Letter from the CEO
During the year, we continued to see the strong deep sea transportation demand, while on the other hand, the supply demand imbalance remained, characterised by limited capacity growth and operational disruptions such as port and canal delays and emergency rerouting. Consequently, this led to a huge capacity tightness, pushing the spot rate to a new high level.
Höegh Autoliners was well positioned to take advantage of the strong spot market, and together with several successful repricing of the contract portfolio, managed to achieve substantial rate and top line increases throughout the year. Additionally, the Company maintained control over the operating expenses, and with minimal exposure to the overheated charter market, delivered a strong operational result for the year 2023.
Building resilience and strategic positioning for the future
The strong market also provided a golden opportunity for the Company to build resilience for the future. This was achieved by a combination of securing income via longer term customer contracts with substantially higher rates and reducing capacity costs. The Company declared purchase option for Höegh Jacksonville and took delivery of three vessels: Höegh Berlin, Höegh Tracer and Höegh Trapper. This allowed us to significantly reduce the cash cost and limit our exposure to the overheated charter market. The Company also took advantage of the strong market to further optimise the fleet in preparation for the delivery of the newbuilds, by selling Höegh Bangkok, an unencumbered 16-year old vessel for USD 63 million, resulting in a USD 36 million accounting gain.
Sailing for sustainability
Höegh Autoliners firmly believes decarbonisation is where we can make the biggest impact, and our newbuilding program serves as a key factor in realising our ambition to be a net zero emissions operator by 2040. Our newbuilding program has proceeded with full speed since the concept launch in 2021, with the option for vessels 9 to 12 declared, including an option for installing ammonia engines on these vessels. The Company has secured committed financing for all of the ordered Aurora-class vessels on attractive terms.
In terms of construction, all the milestones have been reached well ahead of the original plan, and the Company expects to offer low emission transportation services to our customers onboard the Aurora class, the greenest and smartest vessels ever built, from August 2024.
We have taken relentless action to solidify our position as the preferred green PCTC carrier for our customers. More than 80% of our fleet received a CII rating of C and above – being one of the best vessel performances in the whole PCTC sector. We continued to offer low-carbon transport solutions using biofuels, with a remarkable 100% increase in biofuel volumes purchased and consumed during 2023 compared to 2022, indicating a clear increase in customers’ interest for green transportation.
The Company actively took part in various initiatives and forums to further promote collaboration between organisations with a similar decarbonisation vision, as well as to gain access to cutting edge green capabilities and technology. We are now a member of NCE Maritime Cleantech, a world-renowned maritime commercial hub and a Mission Ambassador in the Mærsk McKinney Møller Center for Zero Carbon Shipping. The Company also formalised partnerships with several key ammonia suppliers worldwide such as Sumitomo, North Ammonia, Varo to realise our 100% net zero carbon shipping vision.
Committing to value creation for shareholders
The Company’s shares continued to be one of the best-performing shares on the stock exchange during 2023, experiencing a 42% increase compared to 2022, outperforming the OSEBX main index in the same period. This solid development was a testament to the market’s approval of our actions and our future plans. Shares have gradually attracted increased interest from investors all over the world, illustrated by the exponential growth in the number of shareholders and daily traded volumes.
The Company paid 50% of net profit adjusted for extraordinary items for the first three quarters in 2023, before updating the dividend policy to pay around 100% of free cash flow after Capex and debt services. This resulted in an over 400% increase in the dividend declared in March 2024, reaching USD 360 million and marking the best trading day ever for the Company. Given the current operational performance, Capex requirements, and debt profile, we expect to maintain a solid payout ratio in 2024.
Upskilling our people to meet our future needs
We have already taken significant, concrete steps towards our goal of zero emissions. This progress gives our people exciting career opportunities and to develop new skills in order to deliver green products to our customers, operate new vessel designs, adopt innovative technologies, and embrace new ways of working. A recent example of our commitment is our collaboration with Höegh LNG. This partnership aims to upskill our seafarers, equipping them with the necessary accreditations to operate LNG-ready vessels. We continue to focus on skills development and have introduced various tools and processes to support our teams in managing their own career paths. We continue to run and promote a range of internal development programs aimed at fostering growth and are proud that through our recent engagement survey results our people recognise these efforts.
None of these achievements would have been possible without the joint efforts of our seafarers and onshore employees, our customers, and our suppliers. I extend my heartfelt gratitude to each one of you for contributing to an outstanding 2023. Together, we are committed to sailing Höegh Autoliners into a solid future ahead.
Andreas Enger, CEO