Euronav Announces Final Year Results 2021

Source: 3/31/2022, Location: Europe

- Challenging year for crude tanker markets throughout 2021
- Oversupply of vessels combined with Omicron variant and slower than expected return to normalised levels of economic activity key drivers of low freight rates
- Medium term thesis of freight recovery remains intact with supportive industry fundamentals
- Euronav counter-cyclically invested in 8 new eco-vessels (5 Suezmaxes & 3 VLCCs) at advantageous prices
- Continued to diversify funding sources with new USD 200 million corporate bond; sustainability linked financing now over 40% of total funding
- Depreciation charge reduced by USD 100 million per annum as from 2022 and certain cost elements reclassified to ensure comparability within the sector

Euronav NV reported its final financial results for the full year to 31 December 2021.

The return of oil consumption at a global scale was going to be a key driver to freight market recovery in 2021. When COVID vaccinations started being administered throughout the world, this recovery seemed to be imminent. Unfortunately, this did not evolve at the pace desired or expected.

The first half of 2021 was still impacted by a static and relatively low oil and related product consumption averaging just 96 million barrels per day. This compared to pre-COVID highs of more than 105 million barrels for Q4 2019. Some control over the virus from Q3 2021 onwards delivered small but sequential improvement in freight rates. Demand for oil was also boosted during Q4 by extreme price increases and volatility in energy and fuel prices. This prompted some substitution into oil and an increase in oil demand. While estimates vary, this event has resulted in an additional oil demand of 1 million barrels per day.

In early 2021, Euronav took the opportunity to counter cyclically invest by taking over a number of resale contracts for new vessels and proactively ordering new tonnage. This totalled 8 new vessels during 2021, with all vessels to be scrubber fitted and “future proofed” via investment in vessel infrastructure allowing later retrofitting of new technologies as and when they become available. Prices today are 25% higher for such tonnage and this investment represents a 15% increase in our fleet size on an underlying basis.

The year also saw global oil inventories decline significantly, and all major OECD hubs saw commercial crude oil stocks fall below the 5-year range. Replenishment of these reserves is necessary at a time when energy security has become a key issue following the Russian invasion of Ukraine at the end of the year.

Oil supply is another important factor in the recovery of the freight market. Production cuts began to taper in May 2021 and the OPEC alliance has gradually added more oil supply to the market progressively. This started to become visible to the tanker market going into the fourth quarter of 2021, as cargo numbers started to reflect the recovery in the oil market. The Arabian Gulf in particular is seeing crude cargo liftings on VLCCs approach the levels seen before the pandemic.

On the vessel supply side of the equation, the market remained oversupplied of tonnage. Historical precedents suggest that during periods of challenging freight rates, tanker owners are induced to recycle their older tonnage, therefore reducing the global trading fleet. While we saw some fleet exits during the year, this was not to the extent that history may have predicted. Some analysts suggest that older tonnage has instead been used for 'illicit trade' that has developed around sanctioned cargoes, therefore no longer being accessible for the regular commercial trade. A question remains as to whether these vessels will ever rejoin the commercial fleet, be it due to old age or because of now being earmarked as unlawful tonnage.

As for the contracting of new tonnage, the dual-fuel commitment from owners reflects the growing structural focus on emissions reduction from participants across the industry, from investors to charterers, to financiers. This will in turn increase pressure on older, higher emission tonnage with the potential to drive a strong phaseout programme at some point. In the second half of the year no new orders were placed in either segment. Alternative shipping sectors, such as container liners and dry bulk carriers, have experienced an earnings boom through 2021 and much of the extra cash has been invested in new tonnage of these types. This left tanker owners unable to compete with increasing newbuilding prices and many yards are now full into 2025. The new supply picture until then is therefore very clear and supportive of an improving tonnage balance in the near to medium term.

2021 Key figures
In order to improve the relevancy of the accounting information of the income statement, the Company reclassified certain cost elements without impact on the profit (loss) for the period. These changes have been adopted in 2021 to improve comparability within the sector. It has been applied retrospectively and comparative information has been revised. (*)

Difference between the preliminary results and final results
The final result of USD (338.8) million reported is USD 0.4 million better than the preliminary results reported on 3 February 2022 of USD (339.2) million. This difference is related to the integration of 2021 results of our joint ventures TI LLC and TUKA Ltd. Furthermore, some balance sheet reclassifications have been processed without impact on the net result to improve presentation

Procedures of the independent auditor
The statutory auditor, KPMG Bedrijfsrevisoren - Réviseurs d’Entreprises, represented by Herwig Carmans, has confirmed that the audit procedures, which have been substantially completed, have not revealed any material misstatement in the accounting information included in the Company’s annual announcement.

COVID-19 update and impact on oil demand
The COVID-19 outbreak from early 2020 impacted many countries around the world and disrupted the lives of many millions of people. The Company has been taking the risks associated with the outbreak extremely seriously, and the safety and wellbeing of its employees is of paramount importance.

In that respect, the biggest operational challenge was to conduct crew changes. Apart from serious humanitarian and crew welfare concerns, there is an increasing risk that fatigue will lead to serious maritime accidents. To resolve the difficult situation, Euronav’s management decided to accommodate deviations by ships to facilitate crew changes.

Many Euronav employees shifted from office to remote working in no time. We explicitly want to mention and are proud of the reaction of our people, where our global workforce bonded together to support one another.

Going forward, it remains difficult to estimate the future impact of the pandemic on the economies where we are active, and hence the impact these factors might have on the financial results.

The Supervisory Board, represented by Carl E. Steen, its Chairman, and the Management Board, represented by Hugo De Stoop, Chief Executive Officer, and Lieve Logghe, Chief Financial Officer, hereby confirm, in the name and for account of Euronav that, to the best of their knowledge the consolidated financial statements as of and for the year ended 31 December 2021 presented herein were established in accordance with applicable accounting standards (IFRS as adopted by the EU) and give a true and fair view, as defined by these standards, of the assets, liabilities, financial position and results of Euronav NV.

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