TORM’s Q2 2025 financial performance reflected the normalization of freight rates from the exceptionally strong levels seen in the first half of 2024. Revenue decreased 28% to $315.2 million, primarily driven by lower TCE rates across all vessel classes. The decline was expected as the product tanker market normalized following the extraordinary conditions created by geopolitical tensions and Red Sea disruptions in 2024.

TCE earnings declined 36% to $208.2 million, with the company achieving an average TCE rate of $26,672 per day compared to $42,057 in Q2 2024. Despite the rate decline, available earning days increased to 7,888 from 7,749, demonstrating strong operational efficiency and fleet utilization. LR2 vessels achieved the highest rates at $35,459 per day, followed by LR1 vessels at $27,371 and MR vessels at $23,345.

Net profit decreased to $58.7 million from $194.2 million in Q2 2024, representing a 70% decline. The decrease was primarily due to lower TCE earnings, though the company maintained strong operational discipline with OPEX per day remaining relatively stable at $7,853 compared to $7,731 in the prior year period.

Adjusted EBITDA was $129.0 million in Q2 2025, down 49% from $251.1 million in Q2 2024, resulting in an EBITDA margin of 40.9%. While margins compressed due to lower rates, the company maintained strong cash generation with free cash flow of $166.5 million and continued its disciplined capital allocation approach.

Return on Invested Capital (ROIC) was 10.0% for Q2 2025, down from 29.5% in the comparable period. Despite the decline, the ROIC remains attractive relative to the company’s cost of capital and reflects the cyclical nature of the tanker shipping industry.

LR2 vessels delivered the strongest performance with TCE rates of $35,459 per day, benefiting from Middle East tensions that drove rates from low $20,000s to above $50,000 before stabilizing around $30,000. The LR2 fleet operated 1,866 earning days in Q2 2025, representing strong utilization despite challenging market conditions.

LR1 vessels achieved TCE rates of $27,371 per day across 905 earning days. While rates declined 35% year-over-year, the segment showed resilience with stable utilization and operational efficiency. The LR1 fleet continues to benefit from its flexibility in carrying both clean petroleum products and chemicals.

MR vessels, which comprise the largest portion of TORM’s fleet, achieved TCE rates of $23,345 per day across 5,117 earning days. Despite the 39% year-over-year decline in rates, the MR fleet demonstrated strong operational performance with increased available earning days and maintained cost discipline.

Across all vessel classes, TORM maintained strong operational efficiency with operating expenses per day averaging $7,853, representing only a 2% increase from the prior year. The company’s focus on operational excellence and cost management helped partially offset the impact of lower freight rates.

The fleet utilization remained strong with 8,241 operating days in Q2 2025, reflecting TORM’s effective commercial management and ability to secure employment for its vessels across different market conditions. The company’s modern, high-quality fleet continues to command premium rates relative to older tonnage.

The product tanker market in Q2 2025 was characterized by volatile geopolitical developments and evolving trade patterns that significantly impacted freight rates and trading opportunities:

Red Sea Disruption Impact

• Continued Route Disruption: Product flows on Middle East Gulf/India to Europe routes remained 20% below year-on-year levels despite some recovery
• Suez Canal Volumes: Cargo volumes via Suez Canal stabilized at above 30% of route volumes, compared to 4% in the same period last year
• Ton-Mile Effects: While product tanker ton-miles began rebounding in March 2025, earlier gains from longer routing were neutralized by subdued trade volumes

Middle East Tensions

Tensions between Israel and Iran escalated during Q2 2025, culminating with U.S. bombing of Iranian nuclear sites in June. This created significant market volatility, with LR2 rates in the Middle East almost tripling from low $20,000s to above $50,000 before stabilizing around $30,000 after a ceasefire was announced. The situation highlighted the critical importance of the Strait of Hormuz, through which more than 30% of world crude flows and 13% of clean petroleum product flows originate.

Fleet Dynamics

• Crude Cannibalization: Remained constant at 2-3% of clean petroleum product volumes carried on crude tankers, significantly below Q3 2024 peak levels
• LR2 Fleet Changes: Around 52% of the LR2 fleet was trading dirty at the end of Q2, with approximately 40 newbuilt LR2s entering the fleet while clean-trading vessels declined by 20 units
• Fleet Contraction: Total clean-trading product tanker fleet ended Q2 2025 at 2% below the same time a year ago

Despite these challenging market conditions, TORM’s diversified fleet and operational expertise enabled the company to navigate the volatile environment effectively, maintaining strong utilization rates and operational performance across all vessel classes.

TORM continued its active fleet management strategy during Q2 2025, optimizing its portfolio through strategic divestments and operational improvements:

Fleet Transactions

• Vessel Sales: Sold and delivered the 2008-built LR2 vessel TORM Mathilde during Q2 2025
• Additional Sales: Sold two 2008-built MR vessels (TORM Voyager and TORM Discoverer), with TORM Discoverer delivered in July and TORM Voyager scheduled for Q3 delivery
• Fleet Size: Following these transactions, TORM’s fleet will comprise 88 vessels
• Strategic Rationale: Sales focused on older vessels to maintain competitive average fleet age and operational efficiency

Purchase Option Exercises

As part of ongoing capital and loan management strategy, TORM exercised purchase options for 13 leaseback vessels, transitioning them to full ownership. The first four LR2 vessels (TORM Herdis, TORM Hellerup, TORM Hannah, and TORM Kiara) transferred to owned fleet in Q3 2025, with the remaining nine vessels following in Q4 2025.

Fleet Valuation

• Market Value: Fleet market value of $2,887.6 million based on broker valuations, representing 7% above carrying value
• NAV: Consolidated Net Asset Value (NAV) of $2,299.8 million as of June 30, 2025
• NAV per Share: $23.5 per share, reflecting the underlying asset value

Operational Excellence

TORM’s commitment to maintaining a high-quality, competitive fleet remains a core priority. The company’s approach includes regular divestment of vessels as they reach certain age thresholds, balanced with selective acquisitions of high-quality second-hand vessels that are rapidly upgraded to TORM standards. This disciplined process ensures long-term competitiveness and meets evolving customer expectations.

TORM maintained a robust financial position throughout Q2 2025, providing significant operational flexibility and financial stability:

Balance Sheet Strength

• Total Assets: $3,396.7 million as of June 30, 2025, down from $3,469.6 million at year-end 2024
• Equity: $2,107.3 million representing a 62.0% equity ratio
• Fleet Carrying Value: $2,691.7 million, including $121.9 million in capitalized dry-docking costs

Liquidity and Cash Position

• Cash and Equivalents: $369.8 million including restricted cash of $10.0 million
• Total Liquidity: $664.1 million including $294.3 million in undrawn credit facilities
• Free Cash Flow: Strong generation of $166.5 million in Q2 2025

Debt Management

• Net Interest-Bearing Debt: $767.0 million
• Loan-to-Value Ratio: 27.0% for the tanker segment, maintaining conservative leverage
• Debt Maturity: Well-laddered maturity profile with no significant near-term refinancing requirements

Refinancing Achievements

TORM secured financing commitments of up to $857 million on attractive terms to refinance two existing syndicated loans and lease agreements covering 22 vessels. The new structure combines term and revolving credit facilities, strengthening capital flexibility. Syndicated loans will be refinanced in Q3 2025, while lease agreements will be refinanced on a rolling basis before Q2 2026.

The company’s strong balance sheet and conservative capital structure provide substantial financial flexibility to navigate market cycles, invest in growth opportunities, and maintain consistent shareholder returns through its distribution policy.

TORM’s coverage position provides good visibility into near-term earnings while maintaining flexibility to capture market upside:

Q3 2025 Coverage

As of August 8, 2025, TORM had covered 56% of Q3 2025 earning days at an average rate of $30,617 per day. By vessel class, coverage stood at 63% for LR2s at $36,670 per day, 54% for LR1s at $29,285 per day, and 54% for MRs at $28,436 per day. This coverage level provides earnings visibility while allowing participation in potential market improvements.

Full-Year 2025 Position

For the full year 2025, 66% of earning days have been fixed at an average rate of $27,833 per day. The remaining 34% of earning days (equivalent to 10,892 days) remain open to market fluctuations. A change in freight rates of $1,000 per day will impact EBITDA by approximately $11 million, providing transparency on earnings sensitivity.

Revised Full-Year 2025 Guidance

Based on strong market momentum and first-half performance, TORM raised its full-year 2025 guidance:

• TCE Earnings: $800-950 million (raised from $700-900 million)
• EBITDA: $475-625 million (raised from $400-600 million)
• Fleet Size: Based on current fleet size following recent vessel sales

The guidance revision reflects management’s confidence in the underlying market fundamentals and TORM’s ability to capitalize on improving market conditions in the second half of 2025. The company expects stable operational costs and continued strong operational efficiency across its fleet.

TORM maintained its disciplined approach to capital allocation and shareholder returns during Q2 2025:

Dividend Policy

• Q2 2025 Dividend: $0.40 per share, representing 67% of net profit
• Total Distribution: Expected total dividend payment of $39.2 million
• Payment Date: September 3, 2025, to shareholders on record as of August 22, 2025
• Policy Adherence: Distribution reflects TORM’s consistent distribution policy

Six-Month Performance

For the first six months of 2025, TORM paid total dividends of $97.7 million, demonstrating the company’s commitment to returning cash to shareholders even during periods of normalized market conditions. The dividend payments were well-covered by free cash flow generation of $292.9 million for the six-month period.

Capital Allocation Priorities

• Fleet Optimization: Strategic vessel sales and acquisitions to maintain competitive fleet profile
• Debt Management: Conservative leverage maintenance with targeted refinancing initiatives
• Shareholder Returns: Consistent dividend payments aligned with distribution policy
• Growth Investments: Selective capital expenditure on fleet upgrades and operational improvements

Share Performance

TORM shares closed at $16.7 (106.8 DKK) on June 30, 2025, with a total of 98.0 million shares outstanding. The company’s Net Asset Value per share was $23.5, indicating potential value appreciation opportunities. The strong balance sheet and consistent cash generation support the company’s ability to maintain shareholder-friendly policies through market cycles.

TORM’s outlook for the remainder of 2025 reflects both cautious optimism about market fundamentals and confidence in the company’s competitive positioning:

Market Drivers

• Refinery Closures: Four refineries shutting down in Northwest Europe in 2025, with two more on the U.S. West Coast by Q2 2026, increasing import needs and supporting ton-mile demand
• Trade Recovery: Clean petroleum product trade volumes surged to early 2024 levels at the beginning of Q3, driven by increased Middle East exports and widening East-West diesel arbitrage
• China Exports: Significant increase in product exports from China, while flows from the Americas maintained strength
• Supply Dynamics: Clean-trading product tanker fleet remains 2% below prior year levels, providing supply-side support

Key Risk Factors

• Geopolitical Uncertainty: Ongoing conflicts in Ukraine, Middle East tensions, and Red Sea disruptions continue to create market volatility
• Economic Conditions: Global economic growth, refined product consumption, and inflationary pressures affecting demand
• Regulatory Changes: Environmental regulations and potential changes in trading patterns
• Fleet Growth: Newbuilding delivery schedules and ordering activity affecting supply-demand balance

TORM’s Competitive Advantages

TORM’s positioning for future market opportunities is strengthened by several key competitive advantages:

• Modern Fleet: High-quality, fuel-efficient vessels commanding premium rates
• Operational Excellence: Market-leading operational efficiency and safety standards
• Financial Strength: Strong balance sheet providing flexibility through market cycles
• Market Position: Leading position in product tanker markets with established customer relationships
• Management Experience: Experienced management team with proven ability to navigate market cycles

Management’s confidence in raising full-year guidance reflects both improving market fundamentals and TORM’s ability to capitalize on market opportunities through its competitive positioning and operational excellence.