Earnings call transcript: Ocean Yield Q4 2024 sees record EBITDA and fleet expansion

Ocean Yield (OCNFF) reported its financial results for the fourth quarter of 2024, showcasing a strong performance with record adjusted EBITDA and substantial fleet expansion. According to InvestingPro data, the company’s stock is currently trading at $0.02, significantly below its Fair Value, suggesting potential upside opportunity. The company also provided insights into its future strategies and market conditions during its earnings call.

Key Takeaways

• Ocean Yield achieved a record adjusted EBITDA of $375 million for 2024.
• The company completed a major investment in France LNG, adding 12 vessels to its fleet.
• All vessels are employed on long-term charters, ensuring stable revenue streams.
• The shipping market is normalizing, with increased demand for sale and leaseback transactions.
• Ocean Yield is focusing on decarbonization and exploring new investment opportunities.

Company Performance

Ocean Yield demonstrated mixed performance in Q4 2024, achieving an adjusted EBITDA of $86.5 million and a net profit of $25.8 million. While the company reported impressive revenue growth of 137.76% in the last twelve months, InvestingPro data shows concerning metrics, including negative EBITDA of -$4.11M and a current ratio of 0.69. For the full year, total revenues reached $244 million, up from $237 million in 2023. The company’s strategy of long-term charters and fleet expansion has positioned it well amid a normalizing shipping market.

Financial Highlights

• Q4 2024 EBITDA: $86.5 million (adjusted)
• Q4 2024 Net Profit: $25.8 million
• Full Year 2024 Total Revenues: $244 million
• Full Year 2024 Adjusted EBITDA: $375 million
• Available Liquidity: $110-111 million
• Equity Ratio: 31.2%

Outlook & Guidance

Looking ahead, Ocean Yield plans to continue its investment strategy across various shipping segments, with a focus on decarbonization efforts in the maritime industry. With a beta of 1.2, the stock shows moderate market sensitivity. The company aims to complete financing for its newbuilding program in the second quarter of 2025 and remains vigilant regarding potential impacts from international trade policies. For deeper insights into Ocean Yield’s financial health and growth prospects, investors can access comprehensive analysis through InvestingPro’s detailed research reports, which provide expert analysis on over 1,400 US stocks.

Executive Commentary

CEO Andreas highlighted the company’s strong performance in 2024, stating, "2024 was a strong year for Ocean Yield." CFO Erik Eide noted, "This is actually the highest adjusted EBITDA in the history of the company." Andreas further emphasized the company’s cautious and selective investment approach, considering the cyclicality of the market.

Risks and Challenges

• Potential tariffs on Chinese-built ships could impact the market, though Ocean Yield expects no material impact due to its lease structure.
• The shipping industry faces continued volatility in tankers, bulkers, containers, and gas segments.
• International trade policies could affect future investment strategies and market conditions.

Ocean Yield’s strategic investments in 2024 have positioned the company in the evolving shipping industry, though investors should note the company’s financial health score of 2.02 (rated as "FAIR" by InvestingPro). For comprehensive analysis of Ocean Yield and similar shipping companies, including exclusive ProTips and advanced financial metrics, explore InvestingPro’s extensive research tools and ad-free platform.

Full transcript - Ocean Yield (OCY) Q4 2024:

Andreas, Presenter/CEO, Ocean Yield: Good morning, everyone, and welcome to Oceaneal’s Fourth Quarter Earnings Presentation. As usual, I will start today’s presentation with the highlights of the quarter and go through the changes to the portfolio. Then our CFO, Erik Eide, will walk us through the financials and the financing activity of the quarter. The presentation will be concluded with opening up for questions. If you would like to ask a question, please use the Q and A function.

Starting off on Page two. 20 20 four has been an active year for Ocean Yield, and we are pleased to report a fourth quarter with strong and stable performance. We report an EBITDA adjusted for finance lease effects of $86,500,000 and a net profit of $25,800,000 This brings the 2024 full year figures to $374,700,000 and $96,600,000 respectively. We ended the fourth quarter with $110,000,000 of available liquidity and a strong equity ratio of 31.2%. At the end of the year, the EBITDA backlog was $4,200,000,000 and the average remaining contract duration is ten point four years.

The transformational investment in France LNG was closed during the quarter, finally including the LNG segment into the portfolio. The infrastructure like characteristics of LNG fits well into our strategy of investing in modern vessels with long term stable cash flows to Tier one counterparties. The Newcastle Max newbuilding program continues to progress according to plan and schedule, and four vessels are now delivered with the remaining four vessels scheduled for delivery before the summer. Also post quarter end, the LNG gas vessel Brilliant Future was delivered and commenced her fifteen year bareboat charter to Braskem (NYSE:BAK). The vessel has already successfully loaded her first cargo of ethane from the Morgans Point terminal in Houston, and the cargo will be discharged in Mexico during the March.

Moving on to Page three. Including the 12 LNG vessels, the fleet now counts 66 vessels at year end with an average age of four point eight years. The EBITDA backlog at year end was four point two billion and one hundred percent of the fleet remains employed on long term charters. The investment in France LNG significantly increases the diversification of the backlog with LNG and gas carriers now making up 27% of the backlog. Following the addition of three European investment grade rated companies, we now have seventeen first class end users and charterers who all have leading positions in the seven different shipping segments where they operate.

This provide both sector and client diversification and create a solid foundation for long term stable cash flows in the years to come. So let’s move to Page four for more details on changes to the portfolio. Closing of the Geogas transaction took place in December, welcoming seven vessels in operations and five additional newbuilds to the fleet. During and post quarter end, Mineral Aire, Espana, Portugal and Osterreis were delivered from the yard and commenced the fifteen year bareboat charters to CMBTech. After quarter end, the LNG vessel Brilliant Future was delivered and commenced her fifteen year bareboat charter to Braskem.

During the fourth quarter, a purchase option have been declared for Hafnaya Ronaldo and she is expected to be delivered in Q2. Post (NYSE:POST) quarter end, Nordic American tankers have declared option for Nordic Aquarius and Cygnus and both vessels are expected to be delivered during the third quarter. During the fourth quarter, Detroit, Barcelona, Genoa and Livorno Express as well as Navigator Aurora were delivered to the new owners. So with that, I would like to hand the word over to Erik, who will take us through the financials and the financing activity of the quarter.

Erik Eide, CFO, Ocean Yield: Thank you, Andreas. So as usual, let me start with taking a look at a financial snapshot of the company as of the fourth quarter. This quarter, we have recorded EBITDA of $49,700,000 and the adjusted EBITDA where we adjust for the lease accounting effects was $86,500,000 dollars Net profit for the quarter was $25,800,000 and the Board of Directors has decided not to declare a dividend for this quarter. We had available liquidity of $110,600,000 and the equity ratio stood at 31.2%. So let us take a look at the headline figures of the income statement.

Overall, we recorded total revenues of $56,100,000 which is down from $61,000,000 in Q3. Now more specifically, operating lease revenue was $19,500,000 compared to $21,000,000 in Q3 and this is due to full quarter effect of the sale of the Hoegh Jetta. Finance lease revenue was $29,600,000 compared to $32,100,000 in Q3. And the decrease here is mainly a result of the sale of the four container vessels and one gas carrier. Income from our joint ventures was in line with Q3 and that was $4,800,000 And then we had other income of $2,100,000 and this is mainly due to one off gains related to sale of vessels and lease modification gains.

So that brings us then to an operating profit of $43,900,000 compared to $49,600,000 in Q3. Net financial items were negative $18,200,000 in Q4 compared to $27,700,000 in Q3. This is mainly driven by positive change in the foreign currency movements and offset by negative changes to the fair value of derivatives. So then the quarter ended with a net profit of $25,800,000 in the quarter. Now if we move on and look at the historical adjusted EBITDA and look at the historical figures for that and this is the cash EBITDA that we actually receive under our lease agreement.

And this was $86,500,000 in Q4 compared to $94,600,000 in Q3. And you can see the historical development back to 2022 on this slide. Then if we move on, let us take a look at the numbers for the full year 2024. For the year 2024, we had total revenues of $244,000,000 compared to $237,000,000 in 2023. Operating profit was $198,000,000 which is marginally down from the year before and net profit $96,600,000 compared to $92,500,000 in 2023.

Also if we move on looking at the adjusted EBITDA for the full year, this came in at $375,000,000 which is up from $341,000,000 in 2023. And as you can see from this slide, this is actually the highest adjusted EBITDA in the history of the company. If we then turn to the balance sheet, we had total assets at the end of Q4 of $2,316,000,000 which is up from $2,215,000,000 in Q3. And this is mainly due to delivery of vessels and completion of the investment into France LNG shipping. Now our recent investment into France LNG shipping.

Now our recent investment

Andreas, Presenter/CEO, Ocean Yield: into France LNG shipping is

Erik Eide, CFO, Ocean Yield: made through a combination of equity and shareholder loans. So this investment is reflected both under investments in associates and under interest bearing receivables. So you will see on the balance sheet that investments in associates has increased to $316,000,000 this quarter, up from $182,000,000 last quarter. And interest bearing receivables has increased to $217,000,000 dollars up from $108,000,000 last quarter. So on the profit and loss statement going forward, part of this investment will be reflected under investments in associates and part of it under financial income.

Of other movements to note is that long term interest bearing debt has increased to $1,300,000,000 up from $1,100,000,000 in Q3. And this is due to the fact that we have taken delivery of further vessels to the fleet and also draw downs on revolving credit facilities. Available liquidity was $111,000,000 and this is down from $385,000,000 in Q3. And the number for Q3 was unusually high since we were building up cash for the closing of the France LNG transaction that was completed in Q4. If we look at the book equity, it was $723,000,000 compared to $752,000,000 in third quarter.

And the reduction here is mainly due to a dividend payment declared in the third quarter. So overall, we ended the year with an equity ratio of 31.2% compared to 34% in Q3. Then we move on to talk about financing initiatives. And I’m pleased to see that we are progressing well on the financing of the four LR1 newbuildings where the banks have now obtained credit approval for the long term financing of these vessels. We are completing several transactions with two Asian based financing institutions and one with the European and U.

S. Bank for these vessels. So we expect to have these loan agreements signed within the second quarter. And with that, our newbuilding program is actually fully financed. In general, we are continuing to see strong interest from banks and also increased interest from Asian based financing institutions.

And that will further contribute to diversify our funding sources going forward. And on the bond side, we repaid the remaining amounts outstanding under the bond issue OCY seven, which had final maturity in December. And this was NOK 150,000,000. Currently then, we have four outstanding bonds, which includes the hybrid bond. So that concludes my part of the presentation, and I’ll then give the word back to Andreas to summarize.

Andreas, Presenter/CEO, Ocean Yield: Thank you, Erik. Let me summarize the quarter on Page 10. 20 20 four was a strong year for Ocean Yield. And despite the increasing macro uncertainty, the portfolio remains solid. Lease to value stands at robust levels and our counterparties are well capitalized.

We continue to allocate capital in line with our capital allocation policy towards a strong and robust balance sheet. And as such, we are well positioned to further grow and diversify the portfolio. As the majority of the shipping markets are normalizing and the S and P activity remains high, we experienced increasing demand for sale and leaseback transactions. Also, our ambition to continue to contribute to the decarbonization of the maritime industry remains intact. I encourage all of you to by 02/1950 in line with the targets set for the maritime industry.

So with that, I would like to thank you all for watching the Ocean Yield Q4 earnings presentation. And I would now like to open up for questions.

Erik Eide, CFO, Ocean Yield: We have received a couple of questions, Andreas. So I’ll start with the first one. We are hearing a lot of noise about potential tariffs on Chinese built chips. Would this have any impact for a company like Ocean Yield?

Andreas, Presenter/CEO, Ocean Yield: Well, I think well, it’s a very good question. It’s a big question. Of course, we have picked up the same news and we read the same proposal, which has been sent in for hearing. And I think it’s taking a step back, it’s fair to say that with more than 50% of the global fleet being built in China and probably around 65% of the order book coming out of China, this will have huge consequences also for The U. S.

And for global trade in general. That said, we are a provider predominantly of Hell and Highwater bareboat leases. So typically, tariffs would be the responsibility of the charterers. So we are monitoring this, but so far there are no indications that this will have a material impact on a business like ours. Okay.

Erik Eide, CFO, Ocean Yield: Thank you. Second question we have received. In the report, you are talking about increased deal flow. In what segments do

Andreas, Presenter/CEO, Ocean Yield: you see the most attractive opportunities? Well, we are a multi segment strategy when it comes to investments, which gives us the opportunity to benchmark investment opportunities across the various segments against each other. And I would say at the moment, it’s probably opportunities across all segments, which means tankers and bulkers, containers and gas, where increased volatility has resulted in, I would say, increased volatility on the share price side. And that combined with normalized asset values in these segments have and will continue to provide, I would say, interesting opportunities in the period ahead of us. That said, we are continuing to be selective.

And and as always sort of cautious taking the cyclicality into consideration. Good. Thank you. I think that seems to be all the questions we have received. So that concludes today’s quarterly presentation.

Thank you all for watching.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.