Cmb.Tech - Earnings Call - Q3 2025

Transcript

Alexander Saverys (CEO)

Good afternoon and welcome to the CMB.TECH Earnings Conference Call for the Third Quarter of 2025. My name is Alexander Saverys, and I'm joined by my colleagues Ludovic Saverys, Enya Derkinderen, and Joris Daman. We have the usual topics we want to discuss with you today, starting with our financials and the highlights of the quarter. We will then move to the Marine Division market update, and we will close with the conclusion and Q&A. I would like to start with the financial highlights and will therefore hand over to our CFO, Ludovic.

Ludovic Saverys (CFO)

Thanks, Alex. If you move to the next slides, this is the typical overview of our company now post-Golden Ocean merger. We have roughly $11 billion worth of assets on the water and being constructed, over 250 ships. We'll go further towards the metrics at a later time in the slide deck. If you move to the next slide, Alex, you'll see that we finished the quarter with the result of roughly $17 million of net profits. Our EBITDA is still at $238 million, where we end the quarter with ample liquidity. We have more than $555 million worth of liquidity in the company. The contract backlog stayed the same, which means that we added a little bit compared to the natural attrition we have quarter on quarter.

The CapEx right now sits at $1.6 billion, and our equity on total assets, book equity for the bond covenants still sits above the 30.4%. We had a pretty active quarter, obviously apart from finishing the merger with Golden Ocean, but the board has decided to declare an interim dividend of $0.05 per share, which is going to be payable early January. Our CapEx program is now fully funded. Happy to say that we have signed all new loan agreements on the remaining CapEx, and the equity component has been covered by own liquidity and sale of assets. Contract backlog mentioned still hovering around $3 billion, but we definitely took a big step forward again in our rejuvenation of the fleet, where we took delivery of seven new-built vessels, which have been announced in our training updates.

We delivered two ships in Q3, but more importantly, we will generate another capital gain of roughly $50 million on the delivery of the VLCC Dalma, the Capesize Battersea, and Zhoushan, and the Suezmax Sofia in Q4. On top of that, we just announced the order of a multi-purpose accommodation service vessel, which is similar to our CSOV but in a bigger format. Alex will discuss that at a later stage. Moving towards the coming quarters, we're quite excited with the timely acquisition of Golden Ocean, our big increase in spot exposure on dry bulk, which is happening at the right moment. It's playing out well. We have 55,000 shipping days in 2026, from which roughly 47,000 is spot. With a big focus on large tankers and large dry bulk, we're perfectly positioned to enjoy the good markets that we have today.

Moving to the next slides, here we've made a simple assumption. If the market today would continue going forward, we would show what the free cash flow capacity is at current rates. This is a pure assumption, but you could see that at today's rates, we would add another $600 million of liquidity over a year on top of the $420 million that we anticipate to pay back on the bonds and on the bridge financing. Happy to say, by the way, that we'll reduce the bridge by another $300 million by the end of this quarter. This slide shows that with the spot exposure and the good market we have, we can generate meaningful free cash flow showing the operational leverage of the company. If people sometimes don't like to spread out over a year, you can easily filter this into quarter by quarter.

This would mean at today's market that we would add $250 million free cash flow per quarter, which I think is a pretty strong sign of our operational leverage. I'll move the floor back to Alex on the various Marine divisions we have.

Alexander Saverys (CEO)

Yes, thank you, Ludovic. I want to take you through our five divisions and the markets in which they operate and what has happened in Q3 and is happening right now in Q4. You can see our usual slide with the five main markets we operate in: the tankers, dry bulk, containers, chemicals, and the offshore markets. You see that we are still positive on tankers, positive on dry bulk, positive on the offshore market. We are cautious since a couple of quarters already on containers and on chemicals. That has to do with the fundamental supply demand numbers.

If I start with the divisions where we're a little bit more cautious, containers and chemicals, you can see the demand numbers for 2025 in containers were positive but are expected to be quite flat or even down a little bit in 2026, combined by a huge order book in containers, 32%, and the fact that we are expecting gradual unwinding of the rerouting away from the Red Sea so that ships would go through the Red Sea again, which represents today between 10% and 12% in ton miles. We think container markets will have a difficult time next year and probably also the year thereafter. Same can be said for chemical tankers, be it to a lesser extent. Supply demand is a little bit overweight in terms of the number of ships coming on stream. So we're also a little bit cautious on the chemical tankers.

As you know, our two divisions, Delphis and Bo-Kem, are mainly covered by time charters and have very little spot exposure. If we turn to the other segments, starting with dry bulk, which is by far our biggest exposure today, we see that there was an increase in ton mile demand growth for capesizes this year of 0.8%. Not very meaningful, but still positive. Expected to ramp up next year to close to 3%, combined with a supply figure where only 9% of the fleet is on order, where the fleet is also aging, 32% of the capes is 15 years and plus. We believe that supply demand fundamentals on dry bulk are actually very strong. On tankers, we are seeing demand growth this year, next year in ton mile.

We see that the fleet is growing, but because of all the inefficiencies that we are seeing in the market, and I'll talk about that in a minute, we still believe that definitely in the short term, the supply demand figures look very good for tankers. Last but not least, on the offshore, offshore wind, but also offshore oil and gas. We have seen the offshore wind markets grow, even though some projects have been postponed. Therefore, offshore supply vessels, there has been a lot of extra demand for the oil and gas from the oil and gas market. We are seeing offshore wind vessels going into the oil and gas market, and supply demand fundamentals definitely in that market are also positive. I'd like to zoom in to Bossimar and maybe go back one slide.

You see here one of the vessels from Golden Ocean that has been renamed to the Mineral Sakura. Our renaming program is in full swing. We are keeping the Golden Ocean or the Golden prefix for our Panamaxes, but are renaming all our Capesizes and Newcastlemaxes to Mineral prefixes. We have three large divisions in dry bulk: our Newcastlemaxes, our Capesizes, and our Kamsarmaxes, Panamaxes. If we focus on the Newcastlemaxes first, what have they done in Q3? We achieved a TCE of $29,500. In Q4 to date, we are at close to $34,000. On our Capes, the number for Q3 is $20,500, going up in this quarter at $26,200. You can see that we've already fixed quite a substantial amount of ships for Q4, but that number could still go up a little bit if the current markets stay strong.

On the Kamsarmax and Panamaxes, definitely a positive surprise for this year. We have seen rates better than anticipated. We achieved rates around $13,500 in Q3, but that's already up in Q4 to $17,000. Main drivers for dry bulk, when we look at all the indicators, a lot of them are green. It's positive on the China steel mill utilization. It's positive on soybean imports to China. Brazil iron ore exports there are also very good. Of course, the dry bulk fleet supply is growing, but we are seeing definitely in the larger segments more demand growth than supply growth of vessels. Sorry for that. Just was a bit too quick. Zooming in on the demand of iron ore, coal, grain, and bauxite, you can see that all numbers are positive, expected positive for 2026 and 2027, except for coal.

We believe definitely for the larger sizes that iron ore and bauxite are compensating or overcompensating the less demand for coal. Watch the space on grain as well. Not really a big driver for cape sizes, but important for our Panamaxes. The numbers there are very positive. With the recent peace agreement on tariffs between China and the US, we're expecting that demand hopefully to continue on the ton mile side. If we look at the number of ships on order compared to the existing fleet, you can see that in 2026 and 2027, we are going to add some cape sizes to the market. All in all, including 2028, the order book to fleet is only 9%. The number for Panamaxes is 14% order book to fleet.

Also there, with the demand figure, I think supply demand should be balanced and definitely looking positive for that market. An important number to highlight is the average vessel age. As you can see, both Panamaxes and Capesizes are at historical highs in terms of average age, which always bodes well for potential scrapping. The next three slides are providing you more information on the Brazil iron ore trade, the Australia iron ore trade, and the Guinea iron ore and bauxite trade. On all three, I can say that we are at five-year highs in terms of output. You can see the numbers there on the slide. We have basically tried as well to highlight the seasonality. Seasonality in the Atlantic Basin in Australia and for Guinea is dependent on rain. The rainy season usually in Brazil and Australia is in the first quarter.

However, in Guinea, that's usually in the third and fourth quarters. We see that the Guinea season can actually help our markets because when Australia and Brazil are down, they are up. Actually, in the rainy season of Guinea this year, it was less than expected. We saw some good outputs regardless of the rainy season. The key takeaway here from this slide and from the Australia slide and from the Guinea slide is that we are seeing volumes up, volumes at five-year highs, and the seasonality in Q4 and Q1 actually supportive. I'd like to talk about our tankers, Euronav, our tanker division, and crude oil transportation. We have a trading fleet of 10 VLCCs with another four Eco VLCCs on order.

Some of the pictures that you have seen during this presentation highlight the new VLCC that we took delivery of a couple of weeks ago, the Atrebates. We have another four coming in the following weeks and months. We achieved $30,500 in Q3. So far in Q4, we're at $68,000 with 78% fixed. We believe that number can still go up. The fixings and the bookings that we have done in recent days and in the coming weeks are looking very promising. We sold one older ship, the Dalma, which generated a capital gain of $26 million. We've extended one ship by year, the Donusa, and then we delivered two vessels to the new owners in Q3, the Hakata and the Hakone. On the Suezmaxes, we have 17 vessels on the water. We have another two ships coming in the fleet next year at the end of Q1.

We sold one Suezmax, the Sofia, which was delivered in Q4. The rates we achieved in Q3 were strong, worth $48,000. In Q4 quarter to date, we are close to $60,000. There we still have some days to fix, so there is upside to that number. When we look at the main drivers and the main indicators, we see that a lot of indicators are positive. Also on the tanker fleet supply, year on year, it is still a moderate fleet growth. Let's look at what is coming. Zooming in on the demand, you can see that the forecasts are that there will still be an oversupply of oil in the coming months and quarters. That leads to more storage. That leads to more oil on the water. That leads to definitely in the short term, better rates.

Because if we look at the supply of vessels, you see that this year there's been very little new ships coming on the water. It is starting to creep up. Next year, 2026, and in 2027, we will see more Suezmaxes and VLCCs come to the market. If you look at the average age of the fleet, this new supply should definitely be manageable. In the very short term, maybe even medium term, we are still bullish on rates for tankers. What happens thereafter, a lot will depend on how many more tankers will be ordered and added to the order book. We are not at the single-digit numbers anymore. For the VLCCs, we're at 15% order book to fleet and Suezmaxes, 20%. It is not what it used to be.

I would say that in the short to medium term, things are still looking very good. Also, the age of the fleet is supportive. On containers, we can be quite brief. As you know, the exposure we have on containers is limited. Actually, it's zero. We have fixed all our ships, the four vessels on the water to CMA CGM. We have one ship coming next year on a 15-year charter. The market on containers has weakened. You can see the SCFI, which reflects the freight rates for containers paid. It has slipped down and is now at a level which is the lowest of the past two years. The high order book, more than 30% of ships on order, plus the Red Sea situation, which will unwind, leads us to being quite cautious on the supply side. Demand should also be lower next year.

Container markets could be up for a bit of a rough patch. Chemical tankers, their spot exposure is also very limited. We have a couple of ships operating in a spool. That is basically our spot exposure. All the rest is time chartered. We still have quite an interesting order book coming with all ships having been fixed. We have one more chemical tanker that has already been christened, but that will deliver soon coming to our fleet. Next year, we will have two product tankers coming to the fleet, which are fully fixed. We have our ships in 2028 and 2029 that were fixed to MOL that will come later. Our spot exposure on chemicals is relatively limited. It is a less volatile market, but it has come off its very high levels of last year and the year before.

We are still at very healthy levels. I'll finish with Windcat, the offshore wind division. Some of you might have seen in our press release, but also in a separate Windcat press release, that we ordered a new CSOV, an enlarged version of a CSOV, which we call an MPASV. I'll say something about that in a second. Maybe first zooming in on our going concern business. We have our CTVs. We have our CSOVs. We took delivery already of one CSOV. That ship has been fixed on a very short-term period for business in oil and gas in Australia. It already gave us earnings in the third quarter of $27,000. The fourth quarter, rates are going up to $118,000 with most of the days already fixed. We have ordered this new multipurpose accommodation service vessel, which I will discuss in a second.

Looking at our CTVs, you can see that the seasonally strong Q3, we achieved good rates of close to $3,500 a day on average. The slower period in Q4, our TCE sits at $2,800. Here you have a render of the newest new building order for CMB.TECH. We ordered one ship with another options for five vessels. It is based on our existing CSOV design for the 120 passengers on board, but we've upsized it to 150 to even 190 passengers on board. It will have a permanent gangway connection, which is better for oil and gas projects. It will be larger, so positive for our charters. When we look at the market, it will be the only vessel type that can truly operate between oil and gas on the one hand and the offshore wind on the other.

Our existing ships are already suited to do that, but this one will be even better suited. We have a 100-ton subsea crane, which is installed. When we look at where that ship will compete, we see that the flotile market for oil and gas is one market that we will target. When we look at designated ships for that market that also have the crane capability, we see that there's actually not that many vessels on the water and that are being built for this. Our markets are everywhere, but clearly one of the markets that will be interesting and something to follow is the Brazilian oil and gas market, where we see more than 30 FPSOs entering service in the next two to three years, which will need a lot of support vessels coming there.

The reasoning behind this is that we want to trade in the two markets. Eventually, this ship will end up in offshore wind. As long as the offshore wind is a little bit quieter, we can also go to oil and gas. With this new building or with this newest addition to our fleet, we can end the part of the presentation and go to the Q&A, Enya.

Enya Derkinderen (Brand Manager)

Yes, we will now open the floor for questions. If you would like to ask a question, please raise your hand. Make sure to introduce yourself and unmute before asking your question. If you can't unmute, you can also use the Q&A section to ask your question. If you're dialing in with a telephone, you can press star five to raise your hand and star six to unmute.

If you have any follow-up questions, of course, you can reach out to Joris. I will now open the floor for questions, so you can raise your hands. The first one is Frode Mørkedal. You can now unmute and ask your question, please.

Frode Mørkedal (Senior Equity Analyst)

Yeah. Hi, everyone. This is Frode from Clarksons. First, I wanted to ask you about IMO, the delayed carbon pricing by a year at least. What's your verdict on this? Have you seen any change, I guess, in terms of, let's say, interest or demand for a dual-fuel technology after that?

Alexander Saverys (CEO)

Yep. Thanks, Frode. I think it's a question many people have. First, on the delay, whether it's going to be a one-year delay, two-year delay, or three-year delay, we don't know. We have, of course, not based our strategy on the IMO coming to fruition in 2028.

It definitely helps our business case. But our strategy on dual-fuel engines is based on finding like-minded partners to charter these vessels and use the technology to decarbonize. We have the EU legislation, which is in place, which is definitely supportive. IMO would have been a very nice-to-have. It's not a must-have for our strategy and for our plans. Our opinion on whether eventually they will find an agreement on the IMO level is that we don't know. But we do see that after the failure of IMO, there's a lot more discussion between countries on a bilateral basis to see what can be done on certain trade lanes, say, Australia to China, for instance, or trades that are linked to Europe. The last word has definitely not been said, but it will not change anything to our strategy.

Frode Mørkedal (Senior Equity Analyst)

Okay, fair enough.

One question on your, let's say, investment philosophy. So you ordered a few large CSOVs, I guess you can call it. But how do you think about opportunities in other segments like dry bulk and tankers? Are you looking to invest more there or maybe trim or sell in those segments?

Alexander Saverys (CEO)

I think we've invested already a lot over the last two, three years at the right time, I would say. We will always look opportunistically at new buildings. Today, clearly, we think new buildings are quite pricey. That does not mean we would not order if it's the right value and if we believe that it will create value for us and our balance sheet can take it. You just saw that we ordered this extra wind vessel, which is really an offshore vessel. We think there's very good value there.

We think this is also something CMB.TECH can perfectly do, even if we have more options that we can declare going forward. That is on the new building side. On the second hand, you have seen, and we will continue to do that, that we're clearing out our older vessels because we just think rates are very good and the prices for second-hand tonnage are at a level where we're rather sellers than buyers. We still have a couple of older vessels. Do not be surprised if we clear them out. There will come a point where we're very satisfied with the age profile of our ship, and we're very satisfied of basically staying on the market and enjoying the good markets.

Frode Mørkedal (Senior Equity Analyst)

Okay. Last question on the dividend. This is the $0.05 second quarter in a row.

That makes it tempting to think this is some type of minimum level going forward, or should investors expect dividends are flexible going forward?

Ludovic Saverys (CFO)

I think, Alex, if I'll take it, we have a fully discretionary dividend policy. I think we've been pretty clear that every quarter, the board will decide what we'll do with the cash that we have. It's fair to say that with the meaningful cash flow generation that we are seeing in Q4, that we're expecting in Q1, there will definitely be a further look at how to reward the shareholders, whether that's share buyback, whether that's dividends, whether that's an accelerated clearing out of some of the bonds. Some people have mentioned the bridge financing or just reducing leverage. I think these markets, the way we positioned ourselves in there, show that it goes very fast.

I do not think we are there to say minimum dividends. We do not say maximum dividends. We are there to balance between rewarding shareholders and strengthening our balance sheets to be positioned for opportunities when they present themselves, whether it is organically or through M&A.

Frode Mørkedal (Senior Equity Analyst)

Okay. Perfect. I will turn it over. Thank you, guys.

Alexander Saverys (CEO)

Thanks, Frode.

Enya Derkinderen (Brand Manager)

Moving on, Eirik Haavaldsen, you can now unmute and ask your question, please.

Eirik Haavaldsen (Head of Equity Research)

Yeah. Hi, this is Eirik from Pareto. Just following up a little bit on the S&P because you have not—I mean, do you have a sort of target list of the vessels you could dispose of? I am thinking especially on the tanker side now where S&P markets are interesting, but cash flows are also fantastic, right? How do you balance that short-term cash flow versus potentially realizing some of these elevated asset values?

Alexander Saverys (CEO)

It all depends on the price.

I think, Eirik, you will agree with me. If you're getting north of $50 million for 18, 19-year-old VLCCs, there's a good case to say that you should sell. Other people might say, "No, keep it on the spot market and trade it out for another year." We are more in the first camp, I think, tonnage, which is older than 15 years old at current valuations. Again, it will depend on the bid and it will depend on the price. We are more sellers than keeping it in our fleet. That doesn't mean we will do it at any cost.

Eirik Haavaldsen (Head of Equity Research)

What about on the—I mean, on the modern vessels, though, to lock some of them up to sort of de-risk a little bit your cash flows? Is that something you're looking at?

Alexander Saverys (CEO)

Yes. A very good question, Eirik.

I think we've mentioned this in previous calls as well, and we've been very open about that. If we see good levels to take some cover, we'll definitely do it. We like to have 40,000 spot days, but at one point, we also want to use the market to take some cover, keep the young vessels in our fleet, but take some TC cover. Now, as we've not announced a lot of time charters, it also means that right now, both on tankers and on dry bulk, we've not been tempted by numbers that are good enough for us to take action.

Eirik Haavaldsen (Head of Equity Research)

Very good. Finally, should we read anything into the fact that you're not changing the prefix on the Panamax Kamsar fleet of Golden Ocean?

Alexander Saverys (CEO)

No. No, that's a good question. Looking back in the CMB days, we had a CMB prefix.

Look, we're very happy and proud that Golden Ocean is now part of our company. Even though we're not using the brand name any longer, we like to respect the Golden Ocean history and keep them as part of our name and our brands by keeping the golden prefix on Panamaxes.

Eirik Haavaldsen (Head of Equity Research)

Excellent. Thank you very much, guys.

Alexander Saverys (CEO)

Thanks, Eirik.

Enya Derkinderen (Brand Manager)

Kristof Samoy, you can now unmute and ask your questions.

Kristof Samoy (Associate Director of Equity Research)

Yes. Good afternoon, Kristof Samoy, KBC Securities. Thank you for taking my questions. A few have been addressed already. Maybe first to go a little bit deeper into IMO that was already touched upon. If the conditions would be right to consider new build ordering, would you for sure order ammonia or H2 ready or fitted vessels, or could you nowadays also consider LNG ready or fitted vessels?

Then secondly, just with regards to the decision of the IMO, what impact does it have on your business plan for H2 industry and infra? Thank you.

Alexander Saverys (CEO)

Yeah. Thank you, Kristof. We are more convinced than ever that ammonia is a very good choice to decarbonize. The reason is not only because we are now getting very close to showing to the world that the technology actually works, but also because we have seen over the last 12 months in China and in India a tremendous evolution on increasing the availability of the green ammonia molecules and reduction in the cost of the green ammonia molecules.

On IMO, even though, as I just said, I do not think there will be a lot of movement in the next couple of years, and I hope we will be surprised, we still think that technology and cost and availability of molecules will be the main driver to convince people like ourselves, but also partners that want to decarbonize their fleet to go for ammonia. In short, right now, we are not looking at any LNG projects. Never say never, but our choice of fuel is still ammonia. On your second question on H2 infra and H2 industry, these all are very small divisions. They are supporting the business we do on the development of hydrogen and ammonia engines on the industry side, and they are trying to develop molecules, producing molecules, but also sourcing molecules on the H2 infra side.

There, we have a lot of ongoing discussions with suppliers in China and India to buy molecules for our fleet of next year. Nothing we can announce yet, but as soon as we have news on that, we will definitely let you know.

Kristof Samoy (Associate Director of Equity Research)

Okay. Maybe just as a follow-up, I mean, any change in the attitudes or the appetites of miners to conclude long-term charges since the decision of the IMO has been made public?

Alexander Saverys (CEO)

That's again a very good question, Kristof. I think there's three categories of people, people like us that were convinced before the IMO discussion that we should decarbonize our fleet. We have a couple of customers, as you saw in April with the deals that we announced, that will continue down that path. People that were convinced are continuing to engage with us and continue their investments.

There's another category of people, and that's still the vast majority in shipping, that take a very much wait-and-see attitude and that don't do anything and basically wait to see how this will evolve. The category in between, people that were hesitating a little bit, I think we definitely lost part of them, that they are not looking at it anymore and more in the camp of wait-and-see, but some others still continue to engage and ask questions. It's a little bit of everything. The conclusion for us is simple. Had the IMO decision been taken a couple of weeks ago, it would definitely have propelled our business plan to a much higher speed. It doesn't slow down our business plan, and it doesn't change our business plan, but it would definitely have helped.

Kristof Samoy (Associate Director of Equity Research)

Okay. Clear. Thank you very much.

Alexander Saverys (CEO)

Thank you, Kristof.

Enya Derkinderen (Brand Manager)

The next one is Climent Molins. You may now unmute, please.

Climent Molins (Head of Shipping Research)

Hi, good afternoon. This is Climent. I'm from Value Investors Edge. I wanted to start by asking about your interest expenses for the quarter. Did those include any one-offs, or is it, let's say, a clean quarter?

Ludovic Saverys (CFO)

It's a good question, Climent. There are two things. Obviously, when you do leverage buyouts, those bridges are somewhat more expensive. We had $1.3 billion. We've reduced that to close to $220 million end of quarter. That definitely has explained our Q2 and Q3 figures of elevated interest expense. Second point there is, obviously, when we did those acquisitions, both from a year-and-a-half point of view, but also Golden Ocean, we had a back financing of re-leveraging the fleet to be able to pay back.

Those refinancings, you always incur arrangement fees with the banks, and these you have to write off over the length of the financing. If you refinance $2 billion over five years, you pay a percent arrangement fee, you're going to add $4 million of interest expense every year. As we've been doing a lot of these, these obviously are increasing the total interest expenses. That said, I think only in the last three weeks, we've been able to look at our total financing package, where we had an average of SOFR plus 275 throughout all our financings. We are actively working billion per billion to reduce that by 100-125 basis points. This is more going to be a topic of 2026, of optimizing our financing portfolio and costs as part of, I would say, integrating the businesses and optimizing our balance sheets.

Climent Molins (Head of Shipping Research)

Thanks for the call. That's helpful. My second question is also on the modeling side. First, should we expect G&A to come in at around $34 million as well in Q4? Secondly, where do you see the run rate on the G&A front once you've realized any potential synergies from the merger with Golden Ocean?

Ludovic Saverys (CFO)

Yeah, I think it's a valid question. When you do large-scale transactions, you always incur a lot of lawyer fees, auditor fees, financial advisory fees, and others. We've been doing that two years in a row, doing multiple billion-dollar transactions. That has not helped our G&A. Full stop. It is a review that we're making while we are integrating the teams, optimizing the insurance packages, the IT systems, and everything like in normal M&A processes. This will be optimized. To put an actual figure, Climent, I think it's hard to say.

I think 2026, give us a couple of quarters, and you'll see those as G&A naturally normalized, I would say.

Climent Molins (Head of Shipping Research)

Makes sense. Thank you. Final question from me. Does the $1.57 billion in remaining commitments include the CapEx on the recent CSOV new build addition?

Ludovic Saverys (CFO)

No, that's a good point. In the Q4, we'll add that. Currently, as Alex mentioned, it's one ship. We can't disclose the new build price, but it's somewhat higher, I would say, than your smaller CSOV. That is going to be added to the total CapEx.

Climent Molins (Head of Shipping Research)

Okay. Perfect. I'll turn it over. Thank you for taking my questions.

Ludovic Saverys (CFO)

Thank you, Climent.

Enya Derkinderen (Brand Manager)

Next up is Kristoffer. You can now unmute and ask your question, please.

Kristoffer Barth Skeie (Equity Research)

Hello. Good afternoon. Can you comment a bit on when the options on the CSOVs are lapsing and when is the delivery of the optional vessels?

In order to declare them, would you need to see any long-term contract in the division, or to put it differently, what do you need to see to declare these options?

Alexander Saverys (CEO)

Yeah. We have a lot of time, so close to a year to declare the option. And then, of course, the options thereafter. Of course, the earlier we declare, the earlier the vessels could deliver. We're looking at deliveries in 2028 and 2029. Answer in terms of contracts, it's not a must-have to have a contract to lift the option. Of course, if we get a contract straight away, we could lift the option earlier, but we could also lift without a contract.

Kristoffer Barth Skeie (Equity Research)

Perfect. Moving over to the tanker division. What type of time charter levels would you need to see in order to de-risk estimates here?

It seems like rates are starting to move up quite fast, so.

Alexander Saverys (CEO)

Kristoffer, where do you peg the five-year? What do you peg a five-year for modern VLCC? What do you think the market is today?

Kristoffer Barth Skeie (Equity Research)

Probably just below 50 or something, or? Yeah.

Alexander Saverys (CEO)

Clearly, that's not something we would do right now. I mean, we can still change our mind, of course. I think the market would need to be higher on long-term, and I'm talking five years plus then in order to consider. Current rates are for us, for our modern tonnage, and I stress on modern tonnage, we would need to see more.

Kristoffer Barth Skeie (Equity Research)

Final one from me. In terms of the bond process you had ongoing, can you just comment a bit on how you're sort of looking to refinance the bond maturing next year?

Is it still the only debt instrument with an equity covenant and not value, just equity?

Ludovic Saverys (CFO)

Yeah. Great question. I think we stopped the bond process because we had much cheaper alternatives, Kristoffer. In that same flow, we are anticipating paying back the bonds with our own free cash flow, sale of assets, and own liquidity. We do not anticipate the bond process to be reinitiated anytime soon. It is a cheap bond, six and a quarter, so we will probably leave it to run until September 2026. The way it is continuing, not just the bond, but also on the bridge, we feel that we can pay this with our own means. We do not foresee any equity issuances or debt capital markets in the coming quarters.

Kristoffer Barth Skeie (Equity Research)

Thanks a lot, guys. That is it from me.

Alexander Saverys (CEO)

Thank you.

Ludovic Saverys (CFO)

Thanks.

Enya Derkinderen (Brand Manager)

Next up is Axel.

You may now unmute and ask your question, please.

Axel Styrman (Head of Research Norway and Head of Shipping)

Thank you. Three questions for me. One, how do you see potential removal of U.S. sanctions on Russian oil to influence the tanker market and the tanker rates? Second question, if the Guinea volumes on the R&R just started really replaces the Australian exports to China, how do you see this outlook, all this influencing the bullish outlook on the dry bulk market for the large dry bulk carriers? And thirdly, what kind of optimal financing structure, what kind of leverage are you looking for after you've taken delivery of your newbuilding program?

Alexander Saverys (CEO)

Okay. I'll take the two first questions, and then maybe Ludovic, you can comment on our finance structure.

On Ukraine, I think the easy thing to say is that before the fully fledged war started in 2022, or when you look at the effect of the war, it was definitely positive for crude oil tankers. If we would unwind it, one might say logically it will be negative. In our opinion, it's way too early to say, and actually we don't know. Maybe in theory, relief of sanctions on Russia could be negative for our market because then you unwind everything that has been put in place over the last two, three years. In practical terms, I think there will be a lot of different levers that will play an impact on that. The short answer to your question is we don't know what the impact will be.

On Guinea cannibalizing Australian volumes, because I think that's what you mean, I think two things need to be said there. On R&R specifically, you have to know that at the very beginning, all the volumes are going to China and are actually being transported by Chinese ships, which is taking away capacity. It is supporting the market in general. Going forward, of course, as we see a ramp-up and there would be any cannibalization, the logical immediate effect is that you're replacing short ton mile with long ton mile. The effect is relatively positive. If on top of that, you would see that the price of R&R starts falling, you might push out some producers that have a higher break-even level. Again, there, we think that will rather stimulate the high or the long ton mile than the short ton mile.

All in all, cannibalization of volumes, of Australian volumes, and replacing them by Guinea volumes, we think it will definitely have an impact on the market, but on a net basis, it could actually be positive. It is on the structure.

Ludovic Saverys (CFO)

Axel, on the optimal loan-to-value, I mean, we are indicating a 50% loan-to-value throughout the cycle. We are somewhat north of that. After the full delivery new building program is assimilated, and most of it is going to be end 2026, I think out of the $1.5 billion, we are taking delivery of $1 billion worth of ships in 2026. Thereafter, it is only a few ships that are on long-term charters. We are definitely targeting the 50%. In your 50%, I think it is important to look at what is the cost of those financings. We still have some expensive leases on board. We still have bonds.

We still have bridges. I think it's also the work in the next two quarters to take out, I would say, the more expensive debt, replace it by inexpensive financing, which is readily available for companies like us at this stage.

Axel Styrman (Head of Research Norway and Head of Shipping)

Thank you. Just a short follow-up. Maybe you partly answered that earlier, but could we then expect a fixed payout ratio or an explicit dividend policy different from what you have or don't have today thereafter?

Ludovic Saverys (CFO)

No, I think no, we don't have. It's a fully discretionary dividend policy. I think while our balance sheet and our company is still in transition, I think that's an important one to say. We need to keep the flexibility to decide on every dollar that goes down on debt, M&A, new builds, rewarding shareholders to share buyback or dividends.

We're not going to go for a fixed payout anytime in the short future.

Axel Styrman (Head of Research Norway and Head of Shipping)

Okay. Many thanks. That's all from me.

Ludovic Saverys (CFO)

Thanks.

Enya Derkinderen (Brand Manager)

We have a few questions in the Q&A, so I will ask them. The first one, is it correct that the 2026 FCF sensitivities assume $118,000 a day in VLCC rates for the whole of 2026? If so, can you provide more color on the factors behind such an assumption?

Ludovic Saverys (CFO)

Sure. And it's 118, so 118 and not 180. I think this is not a projection. We are not believing that this could hold on for a year because we don't know. We are in a kind of market where it could go any way right now. Supply demand looks positive, like Alex mentioned. We just want to show the free cash flow capacity.

If at $118,000 a day for a full year for VLCCs, which is relatively small in our spot exposure compared to our dry bulk, where we anticipate $34,000 on Newcastlemax, where actually we're at $44,000 right now if you look at the market. It is just an assumption to show the operational leverage and the free cash flow generation capacity of our company. Hence, it is strengthened by the belief that we'll be able to pay back the bridges and the bonds and our new build CapEx just by own cash flow. We're fixing Q4 already deep down Q4, and we're starting to fix Q1. Q4 and Q1, there is a good likelihood that we are hovering around elevated levels. Is it going to be 118? We don't know. Is it going to be 34 for Newcastlemax? We don't even know as well.

This could go up.

Enya Derkinderen (Brand Manager)

All right. The second question, what are your expectations for the Simandou mine opening? How important is the service to the offshore oil market OSV to you going forward? There are some very old vessels in operation by competitors. What are our depreciation rates?

Ludovic Saverys (CFO)

On Simandou, I think we've highlighted this already many times. That is, of course, going to be a meaningful impact as it ramps up to its full capacity of 120 million tons of extra R&R. I think on the offshore market, we can be very clear. We have our CTVs for the offshore wind specifically. We have six CSOVs, which are a very meaningful investment of close to $500,000,000, where we definitely want to continue to fix them well, short term and long term. We have now one extra CSOV XL.

If it is successful, if we see traction with our customers, we will definitely order more. The last question was on depreciation rates. We depreciate, I think, 20 years to scrap. Now, on OSVs, the scrap is relatively light, so you can assume close to zero. These are depreciation that we use on the offshore wind vessels.

Enya Derkinderen (Brand Manager)

We have one more question live. Quirijn, you can now unmute and ask your question.

Quirijn Mulder (Senior Analyst)

Good afternoon. Good morning, everyone. Quirijn Mulder from ING. I have a couple of questions. My first question is with regard to the tariffs. Have you calculated what the impact was of tariffs on your company, let me say, between 1st of April and the end of September? That's my first question.

The second question is about, let me say, if you look at your fixed contracts, 295, I think, 294 in that range, what do you think it will be at the end of 2025? That were my two questions.

Alexander Saverys (CEO)

Okay. Yeah. Thank you, Quirijn. I'll answer your second question first. We have the intention, of course, to increase it. I think we've been very vocal about that. We want to take more cover when markets are high. We don't have a fixed target because a lot will depend on the market and what people are willing to offer us. We definitely want to grow our fixed contract cover. The first question on the tariffs, apart from the effect on the market in general with rerouting of ships and what this has had on some of our vessel fixtures, we have actually none or very little impact on tariffs.

Our container ships, container ships are the ones that are more affected, are chartered out. There it is, of course, an issue for our customer, but not directly for us. On the two other segments that would call the United States or would carry goods to and from the United States, it is dry bulk and it is oil. On dry bulk, we do very little to the United States. On oil, as you know, this has been exempted. In short, the impact of tariffs on us, on CMB.TECH specifically, has been close to zero. Of course, the side effects on the broader market of rerouting of ships and people wanting to have Japanese or Korean-built ships to go to China and vice versa for China, that we have felt a little bit. I must say that right now, the effects are very limited.

Quirijn Mulder (Senior Analyst)

Does that also mean that the end of tariffs does not have any impact in, let me say, 2026?

Alexander Saverys (CEO)

Quirijn, I think now I'm talking as a shipping player in general, tariffs are always bad. We prefer not to have any tariffs because then trade can flow freely, and that means more opportunities for our ships to trade. Again, I don't want to create a wrong impression. We are very much in favor of tariffs going away because that creates more trading opportunities for our ships. If you go on a macro level, what has happened in the United States compared to our fleet, there the impact has been limited.

Quirijn Mulder (Senior Analyst)

My final question is about the, let me say, the order ratio for the VLCCs to Suezmax. That is now above 12%, as I understand from your graphs. What is the delivery time of these vessels?

That's mostly 2026, 2027. Is there anything to add to that in terms of when it is coming and what the impact might be?

Ludovic Saverys (CFO)

Yeah. So it's 15% for VLCCs and 20% for Suezmax. So it's actually higher than the 12% you mentioned. 2026, 2027, we don't see any meaningful capacity that can still be added to the order book. 2028, we are seeing new yards or existing yards with extra capacity still coming on stream. So that number by 2028 could still go up. That's my belief. And today, Quirijn, if you would want to jump on these slots, I mean, we had one shipyard in China offering early slots for N27 beginning 2028.

Any conventional yard, as you see in the news flow on the specific shipping news, you are starting to talk N28 if you deliver to the if you'd order today, beginning 2029, even 2030. Shipyards are getting filled up with the current slots. Now, as Alex mentioned, you can have new yards, you can have new capacity coming online as well. Definitely the traditional delivery window, delivery time for VLCCs and Suezmaxes are quite long now.

Quirijn Mulder (Senior Analyst)

Okay. Thank you.

Alexander Saverys (CEO)

Thank you.

Enya Derkinderen (Brand Manager)

We have two additional questions written. The Q4 2025 bookings for VLCCs look low versus the market rates. Can you comment on why?

Alexander Saverys (CEO)

It has to do with the trips that our vessels have been doing. I'm supposing people are referring as well to some of our peers. There's some creative bookkeeping sometimes, load to discharge or discharge to discharge.

There is also a fact that some of our vessels are slightly older and, of course, are earning less than more modern vessels that are operated by our peers. We just took delivery of one very modern ship, but we still have some tonnage, which is 13 years old and which is logically then earning a little bit less because the vessels burn more fuel.

Enya Derkinderen (Brand Manager)

The last one, can you discuss the relationship between nukes and capes historically and going forward? Will this change going forward?

Alexander Saverys (CEO)

The relationship is they move the same cargo. One ship is just five meters wider and carries 25,000-30,000 tons more. Cape sizes traditionally have been the workhorse of the fleet, but Newcastlemaxes are taking this over now because it is relatively cheaper just to build a slightly bigger ship than a cape size 180K.

Same cargo, same trades.

Enya Derkinderen (Brand Manager)

Perfect. I think that concludes the questions.

Alexander Saverys (CEO)

All right. We will close this earnings call by thanking all of you for having dialed in and looking forward to speaking to you in the following weeks, months, or maybe on the next earnings call. Thank you very much.

Ludovic Saverys (CFO)

Thank you. Bye-bye.