Hafnia said on Friday it achieved its best quarterly result ever, boosted by a soaring freight market for its product tankers in the first months of the year.
The company, however, trimmed its dividend payout in view of heightened market uncertainty amid a new flare of the coronavirus pandemic.
Net profit for the second quarter rose more than eight-fold year-on-year to $97.7m, from $12m in the corresponding period of 2019. First-half results were equally robust, climbing 340% to $175m.
“The steepening contango market led to a surge in demand for floating storage for crude oil and refined products… achieved rates were much stronger than normal,” the company said in a results presentation.
Against its own expectations, the market continued performing well into the third quarter, the company said, as the Atlantic basin benefited from lower-than-usual tonnage supply, as well as from a strong market out of the US Gulf due to higher-than-expected refinery utilisation there.
The outlook, however, is far from rosy, BW Group-owned Hafnia warned. Demand for product tankers receded considerably, as market players began drawing down inventories built up over the previous months, thus reducing the number of vessels in floating storage and increasing supply of ships.
Covid-19 is “leading to unprecedented demand destruction and weak economic fundamentals,” Hafnia chief executive Mikael Skov said. “This negatively impacts our short to medium-term market outlook.”
In view of that situation, Hafnia trimmed its dividend payout ratio to 39% for this quarter, compared with 50% in the previous period.
Hafnia’s general policy is to pay half its annual net profit to shareholders, adjusted for extraordinary items.
This dividend reduction came unexpectedly to some analysts, who also said the second-quarter profit was 7% below their own estimates, due to lower-than-expected average revenue for the quarter.
“Based on the report being on the soft side, lower-than-forecast dividend and guidance we would expect a negative reaction in the share price today,” said analysts at Danske Bank, who have a buy recommendation on the stock.
Hafina separately said it agreed to sell one of its older ships, the 75,000-dwt Hafnia America (built 2006) for a net $11.6m. The Onomichi Dockyard-built vessel will be delivered later this year.
Chief executive Skov said the company “invested together with a strategic joint venture partner in a methanol project”.
The comment came a day after TradeWinds reported that Hafnia’s joint venture with CSSC (Hong Kong) Shipping has signed up for four dual-fuel LR2 tankers at Guangzhou Shipyard International (GSI).
Skov also said Hafnia established a “specialised pool”, adding a pillar to the company’s pool management business.
Hafnia became a subsidiary of BW Group early last year after a takeover by the Andreas Sohmen-Pao-led company. A product tanker specialist, it controls 184 vessels, of which 87 are owned.
