growing energy demand and geopolitical uncertainties. All in all, this has led to an increased proportional EBITDA and a solid operating cash return of 15.1% in 2025.

Let me move on to the cash flow generation. Our cash flow generation continued to be strong, resulting in EUR $948,000,000 of gross cash flows generated by the group companies and increased dividend upstreaming from our joint ventures. Compared to last year, gross cash flows increased by 5%. After tax payments, derivatives impact and other cash flow from investing and financing activities, we had million cash flow from our operations. This is the available cash flow that we can allocate towards operating CapEx, which is our license to operate growth CapEx and shareholder distributions, all in line with our capital allocation policy.

The operating CapEx and growth CapEx amounted to EUR537 million in 2024. Shareholder distributions consisting of dividend paid in 2024 and the share buyback program of 2024 amounted to million and were therefore well supported by cash flow generation. It remains our priority to generate strong cash flows in order to fund operational CapEx, pursue growth opportunities and deliver value to our shareholders. The strong focus on cash flow is well reflected on the per share metrics, as can be seen on this slide. Despite an ongoing transition of the portfolio, which involves divestments, we were able to increase earnings per share, excluding exceptional items by more than 40% since 2021.

Also proportional free operating cash flow per share significantly improved to per share, a significant improvement over the last years. This increase in free operating cash flow per share has enabled us to increase shareholder distributions in the form of rising dividend payments and the new share buyback program up to million for 2025 as we announced today. The previous buyback program, which we completed in 2024, supported value per share metrics and the new program will continue to do so going forward. Moving on to the leverage. Total (EPA:TTEF) net debt to EBITDA went up to 2.35 times compared to the end of twenty twenty three when it was at 1.99 times, still below our ambition of 2.5 to three times total net debt to EBITDA.

The proportional leverage, which reflects the economic share of the joint venture debt, slightly increased to 2.67 times compared to the end of twenty twenty three when it was at 2.4 times. Funding joint venture growth prospects is a focus area for us, and we continuously explore different funding options for our joint ventures like we do with our AVTL joint venture in India considering an IPO. As indicated, returning value to shareholders is an important part of Vopak’s capital allocation framework. We have a proven track record of delivering consistent and growing dividends, while maintaining a healthy payout of around 50%. For 2024, we propose a dividend of per share compared to per share over 2023.

That brings me to the full year outlook of 2025. Our financial outlook is cautiously optimistic for 2025 with a proportional EBITDA range of $1,150,000,000 to 1,200,000,000 subject to market uncertainty and currency exchange movements. Additionally, we account for some capacity being repurposed and the technical challenges at our AIMS Energy terminal in The Netherlands. We expect proportional operating CapEx of around $300,000,000 for 2025. And then last but not least, before I want to close off, I want to highlight our upcoming Capital Markets Day on the March 13.

We will provide an update on the company’s strategy, financial targets and overall business development. Please reach out to the Investor Relations team for further details and registration when you would like to attend. The webcast will be made available as well, and happy to meet you there. Bringing it all together in this slide, we delivered on our financial performance and despite divestments, proportional EBITDA grew year on year. Operating cash return increased to 15.1% at the end of twenty twenty four, which is well above our long term target of 12%.

To support our growth ambitions, in India, we reached an agreement for primary equity issue and are in process of a potential local IPO. With our well diversified portfolio in terms of the products we store and the different geographies we operate in, we are able to create connections. We are committed to capture new opportunities to grow in industrial and gas terminals and accelerate towards new energies and sustainable feedstocks. These factors combined with a strong capital allocation framework create value to our shareholders. And this concludes my remarks in the presentation, and I would like to back hand it back to Dick for the Q and A.

Dick Richel, CEO, Royal Corpac: Thank you, Emile. And with that, I would like to ask the operator to please open the line for question and answers.

Conference Operator: The first question comes from the line of Jeremy Kinkade from Van Namsherst Kenpen. Please go ahead.

Dick Richel, CEO, Royal Corpac: Jeremy,

Analyst: it

Conference Operator: has just dropped. The next question comes from Thijs Berkelder from ABN AMRO (AS:ABNd).

Thijs Berkelder, Analyst, ABN AMRO: The steel market is not reacting too well on your report. One of the reasons obviously, let’s say the $20,000,000 1 offs not being on the front page labeled as one offs. The other thing is probably the $20.25 guidance, which probably is perceived as lower than what the market has expected. Can you maybe further quantify your, let’s say, the build up of your 2025 guidance. 70% of your contracts are inflation linked, inflation roughly 4%, dollar stronger, your occupancy rate higher than before.

So why explain why the guidance for 2025 is so cautious Has it maybe to do with startup costs for new projects, whatever?

Michael Hilsing, CFO, Royal Corpac: Well, in general, I think, yes, indeed, what will continue a bit in 2025 is the Mexico impact there. So that is one of the elements. So Mexico was performing still quite well in ’twenty three, over ’twenty four as well. But now we have some empty capacity there that is that has an impact. We have some repurposing impact as well, because we repurpose some capacity in flooding and also in Rotterdam, in Europort.

So that is basically one of the main factors. We will still have some slight impact of the AIMS Energy terminal. Obviously, there is still some currency volatility and we will offset that by some growth projects that is which will be delivered over the year, but it’s not a significant amount, I would say. And then the other factor is, if you look at our growth portfolio, we also need to spend quite a bit of money on business development. So we have quite a sizable growth portfolio and opportunities.

We will update the market more on that in Capital Markets Day. But obviously that also involves quite some investments, which cannot be capitalized so far and have to run through the P and L. So those are the factors. Overall, we expect effectively in the oil market that the oil market will still remain strong and that’s what we also see in the first month of the year. So there is no significant change in that market other than the Mexico impact I just mentioned.

On the gas markets, well, definitely there is demand for our infrastructure to be seen what’s going to happen in Europe with refilling the capacity. But with the take or pay type of contracts, most likely the impact is not going to be material for us in a positive manner. Industrial terminal is still a solid part of our portfolio. And then the chemical side, I would say, U. S.

Should still be strong for the year. Singapore and Europe are still a bit weak compared to where they were historically, but it also seems that that market might bottom out a bit, especially in Europe. So, too early to tell. It’s still a market with some weak elements, but that’s where the market is today. So, that’s altogether has given us a well, I think a realistic outlook from November to December.

Obviously, if you look at the financials in the longer term, we have quite some major construction projects ongoing at the gate expansion here in Rotterdam and then we have also the rest of Canada and we have some sizable projects also in India, but most of these projects are going to deliver either by the end of ’twenty six or beginning of twenty twenty seven. So it takes quite a bit of time before such investments are going to contribute to the financial results of the company.

Thijs Berkelder, Analyst, ABN AMRO: Clear. Then, Ed, on question on your leverage, Are your leverage still below targets? That’s why you maybe can’t afford the $100,000,000 additional buyback. But in your other slides, you’re indicating proportional leverage is to 67 times. And you’re saying providing ample headroom to fund attractive growth.

What is your leverage target range on a proportional basis? Do you have that?

Michael Hilsing, CFO, Royal Corpac: Yes. Well, this is something we will also discuss on the Capital Markets Day. So our preference is well, we have indeed two leverage numbers, but from a portfolio point of view to move towards proportional leverage makes a bit more sense in terms of value creation. We still need to manage our consolidated leverage also from a banking point of view, but we feel that we still have opportunities even within the proportional leverage. So we will most likely give more guidance on the Capital Markets Day related to this topic,

Conference Operator: Jeremy Kinkade from Van La Schott (ETR:1SXP) campaign is back in the queue. Please go ahead with your question.

Jeremy Kinkade, Analyst, Van Namsherst Kenpen: Hello. Good morning, everyone. Can you hear me this time?

Michael Hilsing, CFO, Royal Corpac: Yes. Yes, we can. Excellent. Apologies if I ask

Jeremy Kinkade, Analyst, Van Namsherst Kenpen: a repeat question. Feel free to let me know and I can ask a different one if I do so. But firstly, I was just wondering if you could provide a comment on tariffs in The U. S. And if you’re expecting any impacts to your business from tariffs?

Dick Richel, CEO, Royal Corpac: Good morning, it’s Jeremy. I think if you look at what is happening currently in The U. S, it’s still early to comment on if and what the impact could be. I think if you look at it, let’s put it a bit in perspective of our global portfolio of 76 terminals, eight are currently positioned and located in The U. S.

From that U. S. Location, there’s multiple products that are being exported to other parts of our portfolio, like for instance LNG and like much more other products, like the products that are leaving from the apart terminal at the Houston Ship Channel. So it’s early days to assess if and what the potential impact could be. I think the way we would look at it is much more from a long term perspective and the investments that we’ve done are long term investments.

The flows that are moving to and from our network are long term flows, generally speaking. And if we talk to our customers and we stay close to them to serving them in all the different parts of the world, we don’t get any alarming news from their side on how they want to deal with some of the potential tariffs that will impact them. So I think it’s way too early to mention. And if so, there’s probably going to be a few positives and maybe a few negatives that generally speaking will balance out in the global network.

Jeremy Kinkade, Analyst, Van Namsherst Kenpen: Sure. And then on the Mexican terminal, you’ve obviously taken an impairment alongside a customer leaving that terminal. Does that imply that it’s unlikely to see that terminal being refilled with another customer anytime soon? And if that’s the case, can you give us an idea of what you’re thinking to do with that asset? So the situation in the Mexico terminal, so it’s one of the terminals that we own in Mexico, it’s the one in Veracruz.

Dick Richel, CEO, Royal Corpac: I’ll take you back actually to the situation before we went into fuel distribution. It’s a terminal that is being owned, generally speaking, for imports of chemical products, of bioproducts and feedstocks and vegetable oil products. On top of that, we’ve invested because of the opening in the past of the fuel distribution markets for foreign importers. We’ve partly converted and partly added capacity to support the fuel distribution market in Mexico. What has happened over the past period, and that’s what we’ve updated you on in the last twelve months, is that the government is putting quite a bit of pressure and is making it hardly attractive for foreign importers into Mexico to sell imported fuel products into the country.

So it makes their case pretty complicated to actually be successful in Mexico. Those are the type of customers that rent the capacity at the Veracruz terminal. The reason that we are now impairing the facilities because of that part of the business, so the fuel distribution part of our business, showing limited prospects of turning back relatively soon. Never say never, but at least that’s not what we are betting on at the moment. So what we are doing is repurposing the capacity back into what it was used for before, which is the chemical products, which is vegetable oil products, and that’s the market that we expect to serve as we did prior to the fuel distribution.

And the correction in the impairment was made accordingly. And as Michiel already indicated, that will also have some impact on the results as is outlined in the outlook for 2025.

Jeremy Kinkade, Analyst, Van Namsherst Kenpen: And then final question for me. On the Vopac Ventures portfolio, you’re obviously conducting a strategic review there. Could you give us an indication of how much that portfolio contributes to the group’s EBITDA?

Michael Hilsing, CFO, Royal Corpac: Yes, I can. Well, it doesn’t contribute anything to the EBITDA. At the moment, if you look at the portfolio, we have approximately 50,000,000 invested in Vopak Ventures. The strategic review is really triggered by what we think could be the return of this portfolio versus where our ambitions were. Our ambitions were definitely higher than what we foresee at the moment.

That’s why we also impaired quite a significant part of this portfolio, especially related to our investment in Hydrogenius, which had a positive accretion of the valuation many years ago. But this impairment doesn’t hit P and L, so it goes via the equity. So the results contributed by ventures is low. It’s always based on how attractive can we make an exit on the Vopak venture investments. So at the moment, on the strategic review, and we will give more guidance to the market at the right moment in time, but that’s going to happen definitely in the first half of twenty twenty five.

Conference Operator: The next question comes from the line of Corinne Molder from ING. Corinne Mulder from ING. Please go ahead with your question. The next question comes from the line of Tish Berkelder from ABN AMRO. Please go ahead.

Thijs Berkelder, Analyst, ABN AMRO: Yes. Rest of the market is silent, it seems. So a follow on question. In Slide 15, you are showing an EBITDA bridge where you mentioned other including ventures minus $9,000,000 Is the minus $9,000,000 largely the ventures? Second question is on your new terminal, LNG terminal in South Africa.

What kind of investment requirements should we expect for this terminal from a VOPEC perspective?

Michael Hilsing, CFO, Royal Corpac: Yes, first of all, on the Slide 15, it’s mainly corporate entities. So hardly anything is related to venture type of entities of the 9,000,000. So for example, a corporate entity is a captive we have in Singapore, but there’s other corporate entities we have as well, but the venture impact is relatively limited. In South Africa, we effectively own 52% of that venture we have together with Transnet and our partner Real Chile. The latest outlook for the investment in South Africa is well, it’s still under consideration, but an indicative number for Phase one is around 400,000,000 and ultimately if you include Phase two it will be around 700,000,000 but these are ballpark figures at the moment because we haven’t done a serious FEED process yet.

So these are I would say well indicative numbers.

Dick Richel, CEO, Royal Corpac: Okay, clear. Then

Michael Hilsing, CFO, Royal Corpac: can

Thijs Berkelder, Analyst, ABN AMRO: you maybe give an update on what kind of impact you see from Dutch politics nitrogen legislation, whatever on your plans for the CR2 terminal in Rotterdam. Maybe, what is it, the CO2 energy storage potential project in Rotterdam etcetera?

Dick Richel, CEO, Royal Corpac: Well, maybe to take that one. We’re still committed on the project, so that’s a CO2 NEXT project, that’s for the import or the reception of liquid CO2. Location is available. We see overall still a strong desire from the different partners and end users of the facility to continue with the project. It’s harder given, I think maybe more uncertainty, but the timeline, the exact timeline is always a bit hard to predict.

But if I talk to the potential users in the way they would phrase it is generally speaking, a CCS project that is the one that we are participating in, like this one in Rotterdam, is a relatively competitive CCS project, simply because the industry is next door. There is an offshore solution that is available. So the volumes would definitely justify an investment. And therefore, we are optimistic that this project will continue to develop positively. And not too pessimistic, I would say, on, let’s say, current temperature in the political landscape.

I don’t think that will have a bigger impact on the viability of this project medium to long term.

Thijs Berkelder, Analyst, ABN AMRO: And the Energy Dome?

Dick Richel, CEO, Royal Corpac: The Energy Dome. I want to know about the Energy Dome? Yes. That’s one of the ventures that we’ve invested in.

Thijs Berkelder, Analyst, ABN AMRO: Yes, correct. And they’re expanding, I think, into The U. S. But I thought there also initially was a plan to have an energy dome also based in Rotterdam. Is that delayed postponed or?

Dick Richel, CEO, Royal Corpac: No, I don’t maybe there have been discussions about it, but it seems highly unlikely given the simple size of land surface that you need for it. So in The U. S, some of their projects are potentially attractive because you need a massive amount of land available to put the actual dome there. So in some of the deserts in Utah and some of these places there, it has become a potential option. But in Rotterdam, I don’t think that that is a very realistic well, I think it’s very unrealistic option that that will happen.

We follow everything in Energy Dome through our ventures investment. So we’re not developing any projects together with them. And if finally the market decides that they are a potential provider of a solution, then it’s good for our ventures state, but it’s not that we are co developing projects with them.

Conference Operator: So the next question comes from the line of Querin Molder from ING. Maurer, you’re live to ask a question.

Michael Hilsing, CFO, Royal Corpac: Can you hear me now?

Dick Richel, CEO, Royal Corpac: Yes. We can hear you clearly.

Analyst: Okay, perfect. Now the assistance were not ideal today. Okay, fine. A couple of questions. First of all, about Mexico.

So how long will you think it will take to, let me say, to have the repurposed there already? Is that 2026 already?

Dick Richel, CEO, Royal Corpac: That will take, I think it will be 27, clear eyed.

Analyst: Okay, 27, percent, that’s my first question. And then about let me say the market in general, so you have given an outlook guidance. Can you give me some flavor on the chemicals and oil markets, how you see them developing in 2025? Is that different from 2024, for example?

Dick Richel, CEO, Royal Corpac: I think they’re still fairly healthy clients. If you first take a look at the oil markets, hub locations, Singapore, Fujairah, Rotterdam and Greater Singapore region, I still think or I still think I know healthy demand, healthy occupancy rates. If the total portfolio is 93% in those particular locations, it’s above 95%. So still, I don’t see any weakening of those markets for 2025%. I think if you look at fuel distribution and exclude Mexico for a second, Also there, positive and healthy demand.

So no big change expected. And I’m talking about South Africa, about Australia, about Indonesia, some parts of our Brazil operation, Los Angeles. I think all healthy developments. If I then move so by and large, I think oil continues to be strong for the year. I think chemicals, maybe not so much about what is happening on the macro picture on chemicals because we’ve been repeating that, the main headlines there for a number of quarters now.

But what you see is basically the balance. The U. S. Is doing actually quite well and is up and was doing better in ’twenty four than it was in ’twenty three. So you see that especially Deer Park is super high occupancy and opportunity also to still have a solid rate development.

We see some weaknesses on the other hand in Asia. China low occupancy, but not expected to go much deeper, I would say. And then some of the locations in Asia itself, some of the tanks in Singapore are under pressure. So we see that occupancy has dropped during the year ’twenty four. Yes, that will remain to be seen how that develops in ’twenty five, but I don’t expect that, that will go down much further.

And then I think the balancing element is Europe, but we’re very happy that we’re not exposed to the European petrochemical market, especially in Rotterdam. So I think Belgium is doing quite okay and pretty healthy. I also don’t expect big changes there in ’twenty five compared to ’twenty four. So by and large, I think chemicals with the pluses and the minuses across the portfolio, it’s stable. And I think the as I said on the oil side, pretty healthy.

So overall, and that is, I think, what Michel also indicated in the first question that came from Thijs. On the outlook, it’s really, it’s solid demand in our portfolio. 93 of occupancy across the portfolio is solid demand. But there’s a couple of pockets that are now determining, I think, the outcome of the result in 2025. That’s Mexico, that’s AIMS, that’s maybe a couple of FX developments and movements, maybe some cost developments on the BD side.

Those are kind of like indications that may move the total result up with 10 or minus 10. But fundamentally, demand for the services, it’s still fairly healthy from where I sit.

Michael Hilsing, CFO, Royal Corpac: Fine. And then on your cost, because in my

Analyst: view in 2024, you benefited from lower utility prices. So how is the outlook for 2025 then if that is stabilizing and you still have are confronted with higher wages, etcetera? Anything to add to that?

Michael Hilsing, CFO, Royal Corpac: Yes. Energy prices are definitely higher. A lot can be passed on to our customers because we in 2022, when the prices were really high, we put a lot of effort in making sure that we have the right pass through principles with our customers. But definitely there is some upward pressure in a negative sense on energy and utilities, Kiraly, at the moment.

Analyst: Okay. And then my final question is about the LNG projects or ambitions. Last year, you mentioned Australia, as I remember. It looks like that you were shifting somewhat to South Africa. So, we have, let me say, different shifting parts, shifting projects, it looks like.

Can you maybe elaborate on that?

Dick Richel, CEO, Royal Corpac: I think the latest news was on South Africa because we moved into the agreement with the authorities on the long term concession that we were awarded. So that was why South Africa maybe made it a bit more in the headlines. Australia, and that’s the project in Melbourne for LNG imports, is still on the list. We’re working on that as well. We’re on target and in the process of preparing ourselves for the permit application over there, and that is moving positively.

So I think the two big bets on LNG, which still both of them a development process that is never an easy development process for specific reasons, but we’re both very optimistic at least about the opportunities that we have in those locations. So both South Africa and Australia at the moment are high on our development list from an LNG perspective.

Analyst: My final question is about AVGL. How is the planning looks like at this moment for the, let me say, the second quarter probably, but is there anything to

Michael Hilsing, CFO, Royal Corpac: I guess you mean on the IPO, so we have filed a draft prospectus with the Indian authorities, Seibi. We’re waiting for the final response, so we have answered many questions. But overall, it seems we’re in good shape in terms of prospectus, then we need to file the updated draft prospectus, and then we have another sort of three weeks to go to an IPO. So well, the planning is that it should happen somewhere in the first half of twenty twenty five if everything goes smoothly.

Analyst: Okay. Thank you, Mito. Thank you, Piet.

Dick Richel, CEO, Royal Corpac: Thanks, Cleo.

Conference Operator: The last question, which is a follow-up question from Tish Bekhameder from ABN AMRO. Please go ahead.

Thijs Berkelder, Analyst, ABN AMRO: Yes. Thank you again. Next follow-up question. A, you’re showing a slide with your operational free cash flow per share development over the last couple of years, constantly on the rise, so showing your fresh free cash flow yield is quite high right now. Can you maybe give some guidance on what to expect from dividend from JVs and associates in ’twenty five versus ’twenty four?

Is there any reason to expect a certain drop in the dividend or not? And second question is on REEF, your Canadian LPG exports project. Reading AltaGas (TSX:ALA), they give the impression that Phase one is close to 100% contracted. Could that mean that Phase two is nearby already? And further, AltaGas also made clear that they aim to have the projects levered up while in your accounts.

I think you’re still fully booking the CapEx on your balance sheet.

Michael Hilsing, CFO, Royal Corpac: Maybe let me start on the dividends from joint ventures. So twenty twenty four, we had quite some healthy upstreaming of dividends from our joint ventures. Our target is a minimum of 90% of the net profits we generate. There is no indication that for 2025, we will not achieve it. So in general, we still expect very healthy dividend upstreaming of our joint ventures.

So there is I think that’s the answer to your question in my mind.

Dick Richel, CEO, Royal Corpac: If you look at maybe a brief size, so far the development of the project construction is moving on. The difficult part of the in water works during the right season is underway, and that’s I think a very important element in terms of meeting the timelines. The first phase, as we announced already when we started it, is fully contracted out. There’s always a bit of in the final result, there’s a bit of dependency on the actual volume that will be put through in the first phase. So the variability, I think, in when we go live with the terminal will depend a bit on ancillary revenues for the terminal with a good base because it’s just one customer that will occupy the facility.

I’m happy and that’s what we hear also from AltaGas. They are positive continue to be very positive on the role of the year of the facility and the ability to actually increase that going further. If you look at geopolitically what’s happening between Canada and The U. S, you can only imagine that it becomes an even more attractive outlet for the country to have. So as you are, so are we also speculating and hoping that there is an opportunity for a second phase.

I think the important thing over there to realize is the jetty that is currently being built will only be utilized for a minor percentage in Phase one. So there’s ample opportunity to expand and to use the jetty for much more volume and the same holds true for the land. So if you recall, the investment was done at the time and it is fully based on the full investment that we do in the Jetty and all the land preparation covered by Phase I. But then Phase II and anything that comes after that is actually benefiting from land availability and jetty availability. And then maybe Michel, anything on the leverage of that project because we take it on the balance sheet?

Michael Hilsing, CFO, Royal Corpac: Yes, we take it on the balance sheet. So that’s adding to our consolidated net debt to EBITDA. Obviously, if we look at the proportional leverage, if we would have had a leverage in the joint venture, it would have also added to the year proportional leverage. But it’s yes, that’s where we are. I think it’s fully equity funded effectively, the project, but we take it on the balance sheet.

So we effectively take in the debt here to fund the equity in the Canadian project.

Thijs Berkelder, Analyst, ABN AMRO: Yes. And related to proportional versus consolidated, you now have shifted to only giving an outlook based on proportional EBITDA. Are you expecting or do you want to see sell side moving to pure proportional forecasting more or less?

Dick Richel, CEO, Royal Corpac: Yes, I would yes,

Michael Hilsing, CFO, Royal Corpac: my preference would be to move everything to proportional. Obviously, we need for IFRS purposes, we need to report consolidated numbers, but the value creation really sits with proportional numbers. I think we made quite some steps over the last two years to move towards proportional and also during Capital Markets, we will continue that journey with the ultimate aim to at least give all the guidance on a proportional basis. So that is important for us. And I think it’s also important for the market to fully understand our company, because we have so many joint ventures and the number of joint ventures is not going to go down.

It’s actually increasing, so it’s very relevant to move to proportional numbers. So it would be very helpful if the sell side also moves to proportional numbers and most of people do already sell.

Thijs Berkelder, Analyst, ABN AMRO: Yes. Okay. Clear.

Conference Operator: There are no further questions. So I’ll hand back over to you, Host, for closing remarks.

Dick Richel, CEO, Royal Corpac: Well, thank you very much. Thank you all for joining us this morning for your questions. If there’s any follow-up comments or items that you would like to raise, then you know you can find Marjona and the team on IR and hope to connect and meet you in person in at the Capital Markets Day and to anyone else also virtually. So thank you very much and have a great day. Bye.

Conference Operator: Thank you for joining

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