TORM (Copenhagen:TRMD A) Q2 2026 Earnings Call

0:00 Good morning, and thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the TORM Second Quarter twenty twenty six Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

0:30 Thank you. I would now like to turn the conference over to Jacob Melbard, CEO. You may begin. Well, thank you, and welcome to everyone joining us today. We are pleased to report a record second quarter, reflecting both exceptionally strong market condition and the strength of the platform we have built over many years. Before turning to the quarter itself, I would like to briefly revisit what continues to differentiate TORM and creates value for our shareholders across market cycles. At the core is what we call the One TORM advantage. This is our integrated operating model where commercial, technical and operational decisions are aligned across the organization.

1:21 It allows us to react quickly to changing market conditions, optimize fleet deployment and consistently capture opportunities as they emerge. Our culture is equally important. Through a unified organization and centralized decision making process, we are able to execute faster and more effectively than many of our peers. This alignment creates accountability, improves utilization and supports disciplined cost management throughout the business. The results are measurable. Over the period from 2023 through 2025, our MR fleet generated more than US200 million of additional TCE earnings compared to the peer average.

2:17 This demonstrates the strength of our commercial platform and our ability to consistently create value across different market environments. At the same time, we remain committed to active fleet renewal and disciplined capital allocation. Recent investments in resale and newbuilding vessels demonstrate our confidence in the long term fundamentals of the product tanker market, while helping ensure that TORM maintains a modern and efficient fleet. Our approach to fleet growth has always been driven by value creation and customer needs. Over recent years, we have primarily expanded through vessels already on the water, but the relative economics have evolved.

3:12 With secondhand vessel prices continuing to increase, we now see attractive opportunities in newbuildings. As a result, we have established a phased pipeline of resale and newbuildings deliveries from 2027 through 2029 and potentially into 2030. This ensures that we continue to renew our fleet, maintain a modern offering for our customers and secure future earnings capacity in a disciplined manner. Importantly, these initiatives have not come at the expense of shareholder returns. Our approach remains to balance growth and investment with attractive cash distributions, ensuring that shareholders benefit from both today's earnings and tomorrow's value creation.

4:07 Please turn to Slide four. The second quarter was the strongest in TORM's history, driven by exceptionally strong freight markets following heightened geopolitical tensions in The Middle East and the resulting disruption to global oil trade flows. During the quarter, we generated TCE earnings of US512 million dollars more than doubling the level achieved in the same period last year. The market benefited from significant inefficiencies created by disruptions around the Strait Of Hormuz, which supported freight rates across all vessel classes. This translated into EBITDA of $416,000,000 and net profit of $338,000,000 highlighting both the strength of the market and the operating leverage embedded in the One TORM platform.

5:03 Reflecting the continued strength in freight markets and the visibility provided by our contract coverage, we are also increasing our full year guidance. Thus, we now expect to generate the highest annual TCE earnings in TORM's history, surpassing all previous years and underscoring the exceptional market conditions currently supporting the product tanker sector. Reflecting these results, our board has approved an interim dividend of US2.4 dollars per share corresponding to a total distribution of US246 million

5:43 Fleet renewal also remained a key priority during the quarter. Our fleet stood at 97 vessels at quarter end and we further strengthened our growth pipeline through investments in resale newbuildings with deliveries scheduled from first quarter of twenty twenty seven through 2029. Overall, we entered the second half of the year from a position of strength, supported by a modern fleet, a robust balance sheet and a market environment where geopolitical uncertainty continues to create opportunities for product tanker owners with scale, flexibility and strong execution capabilities. And here, kindly turn to the next slide to Slide five.

6:32 And a key element of TORM's strategy is maintaining a balanced approach to capital allocation. While we are committed to growing organically and renewing the business, it has been equally important to ensure that shareholders directly benefit from the strong earnings generated by the company. Since 2023, we have distributed US15.1 dollars per share in dividends, returning a significant share of our earnings to shareholders. In total, this amounts to US1.5 billion dollars representing a very significant sum of money relative to the total market capitalization of TORM. This reflects our philosophy that value generation and creation should translate into tangible cash returns, allowing investors to participate directly in the strong cash generation of the business.

7:28 At the same time, we have continued to invest in the platform. Over the same period, we have expanded the fleet from 78 vessels at the end of twenty twenty two to 97 vessels today, increasing our earning capacity while also renewing the fleet profile. This balance is important. Shipping remains a cyclical industry and our objective is not only to maximize returns today, but also to ensure that TORM continues to have a modern and competitive fleet in the years ahead. By maintaining a pipeline of vessel acquisitions and newbuilding deliveries extending through 2029, we position ourselves to participate fully in future market opportunities.

8:15 We believe this approach creates long term shareholder value. It allows us to distribute meaningful cash today, while ensuring that we continue to have vessels on the water here and now as well in the years ahead, particularly during periods when market conditions are exceptionally attractive. Importantly, the pipeline of vessel acquisitions and newbuilding deliveries will also gradually replace older vessels that over time reason age where divestment becomes the most attractive option. As illustrated in the appendix on Slide 27, the delivery profile through 2029 and potentially 2030 supports a continuous renewal of the fleet while preserving earnings capacity and maintaining a modern fleet for our customers.

9:07 In short, our strategy is to keep high operational leverage, renew the fleet, maintain financial discipline and return excess cash to shareholders. And now, please turn to Slide number seven. The product tanker market remains exceptionally strong. Recent Middle East tensions have further tightened what was already a fundamentally robust market. Disruptions to key trade routes had increased voyage distances and reduced effective fleet availability, directly supporting freight rates. This is reflected in our commercial performance, where average earnings in the second quarter exceeded $59,000 per day, while third quarter bookings secured to date average $38,600 per day across vessel classes.

10:03 It is also worth highlighting the historical perspective shown on this slide. Market conditions were already robust prior to the latest geopolitical developments. Limited effective fleet growth and sanctions had already created a favorable supply demand balance. The five year average earnings levels for both MRs and LR2s show that product tankers have generated solid returns under changing market conditions. The wide gap between historical highs and lows illustrates the significant volatility inherent in our industry with freight rates sometimes moving sharply from one month to the next. What we are experiencing today is a market operating well above historical averages, supported by geopolitical disruptions and structural inefficiencies.

10:59 At the same time, the volatility shown by the historical ranges reinforces the importance of maintaining a flexible commercial platform that can respond quickly to changing market conditions and capture opportunities as they emerge.

11:17 And now please turn to Slide eight. Despite major disruptions to global outflows, the product tanker market has remained highly resilient. While the closure of the Strait Of Hormuz reduced oil volumes, the loss was more than offset by longer haul movements and extensive trade rerouting. Fewer barrels moved, but they traveled significantly further. Following the temporary ceasefire, oil flows improved from roughly 17% below pre conflict levels in April and May to around 10% below by July, demonstrating how quickly global energy markets adapt. However, renewed hostilities are again disrupting trade.

12:06 Rising tensions around the Strait Of Hormuz and Houti naval blockade against Saudi Arabia are forcing additional rerouting and creating further inefficiencies across the supply chain. For tanker owners, those inefficiencies matter because they increase vessel utilization and support freight rates. Let me illustrate that on the next slide. And here, please turn to Slide nine. And the closure of the Strait Of Amos initially disrupted oil flows equivalent to roughly 20% of global oil consumption. Part of the disruption was absorbed through increased pipeline exports from Saudi Arabia and UAE as well as higher exports from the Atlantic Basin.

12:52 Nevertheless, lower crude availability in Asia reduced refinery runs and clean product exports from the region. Since then, rerouting inventory releases and the ceasefire period have stabilized trade flows. What is particularly interesting is how Gulf producers have adapted. The UAE and others are increasingly using dedicated shuttle operations and ship to ship transfers to sustain exports. Today, more than 30 VLCCs and around 14 LR2s are engaged in these activities. To restore pre closure export volumes entirely, these shuttle operations could require two to three times more VLCCs and over three times more LR2s than currently employed.

13:42 Even before reaching that level, every additional vessel tied up in shuttle trades reduces effective market supply and creates incremental support for freight rates. Please turn to Slide 10. The latest escalation around the trade over moves combined with the continued Red Sea disruptions is driving another round of freight rerouting. Cargoes that previously moved on direct routes are increasingly being diverted through the Suez Canal and around the Cape Of Good Hope. In some cases, these changes add weeks to voyage duration. We have experienced this firsthand. In July, our LR1 vessel TORM innovation was fixed to load in Yandu for discharge in Asia.

14:31 The original routing was through BAP and Mandeb. Following renewed security concerns, the voyage was redirected via Suez and around Cape Of Good Hope under the terms of the charter party. The result was an extension of more than thirty days. A single voyage extension of more than thirty days effectively removes a vessel from the market for an additional month. When this is replicated across the industry, the impact on effective supply becomes significant. This serves as a practical example of how geopolitical events translate directly into increased tonne mile demand and tighter vessel supply. Please turn to Slide 11.

15:19 And let's now look in more detail in supply. While vessels trapped in the Persian Gulf were gradually released during the ceasefire, another and potentially more important trend has emerged. A record number of LR2 vessels have shifted from clean product transportation into crude transportation, a process known in the industry as dirty up. By the end of July, approximately 70 fewer LR2s were available for CPP transportation than at the start of the year. As a result, effective CPP capacity overall has declined by roughly 5%, despite nominal fleet growth of a similar magnitude.

16:04 In other words, headline fleet growth suggest more supply. The reality is that the fleet available to transport clean petroleum products has become tighter. And now, please turn to Slide 12. Although strong markets have encouraged additional newbuilding orders, particularly in food tankers, fleet growth remains constrained by an aging fleet profile and sanctions. In the combined LR2 and Aframax segments, approximately one in four vessels is currently subject to U. S, EU or UK sanctions. Importantly, around 60% of those sanctioned vessels are more than 20 years old. Given their age, many are unlikely to return to mainstream trading even if sanctions were eventually lifted.

16:56 As a result, headline fleet growth overstates the increase in effective market supply. Taken together, sanctions, fleet aging and replacement requirements suggest that effective fleet growth is likely to remain limited for the next several years. Please turn to the next slide. The key message is simple. This is unlikely to be a temporary market event. It looks increasingly like a structural reset. We will not speculate on when the Strait Of Almost may fully reopen. Our focus is on operating the business prudently and maintaining flexibility.

17:46 What matters equally is what happens after reopening. Even if transients normalize, the market will not immediately return to its previous state. Vessel repositioning, trade normalization and fleet rebalancing will take time and create additional friction throughout the system. At the same time, strategic and commercial inventories will need to be rebuilt. As an illustration, replenishing inventories depleted so far could add approximately 1% to 2% to global trade volumes over the next twelve months, with further upside if stock rebuilding accelerates or sourcing patterns become more geographically diverse. Just as importantly, the product tanker market was already supported by strong fundamentals before this trade of almost disruption.

18:37 Those supported fundamentals remain in place. Our view is therefore that reopening this rate should not be viewed as the end of the story, but rather as a beginning of a new phase of market adjustment that can continue to support tanker demand. Slide 14, please. To conclude on the market, the tanker industry is operating in an environment increasingly shaped by geopolitics. Sanctions, security risk, shifting energy flows are making global trade more complex and less efficient. This is not a temporary phenomenon. Since 2022, the number and significance of geopolitical factors influencing our industry have increased materially and this continues to reshape global trade patterns.

19:29 For the tanker market, greater inefficiency means longer voyages, higher vessel demand, fleet dislocation and increased volatility. For TORM, it reinforces the value of our scale, commercial agility and operational execution. And with that, I'll hand it over to Kym, who will take us through the financial results. Thank you, Jacob. Now please turn to Slide 16 and let me walk you through some of the drivers behind our performance. The second quarter delivered the strongest financial performance in TORM's history driven by exceptionally strong freight markets following the disruption to global oil trade flows in The Middle East. TCE earnings reached US512 million dollars compared to US208 million dollars in the same quarter last year.

20:19 Increase was driven by significantly higher freight rates across all vessel classes, reflecting the tighter market conditions and efficiencies that developed across global energy transportation networks during the quarter. The strong market environment translated directly into earnings. EBITDA increased to US416 million dollars from US127 million dollars a year ago, while net profit reached US338 million dollars compared to US59 million dollars in the second quarter of twenty twenty five. On a feed wide basis, we achieved an average TCE rate of US593001 dollars per day, more than double the level realized in the corresponding quarter last year. Performance was strong across all segments with LR2 vessels earning approximately $67,000 per day and both LR1 and MR vessels generating just above US7000 dollars per day. At the same time, operating expenses remained well controlled at US8315 dollars per day. The increase versus last year was mainly driven by higher crew change expenses and consumable costs.

21:28 Despite these pressures, operating costs remain at competitive levels. The result was basic earnings per share of US3.31 dollars reflecting the significant operating leverage embedded in our business when freight market strengthened. Finally, the Board has approved an interim dividend of US2.4 dollars per share corresponding to a total distribution of US246 million This reflects our commitment to returning capital to shareholders while maintaining a balanced capital allocation approach. Please turn to slide 17. This slide illustrates the strong progression in our earnings over the past five quarters and highlights the extraordinary step up we achieved during the second quarter of twenty twenty six.

22:16 The most notable takeaway is the significant increase in both TCE and EBITDA compared to previous quarters. TCE earnings increased as mentioned to US512 million dollars from US286 million dollars in the first quarter, while EBITDA rose to US416 million dollars from US201 million This performance reflects a combination of exceptionally strong freight markets and TORM's ability to capture value through our fully integrated operating platform. During the quarter, market conditions were heavily influenced by disruptions in Middle East oil flows, increasing geopolitical uncertainty and continued rerouting of vessels, all of which contributed to higher tonne mile demand and significantly stronger freight rates.

23:02 Fleet wide TCE rates increased to US59301 dollars per day compared to US34937 dollars per day in the first quarter. What is particularly noteworthy is how efficiently this increase in revenue translated into earnings. TCE increased by US26 million dollars from Q1 to Q2, but EBITDA increased by approximately US215 million dollars In other words, the incremental TCE converted almost one to one into EBITDA demonstrating the strong operating leverage embedded in our business model. With our largely fixed base cost, higher freight rates have a very direct impact on profitability and this means that when market conditions strengthen, a substantial share of the incremental revenue flows directly into EBITDA and eventually cash generation.

23:56 Overall, the quarter highlights both the strength of the current market environment and the earnings power of the TORM platform. It demonstrates our ability to convert a favorable freight market into substantial earnings, cash flow and shareholder value. Now please turn to slide 18. This slide highlights the development in net profit, earnings per share and dividend per share over the past five quarters. As illustrated, the exceptional market conditions we experienced during the second quarter translated into record profitability. Net profit reached US338 million dollars compared to US122 million dollars in the first quarter and US59 million dollars in the same period last year. Correspondingly, earnings per share increased to US3.31 dollars reflecting both strong freight markets and the operating leverage embedded in our business model.

24:50 The strong earnings also resulted in substantial free cash flow generation during the quarter and as a result, the Board has approved an interim dividend of $2.4 per share corresponding to the total distribution of approximately $246,000,000 to shareholders. This distribution reflects our dividend policy and means that all free cash flow generating during the quarter after debt installments will be returned to our shareholders. We believe this demonstrates the strong cash generative nature of TORM's business model and our continued commitment to delivering direct and tangible returns to shareholders when market conditions are favorable. And now turning to slide 19. Starting on the left side, broker valuation of our fleet increased to approximately US4.1 dollars at the end of the second quarter, reflecting the continued strength of both straight markets and tanker asset prices.

25:46 As a result, our net asset value increased to US3.7 dollars representing another quarter of significant value creation for our shareholders. The increase in asset values demonstrates the strong earnings expectation currently embedded in the product tanker market and highlights the quality and attractiveness of our fleet. Moving to the center chart, net interest bearing debt decreased to US715 million dollars from US894 million dollars at the end of the first quarter. At the same time, our net loan to value ratio improved further to 22.4 despite continued investments in fleet growth and renewal.

26:28 The reduction in net interest bearing debt was primarily driven by exceptionally strong cash flow generated from operations during the quarter. Strong earnings translated into significant cash generation, enabling us to simultaneously fund fleet investments, distribute substantial cash to shareholders and further strengthen the balance sheet.

26:48 Importantly, we have achieved this reduction in leverage while operating the largest fleet in TORM's history. The net loan to value ratio in the low 20s provides considerably financial flexibility. It allows us to purchase sorry, pursue attractive investments opportunities, continue renewing the fleet and maintaining resilience through market cycles, while preserving significant capacity for further shareholder returns.

27:14 Finally, on the right side, you see our debt maturity profile. We have US237 million dollars of borrowings maturing over the next twelve months with maturities thereafter well distributed across future years and no significant refinancing concentration. Overall, we believe TORM enters the second half of twenty twenty six with a strong balance sheet supported by high asset values, moderate leverage, strong liquidity and substantial financial flexibility to support both growth and shareholder returns going forward. Now please turn to slide 20.

27:51 Following a record first half of the year and continuous strength we have seen in the freight market during the third quarter, we are once again updating our financial guidance for 2026. Compared to our previous guidance, there are two important changes. First, the sustained strength in freight rates have increased our earnings expectations for the year. Product tanker markets have remained significantly stronger than anticipated, supported by ongoing geopolitical uncertainty, freight disruptions and continued inefficiencies across global oil and product flows. As a result, we are increasing the midpoint of our TCE guidance from US1.3 billion dollars to US1.5 billion dollars Second, with more than half of the year now behind us, a substantially larger share of our earnings is already secured.

28:38 The number of remaining open days has therefore been reduced meaningfully now at 10,271, 30% of total days, providing greater visibility on our full year outcome. This allows us to narrow the guidance range compared to earlier in the year.

28:54 Accordingly, we now expect full year TCE of $1,400,000,000 to $1,600,000,000 corresponding to a range of plusminus US100 million dollars around the midpoint. This compares with our previous guidance of US1.15 billion dollars to US1.45 billion dollars Reflecting the high expected revenue generation and the operating leverage inherent in our business model, we are also increasing our EBITDA guidance to between US1 billion dollars and US1.2 billion dollars This compares with our previous guidance of US800 million dollars to US1.1 billion dollars The tighter range reflects increased earnings visibility, while we continue to monitor developments in The Middle East and other geopolitical events closely, a much larger portion of this year's earnings is now either reported or covered, reducing the impact of volatility in the remaining months of the year.

29:50 Overall, we believe the updated guidance appropriately reflects both the exceptionally strong market environment and the visibility we have today and it also highlights the earnings power of the One TORM platform when supported by favorable market conditions. And with that, I will hand it back to the operator for questions.

30:18 And your first question comes from the line of Jon Chappell with Evercore ISI. Please go ahead. Thank you. Good afternoon. Jacob, you spent a lot of time talking Good morning. Thanks. Jacob, you spent a lot of time talking about the justification for the newbuildings both on this call and apparently in the press this morning. I think it makes complete sense given the discrepancy between newbuild prices and secondhand values. Looking at it from the other side, it looks like roughly 30% of the fleet almost is fifteen years or older. You have these incredible prices for secondhand vessels, including

30:55 older tonnage at present. Have you considered an acceleration or maybe some divestitures to lock in some of these elevated prices on the resale side?

31:07 Yes. Well, that's a good question. We have considered that. What we have found so far is that when we take the NPV of obviously, a potential sale of any of our assets versus what we,

31:24 I would say, conservatively then estimate that we will be earning until sort of our usual life, then that calculation will dictate whether we do this or not. And yes, I'm not seeing any signs of that we should accelerate based on that calculation. Okay.

31:49 The second question I had relates to Slide seven. So the LR2 benchmark being near the all time highs makes sense given the dirtying up that you discussed. The MRs had a nice little spike when the conflict broke out in The Middle East in late winter, early spring, but they've since kind of normalized back to these long term averages. Is there any other difference? Is it just a trade flow, amount of products leaving The Middle East, the disruption and impact of ton miles variance between kind of bigger crude carriers and smaller product that's meant that the MRs have been probably like the most consistent performers as opposed to every other sub segment of the market being exceptionally stronger year to date? And I guess if I can add a second to that as well.

32:40 Is there kind of a catch up trade to the MRs that you foresee once there is some return to normalization in

32:46 global trade flows? Yes. That's a very good observation. And of course,

32:53 being in this day to day, we are making the same observation. I think that there is, of course, a lot of elements in the piece of it. But I think if we lift it up, our conclusion so far, Jon, is that every day we are depleting inventory globally. And the crude oil and the product that is being moved is obviously lower volumes than what it would have been before the current closure effective more or less closure of Australia, Hormuz. And it means that crude is definitely moving to a higher degree

33:42 and it is arriving at destination of where is the end user at the refinery side. But sort of what you would then have a spillover for the MRs to pick up of marginal trades, those marginal trades in an environment where there's not enough cargoes are simply less. They simply don't occur as often. So it's more base

34:11 loads for the MRs. And you would need, in our opinion, to see that you have more volumes of crude that meets or exceeds the daily consumption before you will see that refineries and sort of the arbitrage trades will really in early start to reopen so that the MRs can come into

34:32 flux. Can you follow? So as long as we're in this sort of environment where there's just enough oil for there to be enough, the spillover trades from the refinery sites is less than the day when we see that you have a normalization of the amount of crude that goes to market. Yes. Makes sense. All right. Thank you, Jacob. Thanks. Your next question comes from the line of Frode Morgadahl with Clarkson Securities. Please go ahead.

35:12 Yes. Thank you. Hey, guys. Hi, Frode. Yes. So it's really interesting times, right? Bournese, more or less closed, Red Sea, Black Sea, even Panama Canal disruptions. So I mean, I have to go back way back in the history books to find these type of conditions. So I just wanted to stick your brain on this. How important are these disruptions behind the recent, let's say, rebound in LR2 rates versus, let's say, cargo flows, right? So there obviously, you had the refinery shutdown that meant less export volumes.

35:59 And now you have these inefficiencies and rerouting and shut and trade. So what's driving the recent pullback in raising your view? So the reason say it again, Borje, I'm sure that I heard you a final question. Just repeat the Yes. Mean the LR2 rates coming up. Is it driven by the rerouting and inefficiencies or target flows? Yes. So I think there's two things. On the supply side, clearly, what we mentioned earlier that going into the year, I think we all recall that there was some discussion among analysts and, of course, ship owners like ourselves around the magnitude of the order book on LR2s and that, that could have potentially a negative effect on the freight rates because simply of supply coming to market.

37:05 And the fact that we see 70 fewer LR2s today has of course proven that that was not how the story unfolded. It was more that volumes have kept coming down because of the disruptions, especially in The Middle East that a lot of the naphtha, a lot of the sort of long haul LR2 natural cargoes, the diesel from Middle East to Europe have not been moving in these parts. So volumes have gone down, but of course, the effective supply of clean trading LR2s have also been coming down and sort of keeping the market more or less at bay. Now, the inefficiencies caused that you mentioned, then you only need a little more volume. You just need a little more of the ship to ship transfer to occur.

37:56 And our instincts are that currently, there is a movement is also discussed in the public press that the national states in Middle East are contemplating having this oil bridge, which is basically that you load in the Middle East and you don't go for your end destination, but make the ship to ship transfer, that I think that is maxed out more or less on the capacity that they have and that they are looking to increase that further as a strategic response to the closure and sort of the Iranians and America currently having a tit for tat around who is controlling this.

38:44 And there's I think they are basically saying we would like to control our own destiny. So, we will up the end on this oil bridge, because we don't know when the situation helps. So, I think that is two things. A, so volume have come down, but also supply. And now we're starting to see a little more tickling around that this strategic choice to have also LR2s hauling cargoes out to the Omani waters and makes it to Chitranfa is creating stronger demand. That's interesting. So yes, so I guess, like most people have noticed the crude shut in business, but you're also seeing the same for products, right?

39:36 So how important is that? And is that something that is going to expand, do you think, going forward? Yes. So when we had our Q1 results in May, I think we alluded to that we started to see a few of our vessels being engaged in this ship to ship transfer. And our estimation is that at that time, you would be seeing about 1,000,000 barrels in totality of crude and CPP moving per day on this sort of shuttle. Now fast forward today, we estimate that it's about 6,000,000 barrels of crude and 1,000,000 barrel of CPP. So obviously, not the same level as we saw before, but significantly more than in May.

40:24 Our expectation is that as a strategic answer, again, to that it is being communicated almost daily that Strait Of Hormuz is either closed or open to take it into your own destiny and sort of control the value chain for the producers where the oil is stuck, they will, in our opinion, more likely than not increase the volume both on crude, but also on CPP in the months to come in order to sort of normalize their economic stance and also of course to normalize their relation in terms of that they are not under the gun of somebody else saying there's a war or there's not a war. So we believe that we are seeing a trend that will continue.

41:15 Of course, there's a long way to 20,000,000 barrels that was what we saw prior to this conflict. It doesn't need to go to there. But as I mentioned, if you imagine that the volumes could go back to that, instead of using, let's say, 15 LR2s, you're probably closer to 50 LR2s in that shuttle straight. And that would be beneficial for LR2s in our opinion. Yes. Super interesting. Mean, about the impact on vessel values? I mean, at least you've seen on the crude side, a lot of these Middle Eastern companies basically buying up whatever tonnage they can get hold of to just refill these shuttle services.

42:04 Are you seeing the same dynamics on products perhaps? We're not seeing it with the disease. We've, of course, with interest noted what you also described, we have not seen that yet on the clean side. It has been so far more a crude story, especially on these, but also to some degree, as we can all note also on Suezmax. And to a lesser degree, I don't think it has played out on the product side yet. It's also so if you're overflowing and you are an oil producer, I think it is most important right now. The first sort of dilemma that you would like to solve is what do I do with my crude? And you clearly engage with Wiese in order to have that short of service. And then sort of I think it is in the as a second step, I think you would strategically evaluate, can we resume our operation at the refinery side and how do we then solve the problem around that.

43:05 So I think it's natural that we have not seen anything yet. Yes. Makes sense. But you are seeing the Chinese ramping up refining wells. So hopefully, that will add some volumes going into the fall. How comfortable are you and how bullish are you on the next few months of products? Well, we are constructive around it. But I mean, as we've just discussed, we have all these choke points. And probably, historically, we've never seen more. But our instinct is that most of these choke points will either remain more or less as they are or be positive for product tankers. So that could be the Panama Canal. We have clearly not seen that play out yet. And I think in straight or almost, I don't think that the current status quo is how it will stay. I think that either will find a solution and or you will see that this oil bridge will be expanded.

44:08 Both those scenarios are positive in our opinion for product tankers. Yes. Very good. Thank you. Thanks, Frode. Your next question comes from the line of Bendik Natingis with Danske Bank. Please go ahead. Thank you. Hi, guys. I have one on the newbuilding program as well. You're sort of doubling down on the MRs here. Can you talk a bit through your reasoning on why doing MR newbuilds as opposed to LR2s? Yes, absolutely. Thank you, Wenning. So we are not allowed with any particular of the segments that we are active in. And the way we come to our investment decisions is basically that we look at what is the cost of an asset and what is our expected cash flow from that investment.

45:17 And I want to update here in the second and into the third quarter, it has been the better choice for our investment to place our money on the MRs that we have alluded to, the prices, the delivery, the specification rather than alternative investment. So that is what it it doesn't mean that we could not do LR1 or LR2 at any time, but it just means that currently, that has been the best choice for the investment for our shareholders. Makes sense. And I guess, you haven't disclosed any prices on the new six plus two vessels.

46:12 But can you talk a bit about what we should expect in terms of financial leverage as a percentage? Yes. We are pretty standard on that currently. So we would normally finance our vessels at 50% leverage. So that's a nice sweet spot. You can go higher. Of course, have to go lower, but I think for us it's the situation we are in gives us ample flexibility. Here you have a sweet spot of very low margins, fairly long funding structures. So of course, we're trying to find the sweet spot. We think this is a very good place to be. There are no further questions at this time. I'll now turn the conference back over to Jakob Meldgaard for closing remarks.

47:10 Yes. Thank you very much, and thank you to everyone for listening in to our results for the second quarter twenty twenty six. Have a nice day. This concludes today's conference call. Thank you all for joining. You may now disconnect.