Torm shares weaker despite strong Q1 results 🚢

Danish company Torm (TRMDA.DK) is one of the world's largest operators of product tankers carrying petroleum products, gasoline, jet fuel and diesel. The company's margins and revenues increased after the sanctions on Russia. Since the war in the Ukraine started, its fleet has been operating at full capacity covering longer routes thanks to which it company has higher rates.With its large market share, it can also negotiate higher margins. Management commentary following the results indicated that the trend of high rates following the embargo on Russian oil products continued in Q1 amid high volatility in freight rates. The company has a total fleet of 85 vessels.

• According to a management commentary, daily average rates for the fleet amounted to $41.717 per day, compared to $16.743 in Q1 2022;
• The company's Q1 profit amounted to $153.6 million, the vast majority of which will be paid out as dividends. Q1 2022 net profit was $10.4 million;
• TORM has taken delivery of seven LR1 vessels purchased in January 2023. The company expects three vessels to be delivered before the end of May;
• The stock has gained nearly 130% over the year, and over five years has gained more than 300% beating the rate of return of most Danish companies. The company's adjusted return on invested capital (ROIC) was 29.2%, compared to 4.4% in Q1 2022;
• The Board of Directors approved a dividend for Q1 2023 of $1.46 ($121.1 million), the dividend will be paid on June 6 with the dividend ex-date for the share price set for May 22.

Despite the great results, the share price took a dive as the company failed to beat its EBITDA forecast, and markets estimate that product tankers occupancy could fall, facing recessionary outlook. Nonetheless, the TORM fleet appears to play an important role in the European trade infrastructure, with the new balance of power excluding Russia.

Torm (TRMDA.DK) shares, D1 interval. The price is measuring a key support level at the SMA200 (red line), near DKK 191.7 per share. A drop below could result in a test of DKK 175 per share, where we see the 38.2 Fibonacci retracement of the upward wave from early 2022. Source: xStation5