Thank you for dialing in and welcome to TORM's Conference Call regarding the Results for the Second Quarter and the First Half Year of 2019. I would now like to hand the conference over to Morten Agdrup, Head of Corporate Finance and Strategy in TORM. Thank you. Please go ahead.

Thank you. And thank you for dialing in, and welcome to TORM's conference call with R&D results for the second quarter and first half year of 2019. My name is Morten Agdrup and I'm the Head of Corporate Finance and Strategy in TORM. As usual, we will refer to the slides as we speak, and at the end of the presentation, we will open up for questions. Slide 2, please. Before commencing, I would like to draw your attention to our Safe Harbor statement. Slide 3, please. With me today is Executive Director, Jacob Meldgaard; and he will be hosting the call. Slide 4, please.

Thank you, Morten, and good afternoon to all. TORM's second quarter 2019 results reflect our strong commercial performance despite the softer market conditions related to short-term factors, as well as the benefits we derived from our fully integrated in-house platform and the cost efficiencies that result in our low daily cash breakeven loans [ph].We remain excited about the developments that we expect to begin to unfold over the coming months and I will describe this in much more detail later in the presentation. But first, let me summarize our results. In the second quarter of 2019, we realized a positive EBITDA of $40.6 million and a positive profit before tax of $5.2 million, which is about $0.07 per share. The return on invested capital was positive at 3.9%. In total, for the first half of 2019, we realized a profit before tax of $28.7 million, equivalent to $0.38 per share. This is the strongest half year result in the past 3 years. We're really pleased that we are able to generate a profit also in the second quarter of the year which has been negatively impacted by -- there was an unusual high and prolonged refinery maintenance period. Our estimated net asset value was $897 million as of end of the quarter, and later in the presentation, I'll take you through a detailed breakdown of this particular metric. Illustrating our continued focus on maintaining a solid balance sheet, the net loan-to-value was 51% at the end of the quarter. Our available liquidity was $367 million, which excludes the $99 million in proceeds which we will get from six recently concluded sale leaseback agreements. The realized TCE rate was US$15,405 per day here in the second quarter, and while second quarter rate was softer than what we experienced in the first…

Thank you, sir. [Operator Instructions] Your first question from the telephone lines comes from John Chappell of Evercore. Please ask your question.

Thank you. Good afternoon, Jacob. So, you laid out a -- if you read the product tanker market review in your presentation and listen to your commentary, it seems like it was kind of the worst of all worlds and you were still able to remain profitable during a very difficult period. And then you highlighted how you expect things to improve in the second half of the year, which arguably should put you in a stronger position. But we think about kind of the risks, let's call them in the near to medium term, where do you think the optimistic view that we all share can go wrong? And when do you start to get worried if you haven't seen a significant and consistent uplift in the product tanker market? Is it you know, by the end of the third quarter, well into the fourth quarter or even need to see the beginning of 2020 before you start to get concerned that maybe IMO 2020, is it having a favorable impact on the market?

Okay, that's good questions. And I guess you kind of gave -- with your two questions, you gave the answer to number one. Because obviously, the one worry would be that the IMO 2020 is just something that we are made up as a combined industry to sort of be positive about the future and that is not -- and it would not play out the way that we expected. And that will be a significant risk. So if I take that risk, then the other risk would be the -- I think the geopolitical environment. And there is quite a lot of things going around there would have a negative effect on consumers on decision makers in general and that you would have an abrupt halt to albeit the slower growth, personal growth in the world economy, but that you would simply see a recession worldwide due to geopolitical factors. I think those would be the two things that you could see scenarios, which would be negative, and which would change our outlook. And if I take the second one, I've not more control than anybody else. Obviously, the geopolitical environment seems to be changing by tweet. So I don't think we should try to get into that too much. My personal thing is that there is a little more reluctant to just believe that this is just going to go away today than then what was the case six months ago. I do see a commentary now from people who are much closer to this than why and where that may be the trade dialogue between U.S. and China would potentially continue all the way up to and including election next year. So I guess that my instinct is that this is something that is still evolving. And…

Okay, very thoughtful answer. Two follow-ups then on that theme, kind of thinking about the way the terms position for the optimistic outlook, the transaction, the second hand MRs and the structure into that to the sound leasebacks and I think that makes sense as an efficient way to add leverage to the market without straining the balance sheet. But then the two sale leasebacks after of existing vessels; I mean, we've kind of become -- the same leaseback structure has seemed a bit more like a defensive structure of later in the down period of the market. But given your current liquidity situation and your view on the market, kind of the near-term to medium-term, can you explain why you chose to do the sale leaseback route on some existing vessels? And should we expect to see more of those in the future or is that somewhat of a one off transaction?

Yes, thanks for that. So, I think it's good to, as you pointed -- in our presentation is two bullets. Is one with the four vessels that we have bought second hand and one for the two existing vessels? And for the vessels we bought, it was a strategic choice to choose one particular lender who has a big capacity and where we by having into now into one deal with four vessels we feel that we strategically have opened up potentially if we at some stage would have the ambition to extend our presence even further that we've now established a relationship with somebody who can write big tickets in an environment where lending in general is constraint. So that was a strategic thinking around that, that it's sort of faded well. The strategic thinking around the two other vessels is our existing vessels that are already in our structure and where we have traditional bank debt associated with it. Here, what we saw was that we could actually lower our cost. On one of these transaction, we could lower our costs by transferring from bank debt into a lease structure. This is with Japanese counterparts where we seem to see that they are more competitive. And there was -- so this was a cost issue, that we actually don't use it as a defensive tool the way you describe it, but rather something where we say okay, if you are there to transact this type of structure on those terms, then we are lowering our cost and we will do that.

Okay, that makes sense. Final one, dividends. So, I mean, you've had a pretty clear strategy, and it seems maybe you've taken a step away from it this quarter. I mean, we look at a pretty difficult market, not as bad as last year obviously, but the best first half and three years, $0.42 earnings across the six month period, the formula should have resulted in some dividend. And I know you explained it a little bit in the presentation, but it seems like with the return of profitability with the optimistic view, with the spare liquidity, and with the stock trading at a massive discount to your estimated NAV, can you just explain a little bit more of the step away from the dividend policy?

Yes, absolutely. So that's a good point. And we are part two, we have a distribution policy, where we semiannually evaluate to be paying out 25% to 50% of net profit in the company. And we've clearly said that strategically that is our goal to do that. However, we also have in the same paragraph, but obviously, is that we all at any given time Look at what is the best interest of the company in terms of strategic implementation of sort of our financing of our activities. And here, we had the discussion with the Board, actually yesterday, where we sort of said we can -- obviously, we can follow through on the 25% to 50% of this given time. However, as we see it, we still have some opportunities right now in the coming -- let's say in the coming period where this cash will be better served to stay inside of the company where it could be modernization of the fleet, it could be further scrubber installations where we [indiscernible] still a compelling potential investment for all stakeholders. And it's probably given that the magnitude of dividend here was -- let's say approximately, let's call it $10 million; then obviously that would account to that you could add another handful of vessels with scrubbers potentially. So we're creating that option alternative [ph] for us without again constraining our current strong financial position. So that's what we're thinking.

All right, I appreciate all of it. Thanks for the thorough answers Jacob.

Thank you.

Thank you. We do have one further question from the line of [indiscernible]. Please ask your question.

Good afternoon. I'm looking at Page 20 on your slide deck which is going to laying out the bunker market in '17 and '20, and the $1.1 million of these annexures is probably a consensus view by now. And then, there is a similar amount of this -- the VLS04's and additional vessels [ph]. I guess my first question is, you know, some of these new products -- products will they move on clean tankers? Potentially, before being blended or is it -- all of that is going to be mainly a crude trade?

Yes, thanks for that. So as you point to; in the case where the blend consists of gas oil, there you will have it. And -- so, if the components are also D2 based going in through the new complaint fuels, then it will be clean product tankers that would be distributing it. So it depends on how the blending formula is on the side of the producer. But the components will be transported on clean petroleum vessels.

Okay. And then, I think some ship owners now are opening a bit up in terms of how their bunker consumption split will be next year. So we're bit curious to hear for you between the HFO and the scrub ship, the DSO and [ph] VLSFO -- I mean, how much are you planning on each of those? And have you taken any actions to secure volumes and price ahead of this already?

In the tramp [ph] business I would argue that we can of course have ambitions around what we expect but we really don't know the exact trade pattern that our fleet will have but based on the experience we have of our historical trade pattern, and then overlay with dialogue that we have with the bunker suppliers; we expect that something 80% to 90% of the compliance use able to say would be VLSFO and then the balance would be that we end up in plot or areas where we cannot get a sufficient of the VLSFO, and where we will then be using distills [ph] or the fuel types. I think it's more suitable for asset container vessels with a very regular trade pattern. There I think if I were -- if I think myself into the management of their, I would be structurally looking at getting supply contracts in place whereas for tramp [ph] companies I think it is not the most logical thing to do.

All right. And I guess, finally, you mentioned the naphtha trade's coming in bit under pressure in the second quarter, you know, competition from the LPG side. I guess, the amount of U.S. LPGs -- they are not looking to slow anytime soon, and I guess with all these light shale oil in the market as well, the amount of naphtha coming out of refineries in the east is probably not going to slow down either but then slippering a lid on margins similar to what we've seen in the last couple of months. So I guess the question is, now for you how important is the naphtha trade?

So, I agree. One, with sort of your general statement that what we've experienced -- let's say with last quarter does seem to be not an out-layer but it could that that is something that is here to stay that you have more competition from LPG into the petrochemical industry and also that locally in Asia, for instance, some of the refineries are coming on-stream in China would be supplying more of the local need. The -- for us, I think it's less than 10% of the naphtha trade, if you take ton-mile for larger vessels, then it's less than 10% of the current naphtha that is reaching for instance in the western hemisphere when you look at it, ton-mile I think is about 7%. So we're going to say there is a risk but all for not for TORM specifically, but for the larger segment in the product space that some of this op off -- with to east; naphtha could come under pressure, and it's about 7% on a global basis is our estimate.

Okay, interesting. Thank you very much, Jacob.

Thanks for the questions.

Thank you. There are no further questions, Sir. Please, continue.

So this concludes the earnings call of the second quarter and half year results. Thank you for dialing in.

Thank you, ladies and gentlemen. That does conclude our conference for today. Thank you all for participating. You may now disconnect.