speaker-1: Thank you, John. Great to be here.
speaker-0: So why don't we jump straight in? ⁓ so most people in shipping know the name Ardmore, but you know, what do they get right about you guys? What do they get right?
speaker-1: That's great question. ⁓ I like to think we're generally pretty well understood in the market. I believe Ortmor is understood to be a quality name that has real long term vision, that executes really well according to a real long term strategy, has built a great culture, and operates to a really robust, well regarded governance standard. Sometimes I wonder if people truly understand how global. of a business we are. Every now and then we're being referenced as a as an Irish ⁓ product and chemical tanker company. And we're very ⁓ fortunate ⁓ to to to be in Ireland in in many ways. ⁓ it all began in Ireland. We're very proud of ⁓ our operating office there and we're very proud of our staff there. We are truly a global business. And if you look across all levels of the company, whether it's the company itself, the management, the board, Our business, our stakeholders, everything truly operates on a global scale. And we also believe that's where much of our strength comes from by being a a truly globally positioned and also a globally staffed and set up organization. Perfect.
speaker-0: Now, both of you have had such a rich, diverse career with regards to like the different roles that you played throughout throughout your career. What you know, you know, Gernot, why don't you walk me through, you know, when did you first understand what good capital discipline looked like? And we like what was that moment like for you?
speaker-1: I would like to think that knowledge and understanding and insight is probably not acquired in one eureka moment. I believe it's something that is built over time through through experience, through iteration, and through compounding really. And for me, ⁓ really looking back at at my career, I've spent now, you know, a quarter century ⁓ in mostly commercial roles of this ⁓ of this business, which of course gives you really that feel for you the ups and downs of a cycle. Right. You see a lot of the good, the bad and the ugly. And my career started on the container side. So I've actually seen a full cycle play out in containers first. And that I guess peaked at some point in like ⁓ four, ⁓ five. And I've really seen both sides of that. And then I think stepping into the tanker market ⁓ gave me, I think, already a very different intuition for some of those cycle demand dynamics and also seeing some some parallels. I think on a more personal level, I've always been a big believer in in acquiring understanding through experience and maybe experimentation. I mean, if if if we had to pin it down to a to to an individual ⁓ event when I was still a a management trainee at Mersk, ⁓ I put some of my hard-earned trainee income to work during the ⁓ Iraq war, ⁓ where I felt that ⁓ because of the turmoil that was in the world, ⁓ some of the some of the shares were quite oversold. And ⁓ you know, I was quite happy with that decision when when markets normalized over time. And I think that gave me sort of that combination between a very big macro understanding and just, you know, going through through the career and and witnessing ⁓ cycles play out in different industries, but also having a very direct personal ⁓ exposure to it, which I think ultimately then then forms your views on on on how the world works. And of course you bring that into your role ⁓ in in any function and certainly in an executive function at a shipping company.
speaker-0: Yeah, I love that. I remember as well when I came into the industry, part of my like forcing myself to kind of get into the industry, get myself educated on a little bit was like, all right, I have to invest in these publicly traded companies. I have to pick some the some of the winners that I want. And like just kind of keeping on top of that the whole time was definitely something that helped me get more engaged, I think, earlier on. So I completely understand. Yeah, exactly. Yeah, exactly. ⁓
speaker-1: Well there you go. There's certainly a name we could recommend.
speaker-0: But so I was talking to Jack Noonan about your history, and he started to rattle off a ridiculous amount of roles that you have played. And I actually have to read them. So, you know, started off as a DAC officer, moved through investment banking, was a naval architect, you're in equity research, tanker operations, like of all these roles that you have played, like, you know, what are some of the things that you've been able to kind of help, I guess, shape the way that you think about risk and shipping and And what are some of the lessons that you've could pulled from those different things that kinda help you in your role today?
speaker-2: Sure. No, I think it's it's taken me a long time to ⁓ realize what I want to do when I grow up. but but definitely starting out on the ships and I think that connection and working for some, you know, pretty demanding captains and and chief mates and really emphasizing that safety is paramount and that safety culture, ⁓ that's really stuck with me and and so so important to support the seafarers. And ⁓ and and you know, sometimes you can feel a little removed, obviously, in the shoreside offices. We try really hard in terms of visiting the vessels, integrating them into when we have different company events. ⁓ I mean, Garnott had the great ⁓ idea that when we have all hands calls ⁓ across our global offices, we actually have the vessels on ⁓ as well with us from time to time. And ⁓ technology can really facilitate that. So ⁓ so so that's been really great. ⁓ and then I think, you know, spending the time on Wall Street and and also working with ⁓ private equity investors, definitely that built up my financial and analytical approach to the business. And certainly then one where how do you position yourself to take measured risk? How do you how do you structure and ensure you have financial strength and then actually can ⁓ can act opportunistically when perhaps others can't ⁓ as as the cycle plays out. ⁓ but But I think similar to Gurna, like they're just, you know, a a wide range of experiences and you just pull on bits and pieces of them every day. ⁓ and and and one where we're still learning and and it's still an evolution. So ⁓ you know, happy ⁓ to be on this team and I think just that alignment where you can utilize your experience, ⁓ you know, ⁓ every every day has been great. Yeah.
speaker-0: amazing i mean you're kind of like a one-man maritime ecosystem yourself so that's that's great ⁓ so b obviously so you know both vast experiences what is one of the beliefs that you had early on in shipping that you no longer have now having kind of gone through the you know the the rigor rigor of everything that you have
speaker-1: For me, I can say fifteen, twenty years ago, I believe I would have understood the industry to be probably more about its transactional nature. Timing around acquisitions and when to sell and really the deal flow ⁓ that defines companies. And of course, ⁓ you know, as we set out ⁓ during the leadership transition, we define that our our strategy execution is going to be focused on innovation, transactions, and culture. And transactions are quite central to continuing to evolve and progress as a business. But I've really gained an understanding through my time at Artmore and seeing all the different facets of the business and also actually building the business and building the commercial platform and integrating it with the other parts of the company, that a successful business is much more than the sum of its transactions. And you really need a strong core, a strong culture, a strong philosophy. And really you need to be able to answer why are we doing this? Where are we going? What's the long term vision here? And and and they all coexist, of course. you know, operational execution and transactional execute execution, but the core of what your company stands for is ⁓ is really at the core of everything. If you take that away, it's just a collection of steel and ultimately everybody can buy ships, ⁓ everybody can be a ship owner. What you do with the steel, what you do with those assets is really what makes a difference and what sets us apart as a business.
speaker-2: ⁓ I think for me, and and maybe it was it was frustration years ago that just, ⁓ the shipping industry is slow to adapt technology, slow to change on that front. And and really see today that, you know, through advances in software, hardware, the combination of both, ⁓ that that there is that greater pace of of innovation, of adoption, and ⁓ and seeing real change. Right. And and and this isn't about Speculative investments. Th this is about real tangible investment where you can get payback and quite significant payback in the in the short term.
speaker-0: ⁓ you talk about the leadership transition. ⁓ and I'm just I just had a moment of like, ⁓ yeah, you guys did that so incredibly seamlessly and so well. And I was like, how is Tony? Like have do you have does he pop does he pop around anytime? Or like how is what's that like?
speaker-1: I think Tony's, I mean, we we are in touch with Tony plenty. I mean, as you know, he has fully retired and has given us ⁓ a lot of elbow room. So he is no longer directly involved in the business. But we we see him a lot. ⁓ you know, Tony, if you're watching, you know. ⁓ of course he has really ⁓ laid a lot of the foundations of of that philosophy I talked about earlier. And ⁓ and I've gained a lot of inspiration ⁓ from working for Tony and really defining who we are as a company, those values. ⁓ they they of course live on well beyond him and they will live on ⁓ well beyond our leadership as well. So in a way it's it's really timeless.
speaker-0: Get back to it. ⁓ I want to kind of get into the weeds around the case study that we kind of discussed earlier. ⁓ walk me through the ⁓ the three vessel acquisition and just kind of talk to me a little bit about the thinking about that, how that kind of came about, and then how that ties into the new building tonnage and and that aspect of it.
speaker-1: Yeah, and we could probably unpack that in in in in a lot more detail than you may be interested in, but but maybe going back to what I said at the start, there's the there's the bigger cycle, the macro picture, which we feel is very compelling, very positive fundamentally, both on the demand and the supply side. ⁓ we believe that ⁓ growth needs to be part of the equation for Artmoor, not for the sake of growth, but the right ships at the right price at the right time.
speaker-0: Very interesting.
speaker-1: Right. and and that requires you to be sometimes very patient and sometimes you have to be very decisive. And as we were coming out of the leadership transition, it felt that ⁓ secondhand values had appreciated quite a bit compared to a lot of other markers. So we actually took a step back and ⁓ and we found other really interesting ways to to reinvest in the business, upgrading our ships, making them more fuel efficient, making them more versatile. ⁓ Of course, we continue to also reward our shareholders to our dividend. And at what point at the end of that year we also saw an opportunity to buy our own stock. So just because you're holding off on on on acquisitions doesn't mean by any means that you're standing still as a company. That's without even getting into the innovation activities, which are something that pays a return ⁓ no matter what the market does. ⁓ then we saw in the earlier part of twenty twenty-five. Markets really correcting quite sharply on the back of Liberation Day, tariffs, what does this mean for the global economy? And you know, you could have really thought for a moment the world was coming to an end. Right. And ⁓ in those times we like to kind of ground ourselves in the fundamentals, in the data, and maybe in the conviction that, you know, the world only ends once. And as we got to a point where ⁓ secondhand values really felt quite oversold, right? ⁓ That point had dropped probably by 20, 25%. We could also see markets maybe turning and the world moving from a high sensitivity around risk to maybe more pragmatic approach ⁓ to you know the world has to keep trading, you know, things have to start or keep flowing. Right. ⁓ and we also saw ⁓ a a really slow bid emerging ⁓ as well. So we felt like we really had had reached the bottom of the market, and then we Very quickly decisively executed on ⁓ three ships that we had been tracking for some time through the market, ⁓ from good counterparties. ⁓ some of them we had a lot of direct touch point with. ⁓ and we're really able to leverage the execution track record that Artmore has. When we commit to a transaction, ⁓ we always deliver. And I believe at a time when there is great uncertainty and volatility, and people put ships on subjects as a free option and then don't execute. We can offer certainty of execution. And I believe that had a lot of value to to the sellers we were engaging with at that time. Yeah. And so we ⁓ we were able to to act very swift, swiftly just before the summer when things really started to pick up. ⁓ earnings continue to, of course, accelerate as we've seen now for five or six consecutive quarters. And prices have moved up significantly. ⁓ you know, those ships are in the money now by 30, 35%, you know, within less than a year. That's So yeah, happy with that, of course. ⁓ and and that's always easier said in hindsight. But we already felt at that time, just in terms of the ⁓ the the the quantum of risk, ⁓ obviously we we didn't bet the farm. It's you know, it we have the financial ⁓ firepower to do this without really stretching the the the balance sheet. ⁓ but again it was the right price, the right chips at the right time. And I believe that kind of sums up the the the broader thinking. And of course then you fast forward to other interesting things we can do. With a portfolio where we then took some of our ownerships and locked them into some ⁓ multi year charters ⁓ that then actually lock in some returns. So if you look at the overall portfolio of Ordmore between leaning into selective growth, ⁓ at the same time, locking in some quality earnings, you're creating this natural hedge that then really enables you to achieve all your objectives ⁓ as you move through a market cycle.
speaker-0: Yeah, that's amazing. I mean, it's it's also what we were, you know, talking about it last year at Marine Money where it's just like so how many black swans can you have until they're no longer really technically black swans anymore? ⁓ but it does seem like the market just continues to drive north ⁓ and to find a moment though when it dipped to capitalize on that is i is really impressive. ⁓ so that's fantastic. But when we talk about opportunity, about if I remember correctly, we had a conversation once where we were talking about, you know, Being purely opportunist can be troublesome. So you've got to have like some checks and balances there. Can you kind of expand a little bit on that? Like kind of what you were thinking. I know that but ⁓ Gunot talked about it a little bit, but what do you mean by that?
speaker-2: Sure. I I think for us, you know, every potential opportunity, you're you're you're not only analyzing that deal in front of you, that vessel, ⁓ but w where where are the macro factors? Where is the company within that setting? And ⁓ and then to Garnott's point, you know, the the what ifs. What if we're wrong? ⁓ you know, what what what does that mean? What if ⁓ what if Liberation Day and tariffs play out? And and things so I I I think f for from our standpoint then it's always this intellectually honest approach as you're analyzing that and ⁓ and and you know realizing that we had the good fortune that Ardware was starting from this point of tremendous financial strength. Right. ⁓ but but for us, yeah, the the key points of, you know, it has to align with our strategy. ⁓ you know, and and then how does that actually go in terms of the operation of these vessels and and the future performance of them? And ⁓ and then for for us, what is it part of from a larger strategy perspective for the evolution of our fleet? And and so we take capital allocation very seriously. I mean, we've had a written policy in place for for years now, and we're always trying to find that right balance and it's dynamic and it can change with the with the conditions where you should be investing in your existing fleet to make it more efficient and to imp improve. And at the same time maintain low leverage so that you actually can have ⁓ capital available to act ⁓ countercyclically while also looking at potential growth opportunities ⁓ when the time's right, all while rewarding shareholders along the way is is part of the journey with returning capital to them. And ⁓ and so that framework I think really, really helps and keeps us grounded and and then hopefully avoids us where all you know. some some vessel or some deal comes up that maybe ⁓ you know, with tunnel vision looks really, really interesting, but that greater context, it actually doesn't fit the frameworks that that we hold so dear.
speaker-0: And I think that like if we start to switch to the cargo aspect of it, I think that that's interesting because I think for years you guys have said that around about, you know, when we think about the product versus chemical mix in your fleet and the flexibility that you guys have there, I think it was something like 25% of your cargo is around non-fossil fuel, is that right? Or like and then the new build of the is it has flexibility to be able to kind of transition between the two. Maybe just kind of talk a little bit about that.
speaker-1: I think that's the answer right there. It's about flexibility ⁓ rather than a philosophical commitment to a a a certain cargo or cargo grade. Yeah. ⁓ there was a time when I I believe it was almost a third where we carried non-fossil cargoes because CPP markets were quite depressed and we saw a lot of opportunity to optimize the earnings potential of whatever market we were facing through integrating it with ⁓ interesting backhauls, alternative more long haul voyages that would be playing out. In some of the non-fossil markets. Right now, the opposite is the case, where even our more versatile ships, our chemical tankers, as a matter of fact, ships we just upgraded to become even more versatile, they've really swapped into mainstream clean product trade crop clean product trades at the at the start of the year because that is where the money is. Right. So for us, it's really about creating trading options rather than obligations. And and we believe, yes, that in the long run. Having assets that are as versatile as they can be gives us a great strategic ⁓ you know flexibility depending on how cargo flows evolve in the long run. Right. Right now, of course, investment in fossil has increased significantly since COVID. But at the same time, ⁓ you know, having having alternative sources of energy also becomes a point of strategic resilience. Right. So for us being able to play across all those is is really important. And ⁓
speaker-2: And maybe on that, I I think that's the the the great point is that you have to have the right team to do this. And and so some other shipping companies, maybe they would segregate and say, okay, we have our refined petroleum product team and and we have our chemical team and they operate at separate desks, separate fleets. And and for us with that integration, you know, you have you have a shoreside chartering team that trades all the vessels. And so they can actually see both markets and actually know how to optimize within it. And then you have to have the right crew on board that actually can turn these multiple cargoes, can do the tank cleaning in an efficient way, be ready for that next voyage. And so it's a number of those layers too that adds to the efficiency. Right. And then and then you generate the incremental return. And so that thinking and knowing that we have that platform behind us really gave us conviction when we looked to the order of these new flexible assets as well.
speaker-0: Yeah, I I think I might steal the term ⁓ trade options versus trade obligations. So thank you for that. That was very helpful. I want to start moving the discussion more to kind of like risks, opportunities, kind of predictions that we see in the future, which is always like an interesting ⁓ piece. So the MR order book is growing, but the global feat is also very old. It has been for you know, this probably that's been the oldest in this century, ⁓ with half approaching scrapping window in the next five years. You know. What is when you look at that picture, are you worried about the autobook or are you confident
speaker-1: I I give a few ⁓ framing thoughts and ⁓ and and and Bart, please by all means f fill fill them fill them in where I'm ⁓ where where there's gaps. But this kind of gets a bit into the ⁓ sort of realm of course speculating about, you know, ⁓ is the market gonna go up or down and and I think time has shown that ⁓ you know even some of the most ⁓ knowledgeable and and wise either companies or individuals Have been quite wrong over the past five years. And let's face it, what has really been moving markets over the past five years isn't actually demand or supply growth, it's political actors and and and and and droughts and and things that are really hard to predict. And also really hard to predict how they will play out from here. But when when we when we are careful to make those binary predictions, we can of course ground ourselves in the numbers. And the numbers are quite simple. I mean, the order book today has grown somewhat, so that is a fact. It is also a fact that it's still significantly lower than at the last peak. It is also a fact that the product tanker fleet is the oldest it's been the century. Right. And that we have the significant slice of the fleet that is trading in the shadows in great trades, ⁓ and now for ⁓ several years operating to really low maintenance standard and I don't think it requires a lot of foresight to see that these ships will be the first to go when you take away the economic rationale to be trading in the shadows. So there is this automatic there's this automatic exit mechanism that will remove a slice of tonnage ⁓ either as the sanctions landscape shifts, or if you were to see a downward correction and you saw a dip in earnings, that pullback would then very quickly, I think, lead to decisions where, okay, are we going to take these ships to the next dry docking cycle? invest more capix into getting them accepted to these very demanding customers we're dealing with in our industry. Right. So ⁓ again, definitively not trying to make a qualitative statement about the order book. These are all facts and I think they're probably a lot more constructive than than the most bearish voices suggest. And one thing that ha really hasn't played a role ⁓ when we saw the cycle play out in the last decade, ⁓ in the twenty tens, is really the geopolitical environment that we're in. Last time it was all about the rise of China and demand, and then you had the financial crisis and a supply overhang that really played out over the better part of that decade. But now, maritime assets, assets that can store and transport liquid energy with one phone call. ⁓ that has extreme value at a time when when when again the world is struggling with security needs, with supply chain resilience. And of course, all companies and and and private private actors, just as much as state actors, ⁓ I think every boardroom probably now has a conversation around, you know, what are some of our key risks and supply chain resilience, supply chain risks are on top of the agenda and and and ships will of course be very core to that. And is that worth fifteen percent of the order book or five percent of the order book or or whatever it is? Hard to say. Right. But it's not nothing.
speaker-0: Yeah, that's that's a fair comment. Yeah, and just yeah, looking at that risk matrix that like you said, every executive has to go through right now. Like we are kind of an optionality for for the
speaker-1: We are the prime risk mitigation tool for the world right now.
speaker-0: ⁓ but on the Q one call you talked about the closure of the Strait of Humuz disrupting about fifteen percent of global oil product flows and about thirty percent of crude. How d and Armor doesn't had it didn't have any ships in the in the region, right? During
speaker-2: Thankfully we didn't but but I think, you know, that being said, you know, we we certainly appreciate that there were a number of ships and seafarers trapped there. And and so ⁓ well we didn't have to live through that situation ⁓ internally, just you know, not great for our industry by any means. And and let's hope that ⁓ yeah, there's some solutions and some flow. It most importantly just so the seafarers can get back to their normal job.
speaker-1: And and I think there's a lot you can do even as a as a as an industry peer, ⁓ because again, we're all in this business and I think, you know, the the the well being of seafarers for us extends beyond just our own seafarers and we think they're ⁓ they're a critically important ⁓ stakeholder group in in in in any company and ⁓ you know we are strong supporters of the ⁓ mission to seafarers. ⁓ we believe they're an extremely professional ⁓ really effective organization that does a lot of great things ⁓ kind of through normal ⁓ normal situations, but also during this ⁓ recent ⁓ escalation of of of of events in the Middle East and then ships literally getting trapped and actually crews getting abandoned, very often the mission to seafarers would have been the first point of contact where they would have fielded calls from crews that said, Look, we can't get food, we can't get water, please help us. And then they jumped in and and and and and kicked off ⁓ sort of ways to action all this. ⁓ so I think for you know a call to ⁓ to all to all our fellow industry peers, ⁓ you know, ⁓ organizations like the Mission to Sea Affairs, but also Intertangle that is doing a great job of just coordinating sort of industry responses and industry industry support and awareness at times ⁓ like these is is really crucial. And ⁓ and and I know this is maybe a little ⁓ off topic, but then again maybe it really isn't. ⁓ I don't
speaker-0: Think it is. I think like you said, it's crucial and they are the ones that are like, you know, putting their lives, you know, potentially in in harm's way, and they're also the ones that are facilitating global trade. So I think it's a very, very important subject to touch on. So no, I appreciate that. And then now that having experienced so many of these geopolitical ⁓ issues, what are you like concerned about, I guess, evolving in the next six to twelve months? Like what are you keeping an eye on?
speaker-2: We speak about a lot internally now, you know, are we are we at the start of this era where ⁓ it's much more of a a world based on mercantilism as opposed to free trade. And and so what does that mean? And in in that complexity, we actually think that ⁓ that that shipping is a beneficiary of that. ⁓ because you might have more trading restrictions, but actually that need for vessels and what Garnott w talked about the, you know, the critical supply. And delivering energy and food to the world is even more critical. And ⁓ it and it doesn't mean though that operationally, you know, I mean, it it could become much more complex. Right. ⁓ so you gotta have that organization that can fulfill and execute. but but one where, yeah, I I think we we don't pretend to be able to predict ⁓ a lot of, you know, the the future and a lot of these things that are gonna occur. We're we're just building the organization to make sure that we're there to execute and react.
speaker-0: And that's and that's kind of one of your core philosophies, right? Why you have all your commercial trading, you do all that, you don't put your vessels in pools and things like that. It's that optionality, that that ability to be flexible and trade and know where your vessels are, right? That is like something that's super important to you guys as a platform.
speaker-1: Sure. Yeah, absolutely. And and and and just to to stay with this point on on on how the world trades are really evolving from what used to be a lot more centralized ⁓ in terms of refinery flows and certainly crude oil flows in in past in past decades. I think the whole global oil supply system and the refined product supply system has become increasingly decentralized, which is why even now, what are we ⁓ a hundred days or a hundred day Hundred days plus into this conflict. ⁓ planes are still flying, cars are still driving, and yes, fuel prices have increased, but nothing's nothing's happened to a point of choking off the economy. ⁓ demand has been pretty inelastic. And ⁓ and and yes, some inventories have been drawn down, but others have been shifted around and replenished. And I think you see this ⁓ this decentralized global oil structure at play here, where of course, to keep that, keep that going, you need ships to to connect those different. different different hubs of of oil and also refined refined product supply. And and that's something that no matter whether the straight opens or not, will not go away. And certainly ⁓ anybody that is looking after corporate or state supply lines is probably going to look for more optionality, more flexibility, more resilience in their energy supply lines. And and and and I think that again creates interesting opportunities. for shipping and and is an inherent ⁓ inherent ⁓ delta to put on top of ton model demand.
speaker-0: Okay, perfect. Well, we're coming towards the end of our time. I know that we could probably chit chat forever and I appreciate that. ⁓ but I guess like and for a closing question, you know, you know, what worries you about the next generation in shipping? What gives you hope? What are you excited for? Like when you think about the people that you guys are nurturing in your company and outside of your company, like what it what are you excited about? What are you scared about with regards to that?
speaker-1: Super excited about the the next generation. ⁓ the people I've had the pleasure of interacting with directly at Artmoor and and elsewhere, ⁓ very switched on, ⁓ with a positive outlook on life. ⁓ I think with a desire to to have impact and and to to be ⁓ have a positive impact, but at the same time in a very pragmatic way. Right.
speaker-2: I'd I'd say ⁓ tremendously excited about the next generation and just think about like Ardmore's cadets. And ⁓ so our joint venture partner, Anglo Eastern, had the opportunity to to visit the Anglo Eastern Maritime Academy it you know, outside Mumbai and sit with them during ceremonies and lunches and and like the questions they ask, how they're engaged. And I'm thinking back like When I was in their shoes, whoa, like we were not doing this. So you know, ⁓ I mean, ⁓ almost using the word goofball or something compared to this you really engaged generation. So I think that, you know, tr tremendous hope.
speaker-0: Thank you guys so much for spending the time. I really appreciate it. ⁓ whenever you're in New York next, I I owe you guys a drink. And ⁓ but I appreciate it. Thank you very much for coming on the on the first on the first session.
speaker-1: Thank you, John. That was great. Thanks.
speaker-2: Thanks, John. Appreciate it.