Odfjell posted record-high numbers on Tuesday evening, although they were guided to be stronger QoQ, but still beat our and consensus expectations. This resulted in USD 1/sh semi-annual dividends to be distributed. The company communicated that 3Q24 is expected to be another strong quarter, but somewhat below 2Q24, which was already expected by us. We reiterate our positive stance towards the stock with a slightly higher NOK 210/sh Target Price.
Record-high results reported
While 1Q24 was a record quarter for Odfjell driven by strong markets, those records were broken pretty quickly already in 2Q24. The rates increased towards the end of the last quarter and the company reached an average of USD 36,493/d rates vs. USD 33,005/d in 1Q and compared to around USD 30k/d in the previous couple of quarters. Cash break-even per day in 2Q24 was USD 22,103 compared to USD 22,501 in 1Q24, bringing the 12-month rolling average to USD 22,876. Cash breakeven levels are expected stable in 2H24. Contracts renewed in the quarter saw average rate increases of 5%, covering around 6% of estimated annual contract volumes. Strong results led to USD 1/sh proposed semi-annual dividends.
3Q should be somewhat weaker
Chemical tanker market remains strong, but the spot rates turned down since the end of 2Q24, in line with the seasonal pattern. As capacity has increased in the Panama Canal, the tonne-mile demand decreased slightly. On the other hand, the conflict in the Middle East seems to worsen, with an increased risk of a wider conflict in the region. Around 15% of volume carried on Odfjell vessels in 2Q24 originated from the Middle East region. All combined, the company guided for a strong performance in 3Q24, but still somewhat below 2Q24.
Fleet status and financing
Global seaborne chemical volumes are stable, and swing tonnage is at low levels despite a slight recent increase. Although the chemical tanker orderbook is not at the historically low levels anymore, Odfjell has played a strong role there with 16 newbuildings to be delivered from 2H24 until 2028. Regarding the financing, it is worth noting that Odfjell has a USD 120m bond maturing in January 2025 and the company is planning to repay it with the cash from the balance sheet.
After the recent share price drop, we have upgraded our recommendation to Buy and now keep it with somewhat higher NOK 210/sh TP seeing strong 2H24 and solid prospects going forward.
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Source: Norne Research