TORM plc (TRMD) Q2 2026 Earnings Report, Transcript and Summary

Good morning, and thank you for standing by. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to the TORM Second Quarter 2026 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Jacob Meldgaard, 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. 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 USD 200 million of additional TCE earnings compared to the peer average. 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. 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 newbuilding 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. Please turn to Slide 4. 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 USD 512 million, 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 USD 416 million and net profit of USD 338 million, highlighting both the strength of the market and the operating leverage embedded in One TORM platform. 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 USD 2.40 per share, corresponding to a total distribution of USD 246 million. 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 2027 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, finally turn to the next slide, to Slide 5. 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 USD 16.10 per share in dividends, returning a significant share of our earnings to shareholders. In total, this amounts to USD 1.5 billion, 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. 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 2022 to 97 vessels today, increasing our earnings 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 our pipeline of vessel acquisitions and newbuilding deliveries extending through 2029, we position ourselves to participate fully in future market opportunities. 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 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 reach an 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. 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 #7. 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 USD 59,000 per day, while third quarter bookings secured to date averaged USD 38,600 per day across vessel classes. 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 5-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. 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. And now please turn to Slide 8. Despite major disruptions to global oil flows, the product tanker market has remained highly resilient. While the closure of the Strait of Hormuz reduced order 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. Rising tensions around the Strait of Hormuz and Houthi 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 increased vessel utilization and support freight rates. Let me illustrate that on the next slide. And here, please turn to Slide 9. And the closure of the Strait of Hormuz 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 the UAE as well as higher exports from the Atlantic Basin. Nevertheless, lower crude availability in Asia and reduced refinery runs and clean product exports from the region. Since then, rerouting, inventory releases and the ceasefire periods 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 2 to 3x more VLCCs and over 3x more LR2s than currently employed. 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 Strait of Hormuz combined with the continued Red Sea disruptions is driving another round of trade 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 Yanbu for discharge in Asia. The original routing was through Bab el-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 30 days. A single voyage extension of more than 30 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 ton mile demand and tighter vessel supply. Please turn to Slide 11. And let's now look in more detail on 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, the effective CPP capacity overall has declined by roughly 5%, despite nominal fleet growth of a similar magnitude. In other words, headline fleet growth suggests 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 crude tankers, fleet growth remains constrained by an aging fleet profile and sanctions. In the combined LR2 and Aframax segments approximately 1 in 4 vessels is currently subject to U.S., EU or U.K. 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. 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 Hormuz may fully reopen. Our focus is on operating the business prudently and maintaining flexibility. What matters equally is what happens after reopening. Even if transits 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 12 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 the Strait of Hormuz disruption. Those supported fundamentals remain in place. Our view is, therefore, that reopening the Strait should not be viewed as the end of the story, but rather as the 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 has increased materially, and this continues to reshape global trade patterns. 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 will hand it over to Kim, 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 USD 512 million compared to USD 208 million in the same quarter last year. Increase was driven by significantly higher freight rates across all vessel classes, reflecting the tighter market conditions and inefficiencies that developed across global energy transportation networks during the quarter. The strong market environment translated directly into earnings. EBITDA increased to USD 416 million from USD 127 million a year ago, while net profit reached USD 338 million compared to USD 59 million in the second quarter of 2025. On a fleet-wide basis, we achieved an average TCE rate of USD 59,301 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 USD 67,000 per day and both LR1 and MR vessels generating just above USD 57,000 per day. At the same time, operating expenses remained well controlled at USD 8,315 per day. The increase versus last year was mainly driven by higher crew change expenses and consumable costs. Despite these pressures, operating costs remain at competitive levels. The result was basic earnings per share of USD 3.31, reflecting the significant operating leverage embedded in our business when freight market strengthen. Finally, the Board has approved an interim dividend of USD 2.40 per share corresponding to a total distribution of USD 246 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 5 quarters and highlights the extraordinary step-up we achieved during the second quarter of 2026. The most notable takeaway is the significant increase in both TCE and EBITDA compared to previous quarters. TCE earnings increased, as mentioned to USD 512 million from USD 286 million in the first quarter, while EBITDA rose to USD 416 million from USD 201 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 continue rerouting of vessels, all of which contribute to higher ton-mile demand and significantly stronger freight rates. Fleet-wide, TCE rates increased to USD 59,301 per day compared to USD 34,937 per day in the first quarter. What is particularly noteworthy is how efficiently this increase in revenue translated into earnings. TCE increased by USD 226 million from Q1 to Q2, while EBITDA increased by approximately USD 215 million. In other words, the incremental TCE converted almost on 1:1 into EBITDA, demonstrating the strong operating leverage embedded in our business model. With our largely fixed base costs, 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. 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 5 quarters. As illustrated, the exceptional market conditions we experienced during the second quarter translated into record profitability. Net profit reached USD 338 million compared to USD 122 million in the first quarter and USD 59 million in the same period last year. Correspondingly, earnings per share increased to USD 3.31, reflecting both strong freight markets and the operating leverage embedded in our business model. 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 USD 2.40 per share corresponding to the total distribution of approximately USD 246 million 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 a 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 turn to Slide 19. Starting on the left side, broker valuation of our fleet increased to approximately USD 4.1 billion at the end of the second quarter reflecting the continued strength of both freight markets and tanker asset prices. As a result, our net asset value increased to USD 3.7 billion, representing another quarter of significant value creation for our shareholders. 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 increased -- sorry, decreased to USD 715 million from USD 894 million 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. 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. Importantly, we have achieved this reduction in leverage while operating the largest fleet in TORM's history. Net loan-to-value ratio in the low 20s provide considerable financial flexibility. It allows us to purchase -- sorry, pursue attractive investment opportunities, continue renewing the fleet and maintaining resilience through market cycles, while preserving significant capacity for further shareholder returns. Finally, on the right side, you see our debt maturity profile. We have USD 237 million of borrowings maturing over the next 12 months with maturities thereafter well distributed across future years and no significant refinancing concentration. Overall, we believe TORM enters the second half of 2026 with a strong balance sheet, supported by higher 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. Following a record first half of the year and continued 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 2 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 USD 1.3 billion to USD 1.5 billion. Second, with more than half of the year now behind us, a substantially larger share of our earnings is already secured. The number of remaining open days has therefore been reduced meaningfully now at 10,271 days, 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. Accordingly, we now expect full year TCE of USD 1.4 billion to USD 1.6 billion, corresponding to a range of plus/minus USD 100 million around the midpoint. This compares with our previous guidance of USD 1.15 billion to USD 1.45 billion. Reflecting the high expected revenue generation and the operating leverage inherent in our business model, we are also increasing our EBITDA guidance to between USD 1 billion and USD 1.2 billion. This compares with our previous guidance of USD 800 million to USD 1.1 billion. 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. 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.

[Operator Instructions] And your first question comes from the line of Jon Chappell with Evercore ISI.

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 15 years or older. You have these incredible prices for secondhand vessels, including older tonnage at present. Have you considered an acceleration of maybe some divestitures to lock in some of these elevated prices on the resale side?

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, of a potential sale of any of our assets versus what we -- I would say, conservative then estimate that we will be earning until sort of our usual life, then that calculation will detail whether we do this or not. And yes, I'm not seeing any signs of that we should accelerate based on that calculation.

Okay. The second question I had relates to Slide 7. So the LR2 benchmark being near the all-time highs make 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 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 subsegment of the market being exceptionally stronger year-to-date. And I guess if I can add a second to that as well. Is there kind of a catch-up trade to the MRs that you foresee once there is some return to normalization in global trade flows?

Yes. That's a very good observation. And of course, being in this day-to-day, we are making the same observation. I think that there's, of course, a lot of elements in the detail. But I think if we list 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 Strait of Hormuz. And it means that crude is definitely moving to a higher degree. 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 not base 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 earnest start to reopen so that the MRs can come into trucks. 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 side is less than the day when we see that you have a normalization of the amount of crude that goes to market.

Your next question comes from the line of Frode Morkedal with Clarkson Securities.

Yes. So it's really interesting times, right? Hormuz, more or less close, Red Sea, Black Sea, even Panama Canal disruptions, right? 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 pick 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 obviously, you had the refinery shutdown that meant less export volumes. And now you have this inefficiencies and rerouting and shuttle trades and so what's driving the recent pullback in rates in your view.

So the reason, say it again Frode. I'm sure that I haven't heard your final question. Just repeat your question...

Yes I mean, LR2 rate coming up, is it driven by the reroutings and inefficiencies or part of both?

Yes. So I think there's 2 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, shipowners 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. And the fact that we see 70 fewer LR2s today has, of course, proven that, that was not how the story unfold. 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 spots. So volumes have come down, but of course, the effective supply of clean trading LR2 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. 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're 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. And 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 -- so I think that is 2 things: a, so volume has come down, but also supply. And now we're starting to see a little more ticking around that this strategic choice to have also LR2s hauling cargoes up to the Omani waters and make ship-to-ship transfer is creating a stronger demand.

That's interesting. So yes, so I guess most people are noticed the crude [ shuttling ] business, but you're also seeing the same for products, right? 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 million 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 million barrels of crude and 1 million-barrel of CPP. So obviously, not the same level as we saw before, but significantly more than in May. 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 our 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. Of course, there's a long way to 20 million-barrel 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 go back to that, instead of using, let's say, 15 LR2s you probably need to close to 50 LR2s in that shuttle trade. And that would be beneficial for LR2s in our opinion.

Yes. Super interesting. I mean how 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 the shuttling services? Are you seeing the same dynamics on products perhaps?

We're not seeing it to -- we -- 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 these in order to have that shuttle service. And then sort of I think it is in the -- as a second step, I think you will strategically evaluate can we resume our operation at the refinery side and how do we then solve the problem around that. 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 runs.

Yes.

So hopefully, that will add some volumes going into the fall. So how comfortable are you? And how bullish are you on the next few months for 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 Strait of Hormuz, I don't think that the current status quo is how it will stay. I think that either we'll find a solution and/or you will see that this oil bridge will be expanded. Both those scenarios are positive in our opinion for product tankers.

Your next question comes from the line of Bendik Nyttingnes with Danske Bank.

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, Bendik. So we are not in love 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. And up until date 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 doesn't mean that we could not do LR1s 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 6 plus 2 vessels. 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 grow higher. Of course, not 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 will now turn the conference back over to Jacob Meldgaard for closing remarks.

Yes. Thank you very much, and thank you to everyone for listening in to our results for the second quarter 2026. Have a nice day.

This concludes today's conference call. Thank you all for joining. You may now disconnect.