Euronav, the Belgian tanker shipping company that is again controlled by the Saverys family, had an excellent performance in the fourth quarter. This also applies to all of 2023, which generated a record profit of $862.3 million. Yet there will be no dividend for the fourth quarter.
2023 and especially the fourth quarter brought major changes in Euronav’s ownership, management and policy. “The fourth quarter of 2023 has been a transformative quarter for Euronav,” CEO Alexander Saverys said in the press release.
He is referring to the solution found to the conflict between CMB, the shipping group of the Saverys family, and Frontline, the tanker shipping company of Norwegian Cypriot shipping magnate John Fredriksen. CMB took over Fredriksen’s stake in Euronav and became the majority shareholder of the tanker shipping company. In return, Euronav sold 24 VLCCs (supertankers of 200,000-320,000 tons) to Frontline. That sale is almost complete. One more tanker needs to be handed over.
The changes at Euronav are far from over. The Saverys want to green and diversify the tanker shipping company. As Alexander Saverys states: ‘Euronav is preparing to become the reference in sustainable shipping.’ There are two important events coming up. The acquisition of CMB.Tech, on which the shareholders must vote on February 7. CMB’s mandatory takeover bid for Euronav will start in mid-February, with the intention not to delist the tanker shipping company.
Because the fleet has become considerably smaller due to the sale of 24 VLCCs to Frontline, income from tanker shipping and the associated profits will decrease significantly.
Regardless of the impending transformation, Euronav had an excellent 2023. The tanker operator posted strong results quarter after quarter thanks to high oil demand, longer sailing routes and the limited supply of tankers. This resulted in very profitable freight rates for both VLCCs and Suezmax tankers (120,000-200,000 tons).
In the fourth quarter, this gave Euronav a net profit of $410.9 million, almost double the amount in the corresponding period of 2022. The profit is largely due to an accounting profit of $323.3 million booked on the sale of the 24 VLCCs to Frontline. For the whole of 2023, Euronav recorded a net profit of no less than 862.3 million dollars. That is the highest annual profit ever for the Belgian tanker shipping company, although it has been increased by the significant book profit in the last quarter.
“Increased geopolitical tensions, longer ton-miles and more oil on the water in transit provided strong support in the fourth quarter,” Euronav’s press release said. In addition, the limited supply of ships, the age of the global tanker fleet and the increasing consumption of oil in the world were supportive.
Euronav is preparing to become the reference in sustainable shipping.
Despite the record profit, Euronav has chosen not to pay a dividend for the fourth quarter. “We have decided not to pay a dividend until the mandatory buyout offer has ended,” says financial director Ludovic Saverys. There are many questions among shareholders about Euronav’s future dividend policy. The Saverys now offer clarity.
“The previous management, which managed Euronav based on the strategy of a pure oil player, had the aim of paying out 80 percent of the profit each time,” says Saverys. ‘Going forward, and provided the acquisition of CMB.Tech is approved, we will switch to an ad hoc policy. So we decide every time based on the profit made.’
What will 2024 bring?
The prospects for 2024 are good. The International Energy Agency estimates total oil production at 103.5 million barrels per day thanks to record production in the US, Brazil, Guyana and Canada. Global oil demand is expected to grow slightly slower this year. The unrest in the Middle East and attacks on ships in the Red Sea can lead to very volatile freight prices.
For the first quarter, Euronav was already able to lease 46 percent of its VLCC capacity at $50,430 per day, a clearly profitable rate. Suezmax tankers were already 54 percent rented at $54,892 per day.
That sounds positive, but an important remark arises. Because the fleet has become considerably smaller due to the sale of 24 VLCCs to Frontline, income from tanker shipping and the associated profits will decrease significantly. Moreover, it is unclear what the financial consequences will be of the planned takeover of CMB.Tech and of the sustainability policy that the Saverys family wants to pursue.
Still, the first quarter results will probably look good, as Euronav is once again forecasting an accounting gain on the sale of supertankers to Frontline, this time of $374.2 million.