Torm PLC's Management Team On The Product Tanker Market (Podcast Transcript)

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Summary

Editors' Note: This is the transcript of the podcast we posted yesterday. Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy.

J Mintzmyer: Good afternoon, everyone. Welcome to another edition of Value Investor's Edge Live. Today we're hosting TORM where we have their CEO, Jacob Meldgaard; and CFO, Kim Balle. They're here to discuss the product tanker markets. TORM reported last Thursday, beating earnings estimates slightly, earnings are significantly up in the product tanker space, but of course, the rates benchmark rates have been pulling back the last couple of weeks. It’s a good time to check in and update us on what's going on with the market and get their unique views. Before we begin for disclosures, I have no current position in TORM. Nothing here under discussion today constitutes investment advice or official company guidance in any form.

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Jacob, Kim, thanks for joining us.

Jacob Meldgaard: Great to be here. Thanks J.

Kim Balle: How are you?

J Mintzmyer: Fantastic. So, if you would have joined us a few weeks ago, we would have been talking about you know all time record high rates and sentiment was very high and stock prices were pushing, you know up yearly highs, but now the sentiment is significantly dialed back right. The rates have come back in a little bit. Can you just give us a kind of an update on product tanker markets right now, the dynamics and where you see that we are in the cycle?

JM: Yeah. Well, I think that's a million dollar question, obviously. But I should point to a couple of weeks ago, we really had elevated rates driven predominantly by what we would term as operational floating storage, i.e. that the product tanker fleet globally were being used as floating storage due to issues on the receiving end of when vessels arrived with cargo that there was actually no space. So, we estimate that about 15% of the global fleet were either in this operational floating storage, or in what is more known from the crude markets, real floating stores where you play the contango and you basically buy it today in order to sell three or six months down the road at a higher price.

I think it has been [left railing] in the product tanker space, then it clearly has been in crude, but everything has been equal a couple of weeks ago. That was the status today. Clearly, the contango has narrowed and it's basically gone. The forward curve is slightly positive, but not at all to the extremes that we saw within the last couple of months. So that has also driven down the demand for crude vessels, but also in the product tanker space for this floating storage and we're seeing a normalization of the market rate as we speak to something which is more akin to what we saw pre this spike in the oil demand for floating storage.

J Mintzmyer: Yeah, definitely. So the rates have pulled back, you know, significantly, but the rates are still strong in the overall picture. I know you're involved in the LR2 space. LR1s, MRs, can you briefly describe maybe the differences between those markets and what sort of dynamics are going on there. I know the LR2s in specific were very, very strong and LR1s as well, and MRs didn't quite get the same spike.

JM: Exactly as you point to. The larger the ship in this environment, the wilder it got and we clearly saw that in sort of the LR2 driving this market. And the interesting thing about the LR2s has been that that is sort of the segment in the product tanker space where you have most switching between being [engaging] the crude market as soon as [indiscernible] and clean at the time where you can sort of look at that it is most beneficial for the owner to be in either crude or product. People generally try to play that and over the last, let’s say six months it was so that at the beginning of the recent increase in rates, it was a crude market that really drove that.

So, quite a number of LR2s went into the Aframax rate to benefit from higher rates. And it actually meant that a couple of months ago, we saw that the number – the net number of the LR2s in the world market were back to levels not seen since 2015. And that was before you got this floating storage phenomenon that I just described before. So, really, it was set up for the supply in LR2 had dwindled, because LR2s were migrating into the higher earning Aframax markets. And when you then saw demand coming back for LR2s rates really spiked and were above $100,000 for [indiscernible] journey in the Pacific as you point to for some time. Unfortunately, it was also so that at the time when rates were really high, the liquidity in the market went down.

So, I think it's fair to say that the number of fixtures done at the extreme highs is probably in a way for owner side in general disappointing, but of course, it is very lucrative. It has been a very lucrative trait for LR2s. LR1 is just behind the smallest siblings not driving rates just as high, but still very, very looks to rates in that segment has probably pulled back from something between 80 to 100 to today, something in the range between 30 and 40 for LR1s, and then on the MRs we saw the recent spike going all the way up to around 60,000 to 70,000 in Asia and Middle East and it's probably pulled back all the way back to mid-teens up to $20,000 depending on your exact position, just as it is right now. But I think it's important, as you point to notice that this is still profitable business for us and for many others.

Our [PBT breakeven] Kim can come back to it in more detail, but we have, you know that one thing you can manage in a structure like TORM is obviously your cost structure and that you don't get carried away on building assets and portfolio assets at the wrong time. And here we're really fortunate that our [PBT breakeven] is at $50,000 per day and everything above that basically goes to the bottom line straight because of our structure. So, it has been very, very profitable and it still is [indiscernible].

J Mintzmyer: Yeah, you mentioned on the LR2s there was so much switching right, the dirty side of the business that clean rates spiked, you had your 14 LR2s, right, two new builds and 12 on the water, what was your current breakdown in terms of how many of those were trading crude and how many of those were on the product market?

JM: As we have – in our portfolio, we basically have about 50/50, because as vessels turn older, you generally tend to migrate towards the crude market. And we have a number of vessels that are built before, say 2005, and all of those we've been trading dirty and the rest we've been trading clean. And we did manage to do a very lucrative trade on one of our more modern units where we did six months period at more than $50,000 net, which of course, sort of, in a historic perspective, is a very, very profitable trade. So, we've been enjoying, but as you point to about half our fleet, in clean and half in crude. Well, let's not forget that the crude market has also been extremely profitable. Not to the extremes of the clean LR2. So…

J Mintzmyer: Yeah, I noticed on your guidance for quarter two, the LR1 rates and LR2 were very similar. And I figured that was because all the LR1s were trading clean and kind of the LR2s were split. Is that is that right? I think the guidance was [indiscernible]?

JM: Yeah. And also that the [indiscernible] that I just described, but you're absolutely right, that – so we didn't get the assertion there, but then we've also covered into Q3 as I just mentioned at levels, think. Let's see, but which could prove to be really healthy on a number of units, you know, in the 40s and in the 50s, into their coverage also in Q3. So, let's see, but it has been very, very interesting and very volatile, as you also point to.

J Mintzmyer: Excellent. Yeah, no, I think that's a pretty decent segue because kind of my next question is, you know, a lot of folks are concerned and myself included, that on the other side of this hill, we're going to have a destocking event that could last for several years. And I know we saw, you know, we saw destocking in 2016 and 2017. And it was very tough for rates. And it seems like, you know, there's going to be a pretty big global glut of products developed. Are you concerned about that, you know, sort of, like, multi-year period of destocking? Or do you think, you know, do you think the rates can still stay strong? And we can work around that? And also related to that, are you taking any sort of defensive measures? I know, you said, you've you fixed a few vessels into like Q3, have you fixed anything longer term than that maybe for a few years?

JM: So, let me just start with sort of our thinking is that if you had asked me, let's say a month ago, I will probably be more concerned about the medium term than what is happening today because so the transition in the oil markets from being in contango and having clear oil supply, cargoes both on crude and clean entering into storage and sort of this buildup, as you point to of storage worldwide, both onshore and an onboard ships is of course something that can be painful to get yourself out of on the other side. So, I think it's fair to say that the period of the build-up has been shorter than what we actually saw as our base case, only one or let's say two months ago. And that it has been a little surprising that the markets have actually fine-tuned themselves that you've seen oil price almost double over the last month and that you've seen demand, picking up at least across as economists come out of, of the lockdown that there is a gradual improvement in the underlying demand for all products and at the same time that the supply has actually been – OPEC+ has been pretty good at keeping up with their promises around that.

So, I think sort of [leasing up a helicopter], we will have a shorter time to enjoy these very, very high rates, but on the other hand, it also means that the buildup of refined products in stores will be lower, everything else being equal than what we could have expected. So, I think that's the one dynamic that is actually a positive. Obviously, it means that we will not have as high rates for longer, but we will then on the other hand have a swing back that can come back potentially faster than what you described from a demand perspective. Of course, it is an unknown for all of us to go through a complete lockdown of the global economies simultaneously more or less and then to reopen it.

So let's see, but it does look promising on that side. Then sector wise what is also positive and different from 2016 and 2017. One thing is the size of the [indiscernible] all products that you need to [eat yourself through], but the other thing is, of course, that we actually looking at order book that is significantly different, you know, the supply of new China's coming to our market in conjunction with this development of that you have to [eat through the buildup] of stock is significantly lower than what was the case in 2016, 2017. So I'm probably leaning toward a more optimistic view than a multi-year, but clearly, there will be a bill to be paid in terms of lower rates as you eat through this buildup of products.

What we've done in terms of more defensively, we actually are pretty aggressive and as I just described, we actually think it would be more shorted so we don't really see a big, I think there is two things we don’t see a big need to go very deep on the curve at the – what you need to do right now is, of course, to discount that heavily on one side, and on the other side there's also [face that] with the transparency around where the global economy is going and what it means for all markets in general. The liquidity in longer term use has been low.

J Mintzmyer: Yeah, it seems like there's been a limited number of charters. I know, you know, Scorpio tankers, for instance, did their earnings and they claim they've been doing a lot of charters, but they didn't, you know, they didn't disclosed those. And we haven't seen a lot. We've seen a few six month deals, I think done for LR2s, but not a whole lot else. And it's hard to get excited about a six month deal with LR2s when the rates were six figures, right? You'd have to take a pretty big discount, just add a few months of cover. So, very interesting there. Let's pivot a little bit and talk about your capital allocation and priorities there. So, we know the stock is trading at a significant discount, right to NAV and you mentioned the small order book. I know you have two LR2s remaining for delivery in 2021. So, those are really far away, is – what kind of are your priorities at this point? Do you focus more on deleveraging the balance sheets more? Are you looking to buy some more assets either new builds or secondhand? Are you looking into repurchases or dividends? How do you kind of rank those priorities and how does that play into the company here?

KB: Perhaps I can answer on that question, Kim here. First of all, the latest recent distribution we made was 50% of our data income for second half of 2019. A combination of share buybacks and dividends of a total of $0.10 per share and that is in accordance with our distribution policy which is between 25% to 50% semi-annually of our net income, so next time we will assess that will be in the same – when released the second quarter earnings in August and where we hopefully will have much more clarity of the outlook for the market and you ask about fleet renewal we are continuously of course looking to maintain and renew our fleet in the most profitable manner.

So, we can do that by purchasing modern secondhand vessels or contracts in new buildings, as you also alluded to that we have been in our order book in 2021 or we can sell all those [indiscernible] and then we believe we maintain our fleet by LR scrubber investments. We have taken delivery of the two LR1s, two MR1s this year and we have obviously one old [indiscernible] size. So, that's basically where we are right now and having said that, our – when you collect that and look into our commitments in the team, so they are very [manageable] and then regarding our deleveraging possibilities, basically we are seeing – we see volatile markets, we see some, a lot of insecurity right now or uncertainty right now.

So, our focus is on cash generation and then deleveraging through bringing down our leverage through cash generation basically, we don't have any claims of repeating extraordinary repeated or any similar, we will be focusing on [indiscernible] through cash generation. So, we will be able to have the financial flexibility to be able to look into further possibilities as they should arise in the market we are going into.

J Mintzmyer: You mentioned, you know, selling some of the older tonnage as a way to kind of keep the average age more renewed. You know, looking at your fleet list, it seems like you have about 25 ships, pretty close to 25, it is like 23 that are 15 years or older, right? So a little better than aging fleet in some regards, how, first of all, how are those ships performing? Because we always hear a lot about, you know, 15 years being kind of a critical age. So, how are those ships performing? And then second of all, do you plan to, you know, return to asset sales? I know, I think last year or so you sold, you know, eight or nine vessels, but since COVID started, you've kind of stopped those sales.

KB: Let me elaborate a bit on that. You're absolutely right that we have seen that it has been quite difficult for buyers and seller to actually engage in dialogue because it's been difficult to inspect vessels for sale. And, actually also that the actual delivery to new owners is quite complicated. When you need to depart an onboard new crew in a world where there's basically restrictions in most countries. So, but I think it's fair to say that the liquidity has evaporated in the S&P market to a very high degree because of operational issues on both sellers and buyers side, But when we look at it more that phenomena is slowly starting to ease, and if we lift it up in sort of a more strategic mode, as you also point to then, yes, we constantly drive our assets for as long as we deem that they are suitable for our customers. And that we see that it is the better employment of [indiscernible], in relationship to keep them on our balance sheet rather than selling them off.

And for instance, the vessels you mentioned that we sold last year, has an average age of about 18. Of course, you can say – and they are actually within a very narrow band of being around that vintage when they exceed our fleet. And that's not a coincidence that is actually because up until then, we see more value creation on our platform by maintaining the vessels to a high standard that meets the criteria of our customers, and which at the same time, contribute with a high return on invested capital, which puts us actually, when you use that as your measuring stick, which we like to on your work that we actually come up best-in-class in our sector.

So, we do not have the youngest fleet, but we've got a fleet that we can utilize towards all of our customers and which contributes with the highest earnings. And as we move forward, I sincerely believe that we will, again, be selling older tonnage, but we don't have the back against the wall and we are happy to maintain them. We are fortunate to have [CAP-1] which is a terminology of CAP-1 rating on our ships, which means that most of our order tonnage can still be utilized by our customers, even though they are more than 15 years of age. So there’s not really a 15-year age sort of invisible sealing, which I think is probably closer to 20, if anything because of our maintenance.

J Mintzmyer: Excellent, good to hear. Yes, I know 15 is kind of thrown around a lot, but it seems like you're doing some good trading on some of those older ships. And, you know, of course, there'll be a little bit lower earnings compared to maybe a modern eco bill, but it seems like your performance quarter-after-quarter has been, you know, similar to the rest of the market, even though your fleet is older, so I thought that was pretty impressive. You know, I'm looking at your latest presentation, I'm on Slide 34 and it shows your scheduled debt repayments all the way out until 2026, so a very smooth kind of amortization. I think you just had about $70 million left this year. And then, of course, 2021 is the most – about $150 million of debt, but after that there's really minimal debt until 2026. And I think I just heard you mention that, you know, you're just going to delever by cash generation, you have no goals of accelerating the debt because it's already – you know the structure is already pretty clean.

So how do we address the share discount? So I think a lot of investors are frustrated, and I'm sure you are as well that look – I think in your presentation, I think you, list your NAV at 13 or something like that, I have your NAV, maybe a little bit lower, but you still trade at a big discount, right, that must be frustrating. So, what sort of levers can you pull to sort of narrow that gap, I mean, obviously repurchases, but have you considered maybe selling assets and using those proceeds to buy stock or any other sort of things that you could do?

KB: I can perhaps start, Jacob. First of all, you're right. We will – we would love to have a high P/NAV of course. Currently, I think we all are more or less in the same boat, then most of us in the [indiscernible] but the way we can improve that is, in my opinion, is down to what we are doing already. We are trying to be the best-in-class performance wise, and then, doing all the right stuff. We have one TORM platform where we have all our services integrated in one company and we believe that is [clear edge] for us. So doing all that right is the basis for maintaining a high standard and high profile and high earnings when compared to the rest of the market. And of course, one thing we must admit, that is what would drive the discount down is, of course, a higher share liquidity.

We have seen that the share liquidity in our U.S. shares has increased somewhat during the current month, but, of course, we need more share liquidity in order to really narrow that down. And, of course, that is a – that's a long-term initiative to do that, and it – yes, and there are several ways of doing it, but our main focus now is just to perform as well as we are doing right now.

J Mintzmyer: You mentioned sort of the share liquidity, which, you know, I guess you kind of beat me to asking about follow up question, but, you know, I think Slide 52 – I took a look at your slide deck before the call here, and, you know, I'm seeing on Slide 52, you mentioned that Oaktree basically owns two thirds of your shares, and then other institutions, you know, both private equity and funds and whatnot, own 20%. So, you add those together and you get 86% of your shares in a very small group and you only have 14% that you estimate is free float retail, so that's very limited, right.

So what sort of efforts can you do? I know you mentioned, right; it'd be nice to have a better free float. Is there anything you can do to boost that float without diluting the shares? Is there any sort of transaction you could do with Oaktree or any sort of tender offer or something you could accomplish? Have you put much thought into that?

JM: Maybe I can have a stab at that, Kim. So yes, I think you're absolutely right [indiscernible]. So [that’s shareholding] whether you take Oaktree isolated or whether you, then as you say, combine with other institutional investors, and I think Oaktree is, of course, fully aware of that. We are fully aware that. We would do the right things, and, of course, a [delusionary] share issuance at the current market levels where we're trading at whatever P/NAV you – whether it's 0.6 or 0.7 or, you know, depending on your NAV evaluation and the current rate, but, you know, it's a considerable discount and I don't think it's going to happen and it's actually not going to help us because it would mean that Oaktree and others would have to give up currently protecting their pro rata share or something that they value high and definitely higher than today's share price.

So, I don't think that's a realistic revenue. I think our own steps would, of course, be that you do some kind of share-for-share transaction with somebody who is willing to go from private into public with us or between two publics, but that is something you can also not control. So the thing is actually – in my opinion, shipping has a broader theme of a problem where we fall into which is that shipping in general is not very favored by institutions at large and that we are actually small in the bigger picture.

So, of course, if we look at ourselves [indiscernible] let’s say, $0.5 billion. You know in the big picture, that's a small fish and I think sort of the labeling of [indiscernible] we need to demonstrate for longer than we actually create superior value in order to get people to be constantly there. But I see a lot of value still, sort of, in us in doing exactly what Kim described. I – you know is simply still trading the vessels better than anybody else, delivering the highest return on invested capital among peers, and at the same time, doing the smart things around our assets that you actually asked me around, you know, yes, we have older assets, and yes, we will be selling them, but we're not going to sell them before we sort of extracted the full value of them and then we will redeploy that capital intelligently.

And I think that's what the market needs to get its heads around that you get the best out of the [indiscernible] operationally extracting as most value as possible and strategically that you have the right asset allocation over time, but admittedly, I think we all – as Kim pointed to, I think we are all in this sector, currently not the favorite animal when you look at the uncertainty in the global economy. The volatility seems to be something that it serves people. We like it; of course, because we think we are doing a great job and having a solid resource. But I can see that the argument is that we are not providing the stable kind of investment. We are, in essence, exposed to volatile markets and we are spot, but we don't have a lot of color on our [food book].

J Mintzmyer: Well, I see it seems like there's not a lot of differentiation when you look at the share prices versus the companies that have clean balance sheets and lower leverage, like you do, and there maybe some other competitors and peers that have higher leverage and a wider fluctuation of assets, and, you know, shipping overall, as you mentioned, has been completely beaten up and even tankers, crew tankers, product tankers, enormous discounts, right, you're not alone, right? If you take your average peer discount, you guys land somewhere in the middle.

So it's frustrating that you're at a discount, but as you mentioned, it seems to be a sector problem. Hopefully, you know, you keep the capital allocation steady and look at repurchases if you can. I know it's difficult to do too many repurchases because you only have a 14% retail free float, so it's difficult to chip away at that one. Last question on that note, you recently did this transaction, it was called a capital, right – I think it was called a capital reduction and I think that was based on something you do with your London listing. Can you kind of talk us through what that means? And I think my understanding of it is it means you can do more dividends and more repurchases down the road. Is there anything else about that capital reduction that we need to know about?

KB: No, it is more or less a technical capital reduction where we distributed it from a share premium and just really to retain the earnings so we basically have the full flexibility to in the future, have dividends – distribute dividends with full flexibility. So that's basically the point. It’s more of technical nature than of anything else. And it is – you're right; it is through [our PLC].

J Mintzmyer: Okay, yes. It was interesting because I saw that, you know, the Tradewinds headline, I saw the – you know the press release that you did, but it seemed like it was kind of a nuance and I was just curious if that would impact your [indiscernible].

KB: Yes, but you're right. It was a nuance. There was also – but basically just [indiscernible] to have the flexibility to maneuver going forward.

J Mintzmyer: Okay, excellent. Interesting. Alright, a couple of other follow-up questions I had and some folks shared some questions on our website and whatnot. You know, has there been any issues with crew replacements? I know there's been a lot of talk about crews being stuck on board, right, because of COVID. Has that presented any unique problems for TORM? Have you been able to do any sort of crew changes, crew swaps, any sort of operational challenges in that regard?

JM: Yes, that is very – operationally I would say that's our biggest issue currently. I think we estimate that our planned crew changes, we've only been able, over the last months, a couple of months, to do, let's say, about 10%. So that means that yes, we've done crew changes, but in absolute terms, not at all to the level that we had planned for. So it means that this is, of course, an unsustainable situation for us, for our colleagues at sea, and I think for the wider industry. We have, let’s say, about 3,000 seafarers in total associated with our fleet, half being at home, half being on board. And, of course, they need to interchange. Globally, you have about 1.2 million seafarers and I think we're, of course, a micro organism in that, but I think the data points that we have would be that it is pretty much the same across the sector.

So, you have hundreds of thousands of people who are actually, you know, staying out on board for longer, and in my opinion, something should be done and you should have sort of a pooling globally between these operators of ships that can enable governments to open up for flights etcetera, because it is something that is concerning that it takes place, but I think we're not in a unique position and we're doing everything we can whenever it's possible to relieve our crew and to exchange it, but it is in the current environment where every nation has its own rules, so to say, and that they change quite rapidly. In that landscape, you really cannot plan as we used to, so we just have to take it day-by-day and then – as one thing operationally and then the other thing to put pressure on governments globally via what is termed ICS, International Chamber of Shipping where we are – as a country, where Denmark is a member, and where, coincidentally, I'm the chairman of Danish Shipping, and where we put political pressure on. And one of the things is we have Danish seafarers and actually in Denmark is one of the few countries where you will have open this and where the government allows seafarers to move over the border to embark and disembark from vessels.

J Mintzmyer: Yes, a very challenging environment. And, of course, you know, as investors and members of the company and different shipping companies, it’s very appreciative of everything the seafarers are doing in just such a challenging environment to be away from families for so many months. And I know there's been a lot of stories of certain crews have been away from their families for, you know, four or five or six months, and so, a very difficult environment.

JM: I think – and yes, at a personal level, I think, of course, we've been working from home. All of our officers have been working from home globally. We got, let's say, about 300 people in India, Manila, Denmark, U.S., UK. They’ve all be working from home, but they are not really the heroes who make that work. That is in a way luxury issues compared to that the really heroes is, obviously as you point to indirectly is the people who are taking the turn on board ships day-on, day-out and really can't foresee also, when are they going to see their loved ones. I'm sure we are in constant direct dialogue on a daily basis with all our vessels. And obviously, the thing that is mostly on their mind is when will I actually get the opportunity to be relieved and see my loved ones. I think that's fair to say that this is an extremely important issue currently for us to assist with, but, of course, we need governments help, we need them to reopen not only the lockdown, but also reopen borders.

J Mintzmyer: Of course, it’s just a remaining – a challenge on the human aspect. And I'm glad again, we got really a chance to point that out because I think a lot of times, you know, when we're talking about investments in the ships and the business, you know, a lot of times we forget about the human aspect, so I'm glad we had a chance to touch on that. Kind of a final question related to kind of COVID-19 and the environment we have today, new builds have plummeted, right, and nobody's really buying vessels. So I imagine that shipyards are getting more – maybe desperate is not the right word, but they're definitely getting more aggressive in terms of their pricing. We haven't seen a lot of new builds. We saw VLCC announce, I think, it was yesterday at a pretty low price. I think it was like $73 million or [indiscernible] $83 million for VLCC. Have you been, you know, receiving offers from shipyards for, you know, LR2s, LR1s, MRs? Have they become more aggressive on their pricing of new builds? And do you anticipate there's going to be any sort of pickup or surge in orders for new ships?

JM: Yes, that's a good question. I think fundamentally, the shipyards will obviously – in the current environment, they need a certain degree of transparency on their order book. On the other hand, as I see it, the way they play their hand is that they will try to have as small an order book as they can get away with and still produce in the current environment. So that also means that the deals that they will be offering at discounted prices will be few and it will be to sort of friends of the house, kind of in all segments, whether it is in the crude product or other segments.

Shipyards don't like to sort of be labeled as going out and just being in panic mode and selling off at low prices, but there will be deals potentially done. I don't imagine that it would be a rush to the yards because the yards will really have to discount at heavily in the current environment. So, yes, some new ordering will take place like the one you mentioned. I'm sure [indiscernible] and all the way down to MRs that will be the art deal being done sort of privately with the friends of that particular shipyard. I think that is how we expect it, but not something that is dramatic and not something that would make me concerned about a tsunami of supply coming to the market within the next couple of years.

J Mintzmyer: Yes, hopefully not. We'll watch it and see what happens there. We haven't really seen any orders on the product side. I think we saw some LR2s a month or so ago, but we haven't seen a lot of orders. Hopefully, it'll stay that way, but I imagine, as we've just discussed, the pricing will come down. I think we've covered most of the topics today. I appreciate your time. I guess kind of a closing question for folks on the call today, and for the recording we'll post later, why should investors pick TORM, right? There's a lot of product tanker companies that are – you know Scorpio, Ardmore, Hafnia, a few others, why should investors pick TORM as their investment choice in product tanker markets? What differentiates and sets you apart from your peers and competitors?

JM: Yes, that's a good closing question. Thanks for that. First and foremost, I think at the end of the day, obviously, in order to invest in TORM, you need to believe in the product tanker segment and we have strong names, as you already pointed to, who are our peers and who – we are actually working in a way together in trying to get as much out of the market as possible. I think what is clear for us is that we really try to balance the customer approach. So we have the One TORM platform, which our customer, honestly, like. They like the one-stop kind of approach where we got everything under control and where everything that is related to whether its safety or commercial terms, we can actually turn any decision around across our fleet within a day because we got everything in house, as Kim also alluded to. And then on the other hand, balancing that out, we’re getting the highest possible return on our investments in TORM so that the platform delivers the highest return on invested capital.

So, I think it's that balancing act of the operational excellence where we see that we can manage the assets and extract the highest potential in any given market and that in turn leads to the assets we have and the allocation of assets. The way we do it actually contributes with the highest return on invested capital, which is a meaningful difference. You pointed to our MR performance and I think, if we, for instance, look at our TCE in the MR segment and take our earning up against what is the average in the peer group, then in the first quarter alone, had we been an average company, we would have had an earning which would be $90 million lower than what we actually came up with. And then, of course, if you do that quarter-on-quarter constantly in the top quarter of this, you will create meaningful additional value that comes back to the investors at the end of the day. So, I think that would be my selling point, but you need to believe, of course, first in the product tanker segment given that we all are in the same boat in the sector.

J Mintzmyer: Yes, thank you, Jacob. It'll definitely be interesting to watch. I know a lot of folks are, you know, looking at the other side, I think it was what you mentioned earlier in our call, that they’re looking at the other side of the hill, looking at the challenges of destocking and seeing how quickly we can manage through that. I mean, of course, it's very important to have a company with good assets, with a good balance sheet, with no challenges, with liquidity. Obviously, TORM checks most of those boxes, different peers, of course, and competitors. We won't name and shame, but might have different leverages or different liquidity challenges and so on. Jacob and Kim, I think it was very useful for our call today. Thanks for joining us, appreciate it.

JM: Thank you very much.

KB: Thanks for having us.

J Mintzmyer: Thanks again to everyone for joining us for another episode of Value Investor’s Edge Live. As a reminder, nothing you heard today on the call constitutes investment advice or official company guidance in any form. I have no current position in TORM. This is being recorded on the afternoon of 19, May 2020. If you listen to recording at a later date, those positions may have changed.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: J Mintzmyer has no positions in any stocks discussed.
Jacob Meldgaard and Kim Balle are employed by Torm PLC.
Nothing on this podcast should be taken as investment advice.