On Friday, Hafnia (NYSE:HAFN) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Hafnia reported a net profit of $277.8 million for Q2 2026, marking the strongest quarterly results since Q3 2022, bolstered by vessel sales and market disruptions.
The company continued its strategic fleet optimization, selling several vessels and reducing its net loan to value ratio from 20.2% to 13%, enabling a 90% dividend payout.
Despite geopolitical tensions affecting oil flows, market fundamentals remain strong with expected inventory restocking driving future tanker demand.
Hafnia's fleet earnings improved significantly, with Q2 TCE rates averaging $44,093 per day and the company covering 80% of its Q3 earning days at $30,716 per day.
Hafnia CEO Michael Skov announced his transition, with Søren Steenberg Jensen to succeed him, ensuring continued focus on disciplined capital allocation and strategic long-term growth.
Full Transcript
Sheena Williamson Holt, Head of Communications at Hafnia
Hello, everyone. Welcome to Hafnia's second quarter 2026 financial results presentation. We will begin shortly. You will be brought through today's presentation by Hafnia CEO Michael Skov, CFO Perry van Echtelt, Soren Winther, VP, Commercial, and Thomas Andersen, EVP, Head of Investor Relations. They will be pleased to address any questions after the presentation, which will be moderated by myself, Sheena Williamson Holt, Head of Communications at Hafnia.
Should you have any questions, you can submit them via the chat function or use the raise hand function to be unmuted to ask the question verbally. Questions will be answered at the end of the presentation. During this conference call, some statements may be considered forward looking, reflecting management's current expectations. These statements involve risks, uncertainties and other factors, many of which are beyond Hafnia's control that could cause actual results, performance or plans to differ significantly from those expressed or implied.
Additionally, this conference call does not constitute an offer or solicitation to buy or sell any securities. With that, I'm pleased to turn the call over to Hafnia CEO Michael Skov.
Michael Skov, CEO
Thank you and hello everyone. We appreciate your joining us for Hafnia's second quarter 2026 earnings call. I'm Michael Skov, CEO of Hafnia. With me today are our CFO Perry van Echtelt, our VP of Commercial, Soren Winther, and our EVP Head of Investor Relations, Thomas Andersen. Our second quarter 2026 results were published earlier today and are available on Hafnia's website. On today's earnings call, I will first cover the main developments in the quarter before Soren walks through the market and Perry reviews the financials.
I will then touch on our strategic initiatives before concluding the call for questions. Let's move to the next slide. Before we proceed, I would like to go through our Safe Harbor statement. The information discussed on this call is based on information we have today which may include forward looking statements that involve risks and uncertainties. Actual results may differ materially from these statements. Nothing presented in this call should be construed as an offer to buy or sell securities.
Next slide. I will start with the key highlights from the quarter. And now we go to slide number five. The second quarter was another very strong quarter for Hafnia. The market has not yet normalized. Six months after the start of the conflict in the Persian Gulf, we are still experiencing disruptions to Gulf flows and rising tensions have re-established the Red Sea choke points dislocating oil flows across the world. Against this backdrop, we delivered a net profit of $277.8 million, the strongest quarterly results since the third quarter of 2022.
We also continued to optimize the fleet by divesting older vessels. During the second quarter we sold one LR1, two MRs and three Handy vessels, recording a gain on sale of $39.3 million. In the third quarter, we completed the sale of our 50% interest in two MRs held through the joint venture with Andromeda, resulting in a $13.3 million gain for Hafnia. Let's go to the next slide. Hafnia's platform remains highly integrated with ship owning, commercial pool management, technical management, bunkering and adjacent businesses all aligned.
At quarter end, we owned 103 vessels and had nine vessels time chartered in with an average owned fleet age of 9.7 years. Our net asset value at quarter end was approximately $4.4 billion or around $8.89 per share, corresponding to approximately 88.47 Norwegian kroner per share. Alongside our own fleet, we commercially manage around 60 third party vessels. Seascale Energy, our bunkering joint venture with Cargill, also continues to develop as an increasingly relevant platform in a volatile fuel and freight environment.
Let's move to the next slide. Now moving to shareholder returns. Our net loan to value at end of Q2 stood at 13%, decreasing from 20.2% in the previous quarter, primarily due to strong cash flow generation from both operations and vessel sales. With leverage now below the lowest threshold in our dividend framework, we will declare dividend based on the maximum payout ratio of 90% of net profit. That translates into a dividend of $250 million or $0.5003 per share.
Together with the first quarter dividend, total dividends for the first half of 2026 amount to $0.788 per share, which represents an annualized yield of around 21% based on a share price of $7.5. This is the 18th quarter in a row in which Hafnia has paid dividends, underscoring both the cash generating quality of our platform and our commitment to returning capital. I will now hand over to Soren to take us through the industry review and outlook.
Perry van Echtelt, CFO
Thanks, Sheena, and good day everyone. If you go to the next slide: in Q2, rates reached record highs and we delivered our strongest quarter since the third quarter of 2022. TCE income was $372.9 million while adjusted EBITDA reached $287.3 million. Our fee-based businesses contributed $8.8 million for the quarter and, in addition, we received $9.9 million in dividend income from our investment in TOR. Net profit was $277.8 million compared with $75.3 million a year ago.
This includes the $39.3 million gain on disposal from the vessel sales completed during the quarter, bringing our half-year net profit to $457.5 million. Return on equity for the second quarter reached 44.6% on an annualized basis, and return on invested capital was 35.2%. Next slide please. Turning to the balance sheet: the balance sheet also improved during the quarter on the back of strong cash flow generation from both operations and the proceeds from sale of vessels.
The cash balance increased to $271 million while gross debt reduced to $798 million. Net debt therefore declined to $527 million at the end of Q2. The net LTV moved substantially down to 13% from 20.2% at the end of the first quarter. This was mainly due to lower debt and supported by the increased vessel values. Total liquidity remains strong at approximately $631 million, which includes $360 million of undrawn facilities. We also remain well protected on interest rates with around 67.6% of our exposure hedged at a weighted average rate of 2.85% announced last quarter.
Our newbuild program now consists of 10 MRs with CapEx payments beginning from the third quarter of 2026. With this, we believe our net LTV ratio would also understate our true committed position. From 2027 onwards, we will calculate net LTV on a fully committed basis. We will include remaining newbuild capital commitments, such as unpaid yard installments, in the numerator while adding the broker-assessed market value of the corresponding newbuilds to the denominator.
We believe this provides a more comprehensive representation of our underlying leverage. Next slide please, where we move to the operating summary. Q2 TCE rates for the year continued to show significant improvement across all segments. Our fleet-wide average TCE reached $44,093 per day, while our average spot rates were close to $50,000 per day. Drydock and off-hire days totaled 392 in Q2. We expect this to fall to around 225 days in Q3 and approximately 110 days in the last quarter of the year, which should increase available earning days through the second half.
Let's move to the next slide. As of August 17, 80% of our Q3 earning days were covered at $30,716 per day, which, although below the exceptionally high levels in Q2, remains a very strong environment considering lowered seaborne volumes. For the second half of 2026, coverage stood at 53% at $28,917 per day. These rates are well above our operational cash flow breakeven and set the stage for another strong year of earnings. For Q3, estimated earning days are around 9,376 after taking into account 50% for the joint venture fleet, scheduled drydocking, the impact of divestments, vessel deliveries, and vessels chartered in during the quarter.
Michael, I will hand it back to you now.
Michael Skov, CEO
Thank you. And moving on to the next slide, please let me briefly touch on our sustainability priorities. As one of the leading owners and operators in the product tanker segment, we view sustainability as an integrated part of the business. Safety, environmental performance, governance, and responsible partnerships have and will always remain core to the way Hafnia operates. Our commitments remain unchanged: zero harm across operations; a 40% reduction in fleet carbon intensity by 2028 compared with 2008; net zero scope 1 emissions by 2050; and continued progress toward 40% women in our offices by 2030. Next slide please. The strategic projects shown here are intended to strengthen Hafnia over the long term, whether through improving our overall shipping platform or advancing our technological capabilities. T Scale Energy continues to strengthen our bunker procurement capabilities together with Kakil, particularly in an environment where fuel availability, pricing, and alternative fuel pathways are becoming more complex.
Complexio is also moving from concept into practical deployment, with early use cases already helping to improve response times in commercial and finance workflows. Next slide, please. Before we close, I want to say a few words about the CEO transition announced on 30 June. This will be my final earnings call as CEO of Hafnia, as announced from 1 September 2026. Søren Steenberg Jensen will take over as CEO, subject to shareholder approval at the extraordinary general meeting held later this quarter.
I'm expected to join Hafnia's Board of Directors and look forward to continuing to contribute to Hafnia in this new capacity. This transition has been planned carefully and with continuity in mind. Søren has been part of Hafnia since the beginning in 2010, and as Head of Asset Management, he has been deeply involved in shaping our fleet, our asset strategy, capital allocation, and many of the decisions that have brought Hafnia to where it is today.
It has been a real privilege to lead Hafnia and to work with an exceptional team across sea and shore. I would like to take this opportunity to thank our seafarers, shore-based teams, customers, partners, and shareholders for their trust and support throughout this journey. What will not change is Hafnia's direction. The focus remains disciplined commercial execution, operational excellence, and prudent balance sheet management. That brings us to the end of the prepared remarks.
Thank you for joining us today. And we will now move to questions.
Sheena Williamson Holt, Head of Communications at Hafnia
Thank you, Michael and Perry and Søren, for taking us through the results today. So to those here, we will begin our Q&A session now. If you want to ask questions, you can put them into the chat function or you can use the raise hand function to be unmuted to ask your question verbally. Questions via the raise hand function will be addressed first before we then move on into the Q&A box. So I'm going to start with Frode, please. Can you unmute yourself, please, to ask your question?
Frode, Analyst
Yes, thank you. Hi, yes, first question is for Søren, I guess. I guess on the topic of Panama Canal, you know, last time Panama was a big issue, we didn't really have Red Sea and Hormuz disruption at the same time. So, you know, when you look ahead and assuming Panama tightens further, how much more disruptive and supportive would this be for products, do you think?
Sheena Williamson Holt, Head of Communications at Hafnia
Søren, can I ask you to unmute yourself? Yes, we can hear you now.
Søren Steenberg Jensen, EVP, Asset Management
Can you hear me now? Okay, sorry. Thank you for the question. I think you're right in the sense that when the Panama Canal again comes on top of many other things ongoing, it probably has an even larger effect. And now it's tying up with China also increasing exports, whereby you would expect, with a further diminished kind of canal transit where you are now paying up to about a million dollars for an auction over there, you're likely to see export from the Far East coming into the U.S. West Coast, adding ton miles to the region, which in the first place have displaced enough tonnage. So it is a strong driver. Whether or not this time around it will be a halving to the tune of 2024 is still a question mark. But you're probably seeing the news that two ships less by the end of this week and then another two a little bit further out. So the trend is there, and the combination of the factors that we have ongoing is not insignificant.
Frode, Analyst
Yeah, right. So you discussed a lot of good points here. So if you were to, let's say, summarize it and look ahead just for the next six to nine months, how would you think this market will develop?
Søren Steenberg Jensen, EVP, Asset Management
Well, on a general note, disruption is the driver here. I think we are now in a scenario that is probably a little bit worse than the beginning of the Middle East crisis. Especially with the news of the blacklisting of ships; at least a more closed Red Sea passage than it was when we spoke last, with a partial opening there as well. And China exports ramping up, a U.S. and a China that is really gravitating the world towards it, which can only mean longer ton-mile on a general note to supply the world.
So I would—I'm constructive for the balance of Q3 and through Q4, obviously with the caveat that we are sitting in a very politically driven environment and changes could still be coming at us like they have been more or less on a weekly basis over the past months, really. So positive and constructive, always with being mindful that it's all good and fine that we have a lot of ton mile and we have disruption all over the place, but oil also has to be available to increase transport demand.
So it all also depends how much the release on SPR volumes will be on a further basis and how much we can actually do as a world. But—yeah. Did that answer the question?
Frode, Analyst
Yes. Very well, thank you. So looks like a good and interesting winter period ahead of us, right?
Søren Steenberg Jensen, EVP, Asset Management
Yeah, I think that's probably also one of the points that we didn't touch upon, but an El Niño year—and whether or not that's going to give the usual cold winter that that brings with it—but depleted inventories coming into a winter season could, in our mind, also kick-start an earlier Q4 transportation spike and probably also market spike than you'd be used to, as you would likely see Europe trying to restock, at least where possible, before the winter really comes up.
Frode, Analyst
Yeah. Fantastic. My final question is for Michael, since this is your last call, I guess, as a CEO. Just wanted to ask you, if you had to leave the investor with one thing you think the market is still underappreciated with Hafnia, what would that be?
Michael Skov, CEO
Yeah, that's a really good question. You know, I don't know if there's anything that's kind of specifically underappreciated, but I think at least what comes to my first mind—as I said, I don't know if it's underappreciated—is that I think our strong focus on capital allocation and particularly discipline through the cycles, I think that has been and will continue to be one of the strong parts of Hafnia: that we have a major shareholder that has a long-term perspective, which means that we can time our investments and the capital allocation for the right timing rather than being forced by other conditions to make decisions through the cycle.
So I think, at least to me, that's one of the strong parameters for us, is that we have the ability to think long term and not be forced to make any panic decisions short term.
Frode, Analyst
Yeah, yeah. It's been a fantastic journey, I guess. So thanks, Michael. And since this is your last call as an analyst, we just, you know, thank you for all the good insights over the past few years. So all the best for what comes next. Thank you.
Michael Skov, CEO
Thank you so much for that.
Sheena Williamson Holt, Head of Communications at Hafnia
Thank you, Frode, for your kind words. I don't actually see any more raised hand functions, but I do see a question in the chat, which is from Fausto, so I'm just going to read it out here. First of all, congratulations on your retirement, Michael, and thank you for your leadership and contribution to Hafnia over the years. So, Hafnia performed particularly well in the LR1 and MR segments during the quarter compared with most of its peers. Can you explain the main drivers behind this outperformance?
Was it partly related to a higher number of product tankers trading dirty, or were there other factors at play? Do you believe these are structural or repeatable factors that allow Hafnia to continue outperforming in Q3 and beyond? Søren, I will ask you to unmute yourself and maybe you want to also look at the question in the chat to answer kind of the three different parts of it.
Søren Steenberg Jensen, EVP, Asset Management
Thank you, Sheena. I think we divide it in segments and start with the miss from the bottom up. So we are not super exposed to dirty trading on the MR, and it's literally not very big in the MR segment. But we had a strategy from already the end of 2025 to be exposed in the US Gulf market that was driven by, I believe, that the turnaround season for the US Gulf would not be as big, driven on the back of high refinery margins. On a general note, that so transpired that the AG, or Middle East, crisis came on top of it.
So we already had a big position in terms of tonnage spread from a Hafnia perspective in the Gulf, and it was just amplified in terms of return for taking that strategic decision by the Middle East crisis. So it's really a positioning thing where we have been leaning very much towards the Gulf PADD 3 and the Far Eastern area, which has been the second-best performing area on the LR1s. It's to the tune of the same story. We migrated tonnage from the east to the west early in the year, and we have capitalized on that because even the Europe market and the Mediterranean and the Red Sea market spiked on the back of the AG crisis.
We also have an exposure in the Panamax market, which has quite clearly through that quarter in particular been overachieving, if you like. Our percentage exposure in the Panamax segment is not that significant, but it has elevated the earnings to a certain extent. Whether or not we are benefiting from the exact same factors in Q3 still remains to be seen for the rest of the quarter. But for the beginning of the quarter it has not been too bad to be exposed to the US Gulf, and we did actually migrate some tonnage towards the Far East at an early stage.
So from a strategic perspective we are sound and well and sitting with a tonnage east-west that we are satisfied with. So I would certainly hope that we are up there with the best.
Sheena Williamson Holt, Head of Communications at Hafnia
Okay, thank you, Soren, for that. Fausto, I trust that covers everything you needed to know. In case not, feel free to send a follow-up in the chat. I’m at the moment going back to the raise hand function. I do not see anything there. Great. And Fausto confirms, Soren, you covered everything. So I think given that there are no more raised hands, then I'm just going to thank the speakers for the presentation and thank those for their questions. So yes, we have come to the end of today's presentation.
Thank you to everyone who joined for attending our second quarter 2026 financial results conference call. You can find information on our website after this call where this recording will be uploaded. Thank you everyone and have a great day and a great weekend when you get there.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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