Euronav’s Earnings Call: Growth Amid Challenges

Euronav ((BE:CMBT)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Euronav painted a mixed picture of the company’s financial health and strategic direction. While there were notable achievements such as profit generation and contract backlog growth, concerns were raised over the underlying net income without capital gains, the decision not to declare dividends, and challenges in specific segments like dry bulk and containers.

Profit Achievement

Cmb.Tech, a division of Euronav, reported a profit of $40 million for the quarter. However, when capital gains are excluded, the net income would have been a negative $6 million, highlighting underlying financial challenges.

Contract Backlog Growth

The company saw significant growth in its contract backlog, which now stands at nearly $3 billion. This includes an impressive addition of approximately $1 billion in the first quarter alone, showcasing strong demand and future revenue potential.

Fleet Expansion

Euronav’s fleet expansion is on track with the delivery of five newbuilding vessels. The total fleet is expected to grow to 150 vessels by the end of 2026, reflecting the company’s commitment to increasing its operational capacity.

Golden Ocean Merger Proposal

A strategic merger with Golden Ocean has been proposed, which would significantly boost the fleet size to 250 vessels and maintain a contract backlog of $3 billion. This merger is aimed at enhancing the company’s market position and operational scale.

Positive Tanker Market

The tanker segment performed well, achieving $40,000 per day in Q1, with an increase to $43,000 per day in Q2. This positive trend indicates a robust market environment for tankers.

Net Income Without Capital Gains

The earnings call revealed that without capital gains, the net income would have been a loss of $6 million, raising concerns about the company’s profitability from core operations.

Dividend Decision

The decision not to declare a dividend for Q1 2025 might be unsettling for investors who typically expect regular returns, indicating a cautious approach by the company amid financial uncertainties.

Dry Bulk Market Weakness

The dry bulk market faced difficulties, with Newcastlemaxes earning $18,000 per day, which is below the profit and loss breakeven point, reflecting broader market challenges.

Challenges in Container Segment

The container segment is grappling with high order books and geopolitical uncertainties, which are affecting trade and posing challenges to the company’s operations in this area.

Forward-Looking Guidance

Looking ahead, Euronav has consolidated Golden Ocean from March 2025, contributing positively to the P&L. The company maintains a strong liquidity position with $245 million at the end of March and a contract backlog nearing $3 billion. With CapEx at $2.2 billion and an equity-to-assets ratio of 31.9%, Euronav is positioned for growth. The anticipated merger with Golden Ocean is expected to create a fleet of 250 vessels and generate substantial free cash flow, projected between $250 million and $750 million for 2025, depending on market conditions.

In conclusion, Euronav’s earnings call reflects a company navigating through both achievements and challenges. While there are promising developments in fleet expansion and market performance, underlying financial concerns and strategic decisions like the dividend suspension warrant close attention from investors. The proposed merger with Golden Ocean stands out as a pivotal move that could reshape the company’s future trajectory.