Ladies and gentlemen, thank you for standing by, and welcome to the TORM's Annual Report 2019 Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, 11 March, 2020. I would now like to hand the conference over to your speakers today, Morten Agdrup. Please go ahead, sir.

Thank you. And thank you for dialing in, and welcome to TORM's conference call regarding the results for the full year of 2019. My name is Morten Agdrup, and I'm Head of Corporate Finance and Strategy in TORM. As usual on these calls, 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 our Chief Financial Officer, Kim Balle. I will now hand it over to Jacob Meldgaard.

Thank you Morten, and please turn to Slide 4. TORM successfully navigated a volatile product market here in 2019, which was impacted by the refining industry's preparation for the IMO 2020 sulfur regulation. Our results for the year were enhanced by our strong operational focus, and our focus to maintain efficient operations and a low cost base. Today, I believe that TORM's fully integrated One TORM platform contributes both to our low breakeven levels, as well as our Superior Commercial performance relative to our peers. The product tanker market strengthened considerably as the year progressed with a significant positive impact from the strong crude tanker market induced by sanctions on the COSCO fleet. The rates stabilize at lower, but still very profitable levels and has all remained at these levels since then. I will go through the details on the market shortly. For the full year TORM's product tanker fleet realized an average TCE rate of $16,526 per day, which is 27% higher than the corresponding figure from 2018. For the fourth quarter of 2019, the realized rate was $19,234 per day. We realized a positive EBITDA of $202 million for the year and a profit before tax of $167 million. Adjusted for an impairment reversal of $120 million, our profit before tax was $47 million or $0.62 per share. The return on invested capital was positive at 4.9% for 2019, which is considered attractive in comparison to our peers. The estimated net asset value was just about $1 billion as of 31, December, and later in the presentation, Kim will take you through a breakdown of this particular metric. Illustrating our continued focus on maintaining a solid balance sheet, the net loan to value was 46% at the end of the year, and available liquidity was $246 million. In…

Thank you, Jacob. Please turn to Slide 14. Before reviewing our OpEx and admin expenses, I would like to remind you of TORM's operating model. We have a fully integrated commercial and technical platform including all support functions, such as and insurance, safe and purchase team, which we believe is a significant competitive advantage for TORM. Importantly, it also provides a transparent cost structure for our shareholders and eliminates related party transactions. Naturally, we are focused on maintaining efficient operations and providing a high quality service to our customers. Despite this trade-off, we have seen gradual decrease of 17% in our OpEx per day over the last six years, which translates into a total increase of around $33 million over an annual basis. OpEx was approximately $6,350 per day in 2019, which we find competitive in light of our fleet composition. We also remain disciplined with respect to general and administrative expenses. We believe that the EBITDA even rate of $8,700 per day and profit, before tax breakeven rate of $14,700 per day achieved in 2019 reflects the efficiency of One TORM platform and is highly competitive compared to other owners in the product tanker ion segment. Slide 15, please. With our spot based profile, TORM has significant levers to increases in the underlying product tanker rates. As of - the 31st of December 2019 every $1,000 increase in average daily TCE rate achieved translate into an increase in EBITDA of around $25 million in 2020. The corresponding figure increases to $38 million in 2021 and 2022. In the bottom of the page, you can see that as of 5th March, 2020, the coverage for the first quarter of 2020 was 87% or sorry 78% at $23,818 per day. For the same individual segments, the coverage range between almost ranges…

[Operator Instructions] Your first question comes from the line of John Chappell from Evercore. Please ask your question.

Jacob I know it's a very fluid market right now, both in tankers and oil in the world. So let me ask you a kind of a bigger picture operational question. You mentioned the geographic positioning of your ships. You also have the joint venture that provides the scrubbers for your own fleet. So kind of multipart here, how are you managing the business giving kind of the disruption going on right now? Have you changed the way that you actively managing the fleet in different regions, given the outbreak? Have you thought twice about the timing around scrubbers, just any kind of bigger picture management operational as it relates to what's going on the world today?

Yes, thank you, John. That is a relevant question, obviously. And I think you can say that the one of the things that we've experienced - the benefit of our One TORM integrated platform is obviously that we can make these decisions almost on a - if not hourly, then on a daily basis about adjusting our approach to all the operational elements where you are already touching upon some. So I think if I start with the effect of the coronavirus, it obviously started with a direct consequence around China. You know how to mobilize vessels that were either on the way to China to drydock to retrofit, and how to actually get people in, get people out without compromising safety. We were lucky in the sense that the particular shipyard we're utilizing predominant for our scrubber retrofits is actually an island, where the government of China and the local government isolated the island by simply putting down that you could leave the island, but you could not come to the island. So in effect that was not by design something we had anticipated. But by design it was so, that the spread of the virus didn't come to this particular area due to that degree, and that the workers that were there continue to work. So it has been on the margin, we've experienced some delay, but it's not something that has led us to change make any other decisions I think from that perspective. Right now, we have still a number of retrofits that are either going to take place as we speak, or pretty soon. I think what could happen with the current strength in the product tanker market is that we may choose to delay. Maybe a couple of our retrofits on a case-by-case basis…

Yes, that makes sense, and it was very noticeable. And then as we kind of take the next - stab, which is the oil price war that's going on and I know you had a slide dedicated to this. I think we try to work off of past experiences. And this feels very similar to the post-Thanksgiving 2014 move biopac that lasted well through 2015 and was incredibly supportive to the tanker industry across every segment. However, it feels a little different this time, just because in that environment, the demand for oil was still relatively robust. And now we're looking at an absolute opening up the spigots across the world where demand may not be there. So, I think it makes sense from a crude perspective to see how there is a direct benefit. But from the product, it's maybe not as clear. So you'd mentioned on Slide 8, the refinery runs and refining margins will be higher to lower fleet stock costs we’ll get that refinery runs? But is there any concern on your part that if the end user is not there, the demand is not there itself. The crew just may be sitting at sea and not being utilized them by the refiners. So, what is happening in the world at least from the last 48 or 72 hours, is directly beneficial to the crude guys without maybe the same direct impact to product?

I share your thought I think I'm a little more refined in my thinking in as much as I think when you have what we have to - let's call it a week ago or 72 hours ago was an environment where everything else been equal. But the crew tanker owners would potentially be looking at a scenario where they would have an incentive to actually cannibalize on the product tanker market. In terms of new builds potentially moving into our trade in terms of Aframax is potentially moving back into the LR2 segment. And when we look at the overall supply of tonnage and product tanker is we aggregate LR2, LR1, MR into one. And it is a significant tailwind to our markets that we are in nominal terms that the biggest segment in terms of size of vessels, LR2 is at the lowest level in nominal capacity since second half of 2015. So I think as a starting point, strength include in absolute terms takes away potential risks for cannibalization in terms of newbuilds from the crude tanker market penetrating clean at number one. And maybe more importantly, the incentive is today much less for owners who are currently trading crude to move over because you will see a benefit across a crude tanker space in my opinion over there. So I think that's the supply side. Then on the demand side, we've debated actually a lot since it happened on Sunday. We've had time to debate a lot internally around, okay. So, one of the points that I've heard being argued from day one is that this will be devastating to the shale oil producers in the U.S. There marginal cost compared to what they can sell it now, this is not going to be a tremendous…

Your next question comes from the line of Espen Landmark from Fearnley. Please ask your question.

Some pretty interesting slides to have in the deck today. Just wanted to follow-on the last question really - yes I just came out with a revision to U.S. crude production next year, a million barrel less. I mean is it possible to kind of quantify the impact U.S. has had on the product trade for the last couple years and what you know, the removal of 1 million barrel or more potentially could do.

So, our opinion is that - as I said that we do not see a shortfall in production of shale in the U.S. it’s not necessarily one-to-one leading to the same lower utilization in the refinery sector in the U.S. Part of the package that came out on Sunday is also that Saudi Arabia will offer a discount to exactly the customers we're discussing in the U.S. on crude in the coming months. So my interpretation of this would be that yes, this is tough for shale gas and oil producers in the U.S. A lower topline will immediately have a consequence and an estimate here that you bring is 1 million barrels. Let's see, but I think it's significant higher. However, do not see that this input competitiveness of the input will be sufficient for the refinery sector not to continue because they are so profitable compared to other refiners that they will - everything else we need to continue more or less at the same level. If that is not a correct thesis, then it would have an impact on the product tanker market.

Okay, it's interesting. And then lots of talk of floating storage now on the crude side, is kind of forward prices on products supporting storage place or if not what is going to need it for that to happen do you think?

Yes, so we are getting inbounds from clients, either on some of the vessels where we already carrying cargos, King cargos, or whether it is, the future place that people are looking at. I think that the contango clearly just needs to widen from where it is before we will see it in earnest. And another element is of course, that we are, in a way competing with land-based storage. And luckily, what happened after 2015 where the storage were being built up, is that we've actually come back to a more normalized storage level. So I think if I'm a trader in this, I will obviously - our thinking is that we will potentially after some time benefit from storage, but then two things needs to happen the contango needs to widen further, then the on land cheaper facilities for storage needs to be filled up. And then you will - in earnest start to see that you can have a storage place. But that would be depending on that before you get to that, that Saudi Arabia, Russia, U.S. have not come to a new how I can say agreement around production and therefore also the pricing in the market.

Okay.

So, we are not taking any - I mean we see the potential, but currently we are not taking in to our models that we will see significant store space in product. So that takes longer.

Yes, and finally on the VLSFO supplies, consumption has been very high, I think for and in comparison to what most people are anticipating, you know 70% of compliant mix and large bunkers. But you know, potentially you mentioned at least and your demand could go higher from here. I mean, are you seeing any change to that in the cargo mix that you have now or is that now later down the road.

Yes, we are seeing that, two things is playing out. One, I think that a lot of bonus operators across shipping, have actually been opting for VLSFO grades, even when MGO has been priced at or when it is slightly above the VLSFO. And according to our technical analysis, you would actually even when the prices even if MGO was slightly more expensive than VLSFO, because of the caloric value is higher and that your main engine maintenance is lower, with MGO you should actually be incentivized to use MGO. I think that, that out of the box, a lot of people have not been making this distinction, because you sort of said, we are going to go from high sulfur. And then you sort of strategically said we are going to go to low sulfur or we're going to go to scrubber. And I think that, the sweet spot for MGO is actually only being explored by a lot of people, including ourselves in earnest now, because it is beneficial to also use MGO not only in the mixing of products but also just - if your prime product when you are - when you're filling up the tanks. So, in lot of them we have - so that's one element and the other is that we have seen in lot of them, that the utilization of MGO is significantly higher now than what it was pre-IMO 2020. In Singapore it’s different. There VLSFO have taken up a big share and let's see how that plays out in a bit longer run, but that's what we see.

[Operator Instructions] Your next question comes from the line of Ulrik Bak from SEB. Please ask your question.

I have two, and the first one being on your OpEx. In Q3 you reported significantly lower OpEx, especially for the MRs and the LR2 compared to the 2019 average. And maybe you could just elaborate about a bit about what - why that is, and what we should think about run rate for 2020?

This is Kim here. Basically, when we consider OPEC, we find it important to consider on a yearly basis because quarter by quarter, it can fluctuate. So we basically we are much more focused on the yearly number. Let's say there is not necessarily a direct link between each quarter. So please focus on the full number, there is no specific reason for why Q3 is deviating.

Okay, thank you. Then, my second question is, you were alluding to that a lot of the LR2s, LR1s are trading dirty at the moment, are any of your vessels trading dirty or do you plan to do so?

Yes. In the, as such, we have - we have some that are trading dirty, utilizing the markets as such. So we do have, we do have some, I don't have the specific number in front of me right now, but we do have some.

There seems to be no questions from the audio. Please continue.

Okay. This is Morten, again here. There is no questions from the web. So this concludes the earnings conference call for the full year 2019. Thank you for dialing in and participating. Have a good day.

That does conclude our conference for today. Thank you for participating. You may all disconnect.