Hafnia : Quarterly Earnings Q3 2022

Hafnia Limited

Quarterly Financial Information Q3 2022

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I am proud to announce that Hafnia in Q3 has delivered the best quarterly result in our company's history for the second quarter in a row.

In Q3, we achieved a net profit of USD 280.3 million, bringing our net profit in the first nine months to USD 487.8 million.

In addition to our 129 owned and chartered-in vessels, we continue consolidating our strong foothold in the product and chemical market by extending our offering across our pool platforms. We now manage pools in every segment, operating a total of 114 third-party vessels commercially. We provide bunker services to over 1,000 vessels. For Q3, we have generated USD 12.1 million from our pool and bunker business, totaling USD 26.6 million for the first nine months of the year.

Founded on our ability to deliver strong and added-value shareholder returns, I am pleased to announce a 50% dividend payout of USD 0.2801 per share or USD 140.1 million this quarter.

To increase shareholder return, we will, from the fourth quarter of 2022, improve our dividend policy to target a quarterly payout ratio of net profit, adjusted for extraordinary items, of:

• 50% payout of net profit if Net loan-to-value is above 40%,
• 60% payout of net profit if Net loan-to-value is above 30% but equal to or below 40%,
• 70% payout of net profit if Net loan-to-value is above 20% but equal to or below 30%, and
• 80% payout of net profit if Net loan-to-value is equal to or below 20%

The demand for clean petroleum products continued to increase in Q3, resulting in more volumes shipped on our vessels, with longer voyages. With a strong winter market approaching, alongside a historically low order book of newbuilds and refined product inventories in the western hemisphere at an all-time low, the market trading patterns continue to be strong, and we expect a continuation of this upward trend in the coming quarters, as the US and EU Russia sanctions take effect in December 2022 for crude products and February 2023 for petroleum products, thereby changing trade flows and increasing ton-miles.

Finally, I cannot emphasize enough my appreciation to the Hafnia team and our trusted partners, who have all been instrumental in these record-breaking results.

Looking ahead, we will seek to build on this momentum to produce even greater results. Our robust business model, and expansion in 2022, which included adding 36 vessels to our modernized fleet, is a true demonstration of how our active management strategy delivers value. The acquisition of Chemical Tankers Inc (CTI) and the 12 LR1 vessels have added approximately USD 116 million to our profit this year, in addition to the vessels' value appreciation, which is in excess of USD 300 million.

- Mikael Skov, CEO Hafnia

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S U M M AR Y

Summary

Highlights - Q3 2022	04	Notes
Safe Harbour Statement	07	Note 1: Property, plant and equipment	23
Key figures	08	Note 2: Borrowings	29
Cash and cash flows	10	Note 3: Commitments	32
Hafnia's dividend policy	11	Segment information	33
Hafnia's dividend policy/Coverage of earning days	12	Subsequent events	37
Tanker segment results	15	Fleet list	38
Consolidated interim statement of comprehensive income	17
Consolidated balance sheet	19
Consolidated interim statement of changes in equity	20
Consolidated statement of cash flows	21

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HIGHLIGHTS - Q3 2022

Highlights - Q3 2022

Financial - Q3

Time Charter Equivalent (TCE) earnings for Hafnia Limited (the "Company" or "Hafnia", together with its subsidiaries, the "Group") were USD 407.6 million in Q3 2022 (Q3 2021: USD 88.7 million) resulting in an average TCE of USD 36,376 per day.

EBITDA was USD 326.0 million in Q3 2022 (Q3 2021: USD 29.7 million).

In Q3 2022, Hafnia recorded a net profit of USD 280.3 million equivalent to a profit per share of USD 0.60 per share (Q3 2021: net loss of USD 20.7 million equivalent to a loss per share of USD 0.06 per share).

The commercially managed pool business generated an income of USD 12.1 million (Q3 2021: USD 7.0 million).

As of 16 November 2022, 67% of total earning days of the fleet were covered for Q4 at USD 35,916 per day.

Operating cash flow breakeven was USD 14,975 per day in the quarter.

In Q3 2022, Hafnia carried out the following activities:

• On 7 July, Hafnia sold a LR1 vessel, BW Orinoco
• On 8 July, Hafnia sold a Handy vessel, Hafnia Green
• On 12 July, Hafnia sold a LR1 vessel, BW Lara
• On 28 July, Hafnia sold the Handy vessels Hafnia Adamello and Hafnia Rainier
• On 29 July, Hafnia signed a framework agreement for the sale of Hafnia Spark, Hafnia Stellar, Hafnia Sirius and Hafnia Sky
• On 4 August, Hafnia sold a Handy vessel, Hafnia Robson
• On 8 August, Hafnia sold a Chemical - Stainless vessel, Hafnia Sceptrum
• On 12 August, Hafnia sold a Chemical - Stainless vessel, Hafnia Spica
• On 23 August, Hafnia sold a Chemical - Stainless vessel, Hafnia Saiph

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HIGHLIGHTS - Q3 2022 CONTINUED

Market

The spot market in the third quarter started strong on the back of a robust second quarter. Global petroleum product demand in the third quarter continued to grow by 1.5 million barrels a day, and an increase in the utilisation of the worldwide product tanker fleet resulted in Hafnia delivering the best quarterly result in the Company's history for the second quarter in a row.

The growth in global product demand is expected to continue in the fourth quarter, reaching 100.6 million barrels and 102.9 million barrels by the end of 2023. However, the deterioration of the global economy and the OPEC+ plan to cut supply by 2 million barrels a day casts a cloud of uncertainty on future demand. Oil-to-gas energy transitions and record- low product inventories somewhat counter the immediate effect of such cuts.

In this third quarter, the product tanker market experienced a decrease in laden distance. Despite a 2% increase in transported volumes, this resulted in reduced product ton-mile, but was partially offset by an increase in ballast distance. The fourth quarter has seen laden distance increasing again to levels higher than the second quarter, and not attributable to the seasonal spike typically experienced in the first quarter. We also notice an unusual ballast duration spike in the fourth quarter.

Russian exports to the US and EU markets have reduced in the third quarter, as a result of ongoing sanctions. Still, they have been partially offset by an increase to non-EU countries, resulting in significantly longer distances for product tankers.

With the EU embargo on Russia's product exports coming into effect in February 2023, EU countries have yet to diversify 75 % of their historical average imports from Russia. We can expect ton-mile for product tankers to continue increasing as the EU seeks to replace Russian imports from further regions such as the Middle East.

Globally observed product inventories are at an all-time low, and the announced cut of OPEC+ oil supply will reduce the likelihood of a build up in inventory anytime soon. Despite OECD inventories increasing marginally in the third quarter following the Strategic Petroleum Reserve (SPR) release, US and EU diesel inventories are at an all-time low, and we expect to see increased diesel imports into these areas.

Due to the continued dislocation between clean refined products and end-user demand, we expect these diesel imports to come from further afar regions, such as the Middle East and the Far East, over the winter season. We are already seeing an increase in shipments from the Middle East to Europe, and we expect this to continue increasing with the build up of refining capacity in the Middle East and Southeast Asia compared with the closure of refining capacities in the US and Europe.

With these solid fundamentals, the outlook for the product tanker market remains very strong going into 2023.

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