Hafnia Ltd (HAFN) Q1 2026 Earnings Call Highlights: Record Profits and Strategic Fleet Expansion

This article first appeared on GuruFocus.

Net Profit: $179.7 million, nearly triple the first quarter of 2025. Net Asset Value: Approximately $4 billion, equivalent to $8.09 per share. Net Loan-to-Value Ratio: Improved to 20.2% from 24.9% at the end of 2025. Total Cash Dividend: $143.8 million or $0.2877 per share, representing an annualized yield of 14%. Total Shareholder Return: Over 100% in the last 12 months. TCE Income: $282.5 million, up from $218.8 million in Q1 2025. Adjusted EBITDA: $198.6 million, compared to $125.1 million in Q1 2025. Return on Equity: 29.5% on an annualized basis. Return on Invested Capital: 22.7%. Fleet Size: 118 vessels with an average fleet age of 9.6 years. Liquidity: Approximately $660 million, including $146 million in cash. Forward Coverage for Q2: 73% of earnings days covered at $46,600 per day. Dividend Income from Investment: $9.9 million from Tor.

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Release Date: May 27, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hafnia Ltd (NYSE:HAFN) reported a net profit of $179.7 million for Q1 2026, nearly three times the profit of Q1 2025, supported by higher freight rates. The company has secured 73% of Q2 earnings days at $46,600 per day, indicating strong expectations for the second quarter. Hafnia Ltd (NYSE:HAFN) announced a contract for eight new MR newbuilds with Hyundai Heavy Industries, with deliveries expected between Q3 2028 and Q2 2029, as part of its fleet renewal strategy. The company declared an 80% payout ratio, translating to a total cash dividend of $143.8 million or $0.2877 per share, representing an annualized yield of 14%. Hafnia Ltd (NYSE:HAFN) has maintained a strong liquidity profile with total liquidity standing at approximately $660 million, comprising $146 million in cash and $550 million in undrawn credit facilities.

Negative Points

The closure of the Strait of Hormuz has significantly disrupted global oil trade flows, impacting Hafnia Ltd (NYSE:HAFN) and the broader tanker industry. The company plans to wind down its Handy and LR2 pool operations, indicating a strategic shift that may affect its market presence in these segments. Global clean petroleum product departures are down approximately 15%, heavily concentrated in the East of Suez, affecting Hafnia Ltd (NYSE:HAFN)'s operations. The geopolitical situation in the Middle East remains uncertain, posing risks to Hafnia Ltd (NYSE:HAFN)'s operations and market conditions. The company faces challenges from the aging fleet, with the fleet aged 20 years and above projected to grow significantly, necessitating ongoing fleet renewal efforts.

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Q & A Highlights

Q: What prompted Hafnia to invest in 10 MR newbuilds now, given past hesitations about newbuild investments? A: Mikael Skov, CEO, explained that Hafnia decided to invest in newbuilds as part of a fleet modernization strategy. They sold older vessels at strong prices, which justified the investment in newbuilds. Additionally, shipyard order books are full until 2029, so securing newbuilds now prevents future fleet aging issues.

Q: Will the newbuild investments affect Hafnia's dividend policy? A: Mikael Skov, CEO, confirmed that the newbuild investments will not impact the company's dividend policy. Hafnia remains committed to maintaining its dividend payouts.

Q: Why is Hafnia winding down its Handy and LR2 pool operations? A: Mikael Skov, CEO, stated that the Handy segment has been shrinking, and they received attractive offers for their Handy vessels. For LR2s, Hafnia has fewer vessels and decided to charter them out, making pool operations less viable.

Q: What is driving the increased charter coverage despite compelling spot rates? A: Petrus van Echtelt, CFO, explained that the increased charter coverage acts as a hedge against geopolitical unrest and future uncertainties, despite the attractive spot rates.

Q: How does the closure of the Strait of Hormuz affect the LR2 market? A: Petrus van Echtelt, CFO, noted that the strong Aframax market and the closure of the Strait of Hormuz have driven LR2s to switch to dirty trading. This migration is expected to continue unless clean freight rates surpass Aframax rates.

Q: Will Hafnia continue divesting older vessels, and why choose newbuilds over secondhand tonnage? A: Mikael Skov, CEO, mentioned that while most older tonnage has been divested, a few vessels might still be sold at the right price. Newbuilds are preferred over secondhand vessels due to their modern design, fuel efficiency, and the anticipated shortfall in tonnage by 2029.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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