TORM plc
TRMD 20-F Report ended Dec. 31, 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
OR | |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended | |
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _________________ to _________________ | |
OR | |
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Date of event requiring this shell company report: | |
Commission file number: 001-38294
(Exact name of Registrant as specified in its charter) |
(Translation of Registrant’s name into English) |
(Jurisdiction of incorporation or organization) |
(Address of principal executive offices) |
+ |
(Name, Telephone, E-mail and/or Facsimile, and address of Company Contact Person) |
Securities registered or to be registered pursuant to section 12(b) of the Act.
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A common shares, par value $0.01 per share |
Securities registered or to be registered pursuant to section 12(g) of the Act.
NONE |
(Title of class) |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
NONE |
(Title of class) |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the
annual report: As of December 31, 2024, there were 97,814,051 of the Registrant’s Class A common shares outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒ | No | ☐ |
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
Yes | ☐ | ☒ |
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
☒ | No | ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files).
☒ | No | ☐ |
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth
Company. See the definitions of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Emerging growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting
Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.S 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
☐ | U.S. GAAP | |
☒ | ||
☐ | Other |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow:
Item 17 | ☐ | Item 18 | ☐ |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes | ☐ | No |
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TABLE OF CONTENTS | ||||
Page | ||||
PART I. | ||||
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | |||
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE | |||
ITEM 3. | KEY INFORMATION | |||
ITEM 4. | INFORMATION ON THE COMPANY | |||
ITEM 4A. | UNRESOLVED STAFF COMMENTS | |||
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS | |||
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | |||
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | |||
ITEM 8. | FINANCIAL INFORMATION | |||
ITEM 9. | THE OFFER AND LISTING | |||
ITEM 10. | ADDITIONAL INFORMATION | |||
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | |||
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | |||
PART II. | ||||
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | |||
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | |||
ITEM 15. | CONTROLS AND PROCEDURES | |||
ITEM 16. | [RESERVED] | |||
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT | |||
ITEM 16B. | CODE OF ETHICS | |||
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | |||
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | |||
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | |||
ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | |||
ITEM 16G. | CORPORATE GOVERNANCE | |||
ITEM 16H. | MINE SAFETY DISCLOSURE | |||
ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION | |||
ITEM 16J. | INSIDER TRADING POLICIES | |||
ITEM 16K. | CYBERSECURITY | |||
PART III. | ||||
ITEM 17. | FINANCIAL STATEMENTS | |||
ITEM 18. | FINANCIAL STATEMENTS | |||
ITEM 19. | EXHIBITS |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order
to encourage companies to provide prospective information about their business. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which
are statements other than statements of historical facts. We desire to take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are issuing this cautionary statement in connection therewith. Our disclosure and analysis
in this annual report pertaining to our operations, cash flows and financial position, including, in particular, the likelihood of our success
in developing and expanding our business, include forward-looking statements. Statements that are predictive in nature, that depend
upon or refer to future events or conditions, or that include words such as, but are not limited to, “expects,” “anticipates,” “intends,”
“plans,” “believes,” “estimates,” “targets,” “projects,” “forecasts,” “potential,” “continue,” “possible,” “likely,” “may,” “could,”
“should” and similar expressions may identify forward-looking statements.
All statements in this annual report that are not statements of either historical or current facts are forward-looking statements.
These forward-looking statements are based on current expectations, estimates, assumptions and projections about the business and our
future financial results and readers should not place undue reliance on them. Forward-looking statements include, but are not limited to,
such matters as:
•our future operating or financial results;
•global and regional economic and political conditions;
•our business strategy and expected capital spending or operating expenses, including dry-docking and insurance costs;
•statements about shipping market trends, including charter rates and factors affecting supply and demand;
•our financial condition and liquidity, including our ability to obtain financing in the future to fund capital expenditures,
acquisitions and other general corporate activities;
•our ability to enter into time charters after our current charters expire and our ability to earn income in the spot market;
•the future price of our Class A common shares; and
•our expectations of the availability of vessels to purchase, the time it may take to construct new vessels, and vessels’
useful lives.
Many of these statements are based on our assumptions about factors that are beyond our ability to control or predict and are
subject to risks and uncertainties that are described more fully in “Item 3. Key Information—D. Risk Factors.” Any of these factors or a
combination of these factors could materially affect our future results of operations and the ultimate accuracy of the forward-looking
statements. These factors and the other risk factors described in this annual report are not necessarily all of the important factors that
could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other
unknown or unpredictable factors also could harm our results, including, but are not limited to, the following:
•changes in governmental rules and regulations or actions taken by regulatory authorities;
•inflationary pressure and central bank policies intended to combat overall inflation and rising interest rates and foreign
exchange rates;
•the impact that any discontinuance, modification or other reform or the establishment of alternate reference rates have on
the Company’s floating interest rate debt instruments;
•increased cost of capital or limited access to funding due to EU Taxonomy or relevant territorial taxonomy regulations;
•the length and severity of epidemics and pandemics and the impact on the demand for seaborne transportation of
petroleum products;
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•general domestic and international political conditions or events, including “trade wars” and the war between Russia and
Ukraine, the developments in the Middle East, including the war in Israel and the Gaza Strip, and the conflict regarding
the Houthi's attacks in the Red Sea, which remain ongoing as of this annual report;
•international sanctions against, amongst others, Russian oil and oil products;
•changes in economic and competitive conditions affecting our business, including market fluctuations in charter rates and
charterers’ abilities to perform under existing time charters;
•changes in the supply and demand for vessels comparable to ours and the number of newbuildings under construction;
•the highly cyclical nature of the industry that we operate in;
•the loss of a large customer or significant business relationship;
•changes in worldwide oil production and consumption and storage;
•risks associated with any future vessel construction;
•our expectations regarding the availability of vessel acquisitions and our ability to complete acquisition transactions
planned;
•availability of skilled crew members other employees and the related labor costs;
•work stoppages or other labor disruptions by our employees or the employees of other companies in related industries;
•the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with
respect to our Environmental, Social and Governance, or ESG, policies;
•Foreign Corrupt Practices Act of 1977, or FCPA, or other applicable regulations relating to bribery;
•effects of new products and new technology in our industry, including the potential for technological innovation to reduce
the value of our vessels and charter income derived therefrom;
•new environmental regulations and restrictions, whether at a global level stipulated by the International Maritime
Organization, and/or imposed by regional or national authorities such as the European Union or individual countries;
•the impact of an interruption in or failure of our information technology and communications systems, including the
impact of cyber-attacks, upon our ability to operate;
•potential conflicts of interest involving members of our board of directors and senior management;
•the failure of counterparties to fully perform their contracts with us;
•changes in credit risk with respect to our counterparties on contracts;
•our dependence on key personnel and our ability to attract, retain and motivate key employees;
•adequacy of insurance coverage;
•our ability to obtain indemnities from customers;
•changes in laws, treaties or regulations;
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•our incorporation under the laws of England and Wales and the different rights to relief that may be available compared to
other countries, including the United States;
•government requisition of our vessels during a period of war or emergency;
•the arrest of our vessels by maritime claimants;
•any further changes in U.S. trade policy that could trigger retaliatory actions by the affected countries;
•the impact of the U.S. presidential and congressional election results affecting the economy, future government laws and
regulations and trade policy matters, such as the imposition of tariffs; the amendment, termination or any other material
change to a relationship governed by a treaty, fees and other import restrictions;
•potential disruption of shipping routes due to accidents, climate-related incidents, environmental factors, political events,
public health threats, acts by terrorists or acts of piracy on ocean-going vessels;
•the impact of adverse weather and natural disasters;
•damage to storage and receiving facilities;
•potential liability from future litigation and potential costs due to environmental damage and vessel collisions;
•the length and number of off-hire periods and dependence on third-party managers; and
•other factors discussed in “Item 3. Key Information - D. Risk Factors” in this annual report.
You should not place undue reliance on forward-looking statements contained in this annual report because they are statements
about events that are not certain to occur as described or at all. All forward-looking statements in this annual report are qualified in their
entirety by the cautionary statements contained in this annual report. These forward-looking statements are made only as of the date of
this report. These forward-looking statements are not guarantees of our future performance, and actual results and future developments
may vary materially from those projected in the forward-looking statements.
We have based these statements on assumptions and analyses formed by applying our experience and perception of historical
trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. All future
written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in this section. We undertake no obligation, and specifically decline any
obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in
this annual report might not occur.
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EXPLANATORY NOTE AND PRESENTATION OF OUR FINANCIAL AND OPERATING DATA
Throughout this annual report on Form 20-F, we incorporate information responsive to the items hereof by reference to our
annual report for the year ended December 31, 2024, or the Annual Report 2024. Therefore, the information contained in this annual
report should be read in conjunction with the Annual Report 2024, which was furnished to the U.S. Securities and Exchange
Commission, or the SEC, on Form 6-K on March 6, 2025. The content of quotations, websites and other sources contained in the
sections of the Annual Report 2024 referenced herein are not incorporated by reference into this Form 20-F.
Unless otherwise indicated, the term “TORM plc” refers solely to TORM plc and the terms “we,” “us,” “our,” the “Company,”
“TORM” and the “Group” refer to TORM plc and its consolidated subsidiaries.
Unless otherwise indicated, all references to “U.S. dollars,” “USD,” “dollars,” “US$” and “$” in this annual report are to the
lawful currency of the United States of America, references to “Sterling”, “£” and “GBP” are to the lawful currency of the United
Kingdom, references to “Danish Kroner,” and “DKK” are to the lawful currency of Denmark. We use the term deadweight ton, or dwt,
in describing the size of vessels. Dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, refers to the maximum
weight of cargo and supplies that a vessel can carry.
Our Class A common shares of TORM plc are issued and traded on Nasdaq Copenhagen A/S, or Nasdaq Copenhagen, under
the symbol “TRMD A” and on the Nasdaq Stock Market LLC in New York, or Nasdaq New York, under the symbol “TRMD”.
All commercial and technical management of our fleet of product tankers is led out of the Denmark office of TORM A/S and
the United Kingdom office of TORM plc as wells as our subsidiaries in India, the Philippines, the United States, Singapore, and the
United Arab Emirates. See “Item 4. Information on the Company.”
We are therefore subject to the applicable corporate governance rules of Nasdaq New York, the UK Corporate Governance
Code, the UKLA’s Disclosure and Transparency Rules and the applicable rules and regulations applicable to companies admitted to
trading and official listing on Nasdaq Copenhagen. Further, in relation to our bond issuance we are subject to the rules and regulations
applicable to companies trading bonds on Euronext Oslo Børs.
We report our consolidated financial results in U.S. dollars and in accordance with IFRS Accounting Standards, or IFRS, as
issued by the International Accounting Standards Board, or IASB, which also comply with reporting requirements under English law.
Accordingly, this document includes the audited consolidated financial statements of TORM plc as of December 31, 2024,
2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022, which have been prepared in accordance with IFRS.
Enforcement of Civil Liabilities
We are a public limited company incorporated under the laws of England and Wales, and substantially all of our directors and
officers are non-residents of the United States. A substantial portion of our assets, including the subsidiaries of TORM plc, and our
directors and executive officers are located outside the United States. As a result, it may be difficult for shareholders of TORM plc to
effect service within the United States upon directors, officers and experts who are not residents of the United States or to enforce
judgments in the United States. In addition, there can be no assurance as to the enforceability in the United Kingdom against us or our
respective directors, officers and experts who are not residents of the United States, or in actions for enforcement of judgments of
United States courts, of liabilities predicated solely upon the federal securities laws of the United States.
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PART I.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Summary of Risk Factors
The below bullets summarize the principal risk factors related to an investment in the Company.
•The product tanker sector is cyclical and volatile, and this may lead to reductions and volatility in our charter rates when
we re-charter our vessels, in vessel values and in our results of operations.
•Our business is affected by macroeconomic conditions, including rising inflation, high interest rates, market volatility,
economic uncertainty, and supply chain constraints.
•Our revenues are derived substantially from a single segment, the product tanker segment, which exposes us to adverse
developments in the product tanker market and which may adversely affect our future performance, results of operations,
cash flows and financial position.
•A shift in consumer demand away from oil and oil products towards other energy sources or changes to trade patterns for
refined oil products may have a material adverse effect on our business.
•We are subject to complex laws and regulations, including environmental laws and regulations that can adversely affect
our results of operations, cash flows and financial position.
•We are subject to international safety, environmental and recycling regulations and requirements imposed by
classification societies that can adversely affect our results of operations, cash flows and financial position.
•Climate change and greenhouse gas regulations may adversely impact our operations and markets.
•Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our
Environmental, Social and Governance policies may impose additional costs on us or expose us to additional risks.
•If our vessels suffer damage due to the inherent operational risks of the product tanker industry, we may experience
unexpected dry-docking costs and delays or total loss of our vessels.
•If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business,
results of operations, cash flows and financial position.
2
•Our operations outside the United States expose us to global risks, such as political instability, terrorist or other attacks,
war, international hostilities, global public health concerns and economic sanctions restrictions, which may affect the
seaborne transportation industry and could adversely affect our business.
•If our vessels call at ports located in countries or territories that are the subject of sanctions or embargoes imposed by the
U.S. government, the European Union, the United Nations or other governmental authorities, or engage in other
transactions or dealings that would be violative of applicable sanctions laws, it could lead to monetary fines or other
penalties and adversely affect our reputation and the market for our Class A common shares and its trading price.
•If we are unable to operate our vessels profitably, we may be unsuccessful in competing in the highly competitive
international product tanker market, which would negatively affect our financial condition and our ability to expand our
business.
•We are dependent on spot charters and any decrease in spot charter rates in the future may adversely affect our earnings.
•We are subject to certain risks with respect to entering into new time charter-in contracts due to our dependence on spot
charters.
•An inability to effectively time investments in and divestments of vessels could prevent the implementation of our
business strategy and negatively impact our results of operations and financial condition.
•A substantial portion of our revenues is derived from a limited number of customers, and the loss of any of these
customers could result in a significant loss of revenues and cash flow.
•We may not be able to meet our ongoing operations and working capital needs and may not be able to obtain additional
financing in the future on acceptable terms or at all.
•As our product tanker fleet ages, we are exposed to increased operating costs and decreased competitiveness, which
could adversely affect our earnings, and the risks associated with older vessels could adversely affect our ability to obtain
profitable charters.
•Obligations associated with being a U.S.-listed public company require significant resources and management attention,
and we incur increased costs as a result of being a U.S.-listed public company.
•U.S. tax authorities could treat us as a ‘‘passive foreign investment company’’, which could have adverse U.S. federal
income tax consequences to U.S. shareholders.
•Insurance may be difficult to obtain, or if obtained, may not be adequate to cover our losses that may result from our
operations due to the inherent operational risks of the product tanker industry.
•Cyber incidents can affect the confidentiality, availability, and integrity of our IT systems, and could negatively impact
our business, including our ability to service customers, and may have a material adverse effect on our compliance,
reputation, future performance, results of operations, cash flows, and financial position.
•We have a significant amount of financial debt and servicing our current or future indebtedness limits funds available for
other corporate purposes.
•Our financial and operational flexibility is restricted by the covenants contained in our debt facilities, and we may be
unable to comply with the restrictions and financial covenants imposed in such facilities.
•Volatility of interest rate benchmarks under our financing agreements could affect our profitability, earnings and cash
flow.
•Change of control and mandatory repayment provisions contained in certain of our debt facilities may lead to a
foreclosure of our vessels.
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•The majority of our Class A common shares are held by a limited number of shareholders, which may create conflicts of
interest.
•We are subject to the United Kingdom Bribery Act 2010, the U.S. Foreign Corrupt Practices Act and potentially other
anti-corruption laws that apply in the countries where we do business, as well as export control laws, customs laws,
sanctions laws and other laws impacting our operations. If we fail to comply with these laws, we could be subject to civil
or criminal penalties, other remedial measures and legal expenses, which could adversely affect our business, results of
operations and financial condition.
The following risks relate principally to the industry in which we operate and our business in general. The occurrence of any of
the risk factors described herein could have a material adverse effect on our future performance, results of operations, cash flows and
our financial position. We may also be subject to other material risks that as of the date of this annual report are not currently known to
us or that we currently deem immaterial but which may significantly impair our business.
Risks Related to Our Business and Our Industry
The product tanker sector is cyclical and volatile, and this may lead to reductions and volatility in our charter rates when we
re-charter our vessels, in vessel values and in our results of operations.
We are a pure-play product tanker company, meaning that most of our revenues are generated from operating our product
tanker fleet. The product tanker market is cyclical in nature, which leads to volatility in freight rates, vessel values and industry
profitability. The freight rates among different types of product tankers are highly volatile. For example, product tanker freight rates
declined from the cyclical high levels reached in mid-2008 (TORM Medium Range (MR) Time Charter Equivalent, or TCE, rates up to
$26,458/day) to a cyclical low period between 2009 and 2014 (TORM observed annual average MR TCE rates of approximately
$14,200/day for the period). During 2023, we realized TCE rates of $37,124/day and during 2024 to TCE rates of $36,061/day. The
factors affecting the supply and demand for product tankers are beyond our control, and the nature, timing and degree of changes in
industry conditions are unpredictable and we may not be able to correctly assess the nature, timing and degree of changes in industry
conditions.
Factors affecting the supply and growth of product tanker capacity include:
•supply and demand for energy resources, including oil and petroleum products, and the supply and demand for seaborne
transportation of such energy resources;
•demand for alternative energy resources;
•the degree of scrapping or recycling of older vessels, depending, among other things, on scrapping or recycling rates and
international scrapping or recycling regulations;
•the number and size of newbuilding orders and deliveries, including slippage in deliveries, as may be impacted by the
availability of financing for shipping activity;
•the number of vessels used for floating storage;
•the number of vessels recycled for obsolescence or subject to casualties;
•the number of vessels under sanctions and hence not able to trade on the mainstream market;
•prevailing and expected future freight and charter hire rates;
•the number of product tankers trading with crude or “dirty” oil products;
•costs of bunkers and fuel oil and their impact on vessel speed;
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•the efficiency, age and sophistication of the world product tanker fleet;
•the number of shipyards and ability of shipyards to deliver vessels;
•availability of financing including with respect to new vessels and shipping activity;
•available interest rates on financing;
•port and canal congestion;
•technological advances in the design, capacity, propulsion technology, and fuel consumption efficiency of vessels;
•government and industry regulation of maritime transportation practices, particularly environmental protection laws and
regulations, including ballast water management, low sulfur fuel consumption regulations, and reductions in CO2
emissions;
•developments in international trade, including refinery additions and closures;
•price of steel and vessel equipment;
•the number of conversions of tankers to other uses or conversions of other vessels to tankers;
•the number of vessels that are out of service, namely those that are laid up, drydocked, awaiting repairs or otherwise not
available for hire;
•product imbalances and hence lack of or surplus supply in certain regions (affecting the level of trading activity);
•the phasing of maritime shipping into the EU Emission Trading Scheme (the "ETS"), which applies to all large ships of
5,000 gross tonnage or above;
•speed of vessel operation; and
•crew availability.
Demand for product tankers is primarily determined by the quantity of cargo to be transported and the distance from origin to
destination. The demand is affected by a number of external factors including:
•demand for alternative energy resources;
•world and regional economic conditions;
•increases in the production of oil in areas linked by pipelines to consuming areas, the extension of existing, or the
development of new, pipeline systems in markets we may serve, or the conversion of existing non-oil pipelines to oil
pipelines in those markets;
•sanctions on harbors, transportation of oil products or parts of the world fleet;
•demand for energy sources and oil and other petroleum products and changes in the consumption of oil and petroleum
products due to availability of new, alternative energy sources or changes in the price of oil and petroleum products
relative to other energy sources or other factors making consumption of oil and petroleum products less attractive;
•any restrictions on crude oil production imposed by the Organization of the Petroleum Exporting Countries, or OPEC,
and non-OPEC oil producing countries;
•the regulatory environment;
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•environmental issues and concerns;
•disruptions and developments in international trade, including those related to the imposition of tariffs, fees and the
increased vessel attacks, piracy and refinery additions and closures;
•currency exchange rates;
•the distance over which oil and oil products are to be moved by sea;
•changes in seaborne and other transportation patterns;
•climate, weather and natural disasters;
•global and regional political developments, including “trade wars” and developments in international trade, national oil
reserves policies, and fluctuations in industrial and agricultural production;
•international sanctions, embargoes, import and export restrictions, nationalizations, piracy, wars or other armed conflicts,
and other international hostilities, terrorist activities and strikes; and
•availability of financing and changes in interest rates.
The factors affecting the supply and demand for product tankers have been volatile and are outside of our control, and the
nature, timing, and degree of changes in industry conditions are unpredictable. Market conditions have been volatile in recent years
and continued volatility may reduce demand for transportation of oil and petroleum products over longer distances and increase the
supply of product tankers, which may have a material adverse effect on our business, financial condition, results of operations, cash
flows, ability to pay dividends and existing contractual obligations.
Our business is affected by macroeconomic conditions, including rising inflation, high interest rates, market volatility,
economic uncertainty, and supply chain constraints.
Various macroeconomic factors, including rising inflation, high interest rates, global supply chain constraints, and the effects
of overall economic conditions and uncertainties such as those resulting from the current and future conditions in the global financial
markets, could adversely affect our business, results of operations, financial condition and ability to pay dividends. Inflation and rising
interest rates may negatively impact us by increasing our operating costs and our cost of borrowing. Interest rates, the liquidity of the
credit markets and the volatility of the capital markets could also affect the operation of our business and our ability to raise capital on
favorable terms, or at all. Adverse economic conditions also affect demand for goods and oil. Reduced demand for these or other
products could result in significant decreases in rates we obtain for chartering our ships. In addition, the cost for crew members, oils
and bunkers, and other supplies may increase. In addition, we may experience losses on our holdings of cash and investments due to
failures of financial institutions and other parties. Difficult economic conditions may also result in a higher rate of losses on our
accounts receivable due to credit defaults. As a result, downturns in the worldwide economy could have a material adverse effect on
our business, results of operations, financial condition and ability to pay dividends.
The world economy continues to face a number of actual and potential challenges, including the war between Ukraine and
Russia and between Israel and Hamas and related conflicts in the Middle East, potential disruption of shipping routes due to ongoing
attacks by Houthis on vessels in the Red Sea, current trade tension between the United States and China, political instability in the
Middle East and the South China Sea region and other geographic countries and areas, Russia and NATO tensions, China and Taiwan
disputes, terrorist or other attacks, war (or threatened war) or international hostilities, such as those between the United States and
China, North Korea or Iran, and epidemics or pandemics, banking crises or failures, and real estate crises, such as the crisis in China.
In addition, the continuing war in Ukraine led to increased economic uncertainty amidst fears of a more generalized military
conflict or significant inflationary pressures, due to the increases in fuel and grain prices following the sanctions imposed on Russia.
Furthermore, the intensity and duration of the war between Israel and Hamas or the Houthi rebel attacks on shipping in and around the
Red Sea is difficult to predict and their impact on the world economy is uncertain. Whether the present dislocation in the markets and
resultant inflationary pressures will transition to a long-term inflationary environment is uncertain, and the effects of such a
development on charter rates, vessel demand and operating expenses in the sector in which we operate are uncertain.
6
Certain banks that have historically been significant lenders to the shipping industry may reduce or cease lending activities in
the shipping industry. New banking regulations, including larger capital requirements and the resulting policies adopted by lenders,
could reduce lending activities. We may experience difficulties obtaining financing commitments in the future if current or future
lenders are unwilling to extend financing to us or unable to meet their funding obligations due to their own liquidity, capital or
solvency issues. The current state of global financial markets and current economic conditions might adversely impact our ability to
issue additional equity at prices that will not be dilutive to our existing shareholders or preclude us from issuing equity at all.
We cannot be certain that financing or refinancing will be available on acceptable terms or at all. If financing or refinancing
is not available when needed, or is available only on unfavorable terms, we may be unable to meet our future obligations as they come
due. Our failure to obtain such funds could have a material adverse effect on our business, results of operations and financial
condition, as well as our cash flows, including cash available for dividends to our shareholders. In the absence of available financing,
we also may be unable to take advantage of business opportunities or respond to competitive pressures.
An increase in trade protectionism, the unraveling of multilateral trade agreements and a decrease in the level of China’s
export of goods and import of raw materials could have a material adverse impact on our charterers’ business and, in turn,
could cause a material adverse impact on our results of operations, financial condition and cash flows.
Our operations expose us to the risk that increased trade protectionism may adversely affect our business. Recently,
government leaders have declared that their countries may turn to trade barriers to protect or revive their domestic industries in the
face of foreign imports, thereby depressing the demand for shipping.
The U.S. government has made statements and taken actions that may impact U.S. and international trade policies, including
tariffs affecting certain Chinese industries. Additionally, new tariffs may be imposed by the Trump administration on imports from
Canada, Mexico and China as well as on imports of steel and aluminum. It is unknown whether and to what extent new tariffs (or
other new laws or regulations) will be adopted, or the effect that any such actions would have on us or our industry. If any new tariffs,
legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government
takes retaliatory trade actions due to the ongoing U.S.-China trade tension, such changes could have an adverse effect on our business,
results of operations and financial condition.
Additionally, the U.S. trade war with China may escalate beyond tariffs with a proposal by the Trump administration to
impose significant fees on any vessel entering a U.S. port where that vessel is owned by a Chinese shipping company or by a vessel
operator whose fleet includes one or more Chinese-built vessels or that has newbuilding orders at a Chinese shipyard. The proposal of
the U.S. trade representative (USTR), if adopted as proposed, would require Chinese shipping companies to pay up to $1 million per
port call and those operating Chinese-built vessels to be charged up to $1.5 million per U.S. port call, depending on the percentage of
vessels in their fleet built at Chinese shipyard or newbuilding orders with Chinese shipyards. It is unknown whether and to what
extent these new port fees on Chinese shipping companies and vessels will be adopted, or the effect that they would have on us or our
industry generally.
Furthermore, the government of China has implemented economic policies aimed at increasing domestic consumption of
Chinese-made goods, which may reduce the supply of goods available for export. Many of the reforms, particularly some limited price
reforms that result in the prices for certain commodities being principally determined by market forces, are unprecedented or
experimental and may be subject to revision, change or abolition.
Restrictions on imports, including in the form of tariffs, could have a major impact on global trade and demand for shipping.
Specifically, increasing trade protectionism in the markets that our charterers serve may cause an increase in (i) the cost of goods
exported from exporting countries, (ii) the length of time required to deliver goods from exporting countries, (iii) the costs of such
delivery and (iv) the risks associated with exporting goods. These factors may result in a decrease in the quantity of goods to be
shipped. Protectionist developments, or the perception they may occur, may have a material adverse effect on global economic
conditions, and may significantly reduce global trade, including trade between the United States and China. These developments
would also have an adverse impact on our charterers’ business, operating results and financial condition which could, in turn, affect
our charterers’ ability to make timely charter hire payments to us and impair our ability to renew charters and grow our business. Any
of these developments could have a material adverse effect on our business, results of operations and financial condition, as well as
our cash flows, including cash available for dividends to our stockholders.
Our revenues are derived substantially from a single segment, the product tanker segment, which exposes us to adverse
developments in the product tanker market and which may adversely affect our future performance, results of operations,
cash flows and financial position.
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Substantially all of our revenues are derived from a single market, the tanker segment, and therefore, our financial results
depend on the development and growth in this segment. External factors that affect the product tanker market will have a significant
impact on our business. Freight rates and asset prices have been volatile. Any adverse development in the product tanker segment,
including in respect of freight rates or the prices of our vessels, would have a material adverse impact on our future performance,
results of operations, cash flows and financial position. Further, our lack of diversification makes us increasingly vulnerable to adverse
developments in the international product tanker market, and this could have a greater material adverse impact on our future
performance, results of operations, cash flows and financial position than it would if we maintained more diverse lines of business.
An oversupply of product tanker capacity may lead to reductions in charter hire rates, vessel values and profitability.
The supply of product tankers is affected by a number of factors such as supply and demand for energy resources, including oil
and petroleum products, supply and demand for seaborne transportation of such energy resources and the current and expected purchase
orders for newbuildings. If the capacity of new product tankers delivered exceeds the capacity of product tankers being recycled and
converted to non-trading tankers, overall industry capacity in the product tanker will increase. If the supply of product tanker capacity
increases, and if the demand for product tanker capacity decreases or does not increase correspondingly, charter rates could materially
decline, which may also negatively affect freight rates and the value of our vessels. In 2024, the value of our product tanker fleet, based
on independent broker quotes, decreased by approximately 4.6% (excluding vessels that we sold and/or acquired during 2024). A
reduction in charter rates and the value of our vessels may have a material adverse effect on our future performance, results of
operations, cash flows, financial position, ability to pay dividends and compliance with current or future covenants with respect to any
of our financing arrangements.
An over-supply of product tankers as well as the uncertainty surrounding the impact of the sanctions on Russian exports of
crude oil and petroleum products has already resulted in an increase in product tanker charter hire rate volatility. In addition, product
tankers may be “cleaned up” from “dirty/crude” trades and swapped back into the product tanker market, which would increase the
available tanker tonnage able to transport refined oil products and which may affect the supply and demand balance for product tankers.
This could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Our results of operations are subject to seasonal fluctuations, which may adversely affect our results of operations, cash flows
and financial position.
We operate our vessels in markets that have historically exhibited seasonal variations in demand and, as a result, freight rates.
This seasonality may result in quarter-to-quarter volatility in operating results. The product tanker segment is typically stronger in the
fall and winter months in anticipation of increased consumption of oil and petroleum products in the northern hemisphere. As a result,
revenues from product tankers may be weaker during the fiscal quarters ending June 30 and September 30, and, conversely, revenues
may be stronger in fiscal quarters ending December 31 and March 31. This seasonality could have a material adverse effect quarter to
quarter on our future performance, results of operations, cash flows and financial position.
A shift in consumer demand away from oil and oil products towards other energy sources or changes to trade patterns for
refined oil products may have a material adverse effect on our business.
A significant portion of our earnings are related to the oil industry. A shift in or disruption of the consumer demand away from
oil and oil products towards other energy resources such as electricity, natural gas, liquified natural gas (“LNG”), renewable energy,
hydrogen or ammonia will potentially affect the demand for our product tankers. A shift from the use of internal combustion engine
vehicles to electric vehicles may also reduce the demand for oil. These factors could have a material adverse effect on our future
performance, results of operations, cash flows and financial position.
Seaborne trading and distribution patterns are primarily influenced by the relative advantage of the various sources of
production, locations of consumption, pricing differentials and seasonality. Changes to the trade patterns of refined oil products may
have a significant negative or positive impact on the ton-mile and therefore the demand for our product tankers. This could have a
material adverse effect on our future performance, results of operations, cash flows and financial position.
“Peak oil” is the year when the maximum rate of extraction of oil is reached. The International Energy Agency (“IEA”)
recently announced a forecast of “peak oil” during the late 2020s. The Organization of the Petroleum Exporting Countries ("OPEC")
forecasts that global oil demand continues to grow through at least 2050. Irrespective of “peak oil”, the continuing shift in consumer
demand away from oil and oil products towards other energy resources such as wind energy, solar energy, hydrogen energy, nuclear
8
energy or renewables, which appears to be accelerating as a result of government commitments and support for energy transition
programs, may have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Increasing growth of electric vehicles and renewable fuels could lead to a decrease in trading and the movement of crude oil
and petroleum products worldwide.
The IEA noted in its Global Electric Vehicles (“EV”) Outlook 2024 that a total of 18% of all cars sold globally were electric in
2023, up from around 14% in 2022 and 9% in 2021. The sales of electric cars grew by approximately 25% in the first quarter of 2024,
as compared with the first quarter of 2023. The IEA’s Global EV Outlook in 2024 estimated electric car sales for 2024 to reach
approximately 17 million. As reflected in the IEA Stated Policies Scenario (STEPS), every other car sold globally in 2035 is set to be
electric based on today’s energy, climate and industrial policy settings. The IEA has also stated that, the rapid uptake of EVs of all
types avoids six million barrels per day (mb/d) of oil demand in the Stated Policies Scenario in 2030, and over 10 mb/d in 2035. A
growth in EVs or a slowdown in imports or exports of crude or petroleum products worldwide may result in decreased demand for our
vessels and lower charter rates, which could have a material adverse effect on our business, results of operations, cash flows, financial
condition, and ability to make cash distributions.
Acts of piracy on ocean-going vessels could adversely affect our business.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the
Arabian Sea, the Red Sea, the Gulf of Aden off the coast of Somalia, Sulu Sea, Celebes Sea, the Malacca and Singaporean Straits, the
Indian Ocean, and, in particular, the Gulf of Guinea region off the coast of Nigeria, which has experienced a continuous high number
of piracy incidents in recent years. Sporadic incidents of robbery are also reported in many parts of Asia and South America. The
political turmoil in the Middle East region may also lead to collateral damages in waters off Yemen as well as in the Gulf of Oman or
Arabian Gulf. In December 2023, three commercial vessels were attacked in international waters in the southern Red Sea, according to
statements by the U.S. military, and Yemen’s Houthi group claiming drone and missile attacks on two Israeli vessels in the area. In
February 2024, one TORM vessel that was externally managed serving U.S. interests was targeted by the Houthi group. The targeted
attempt was effectively averted by U.S. naval forces. The current diplomatic crisis between Gulf Co-operation Council (GCC)
countries may lead to an uncertain security situation in the Middle East region.
The security arrangements made for ship staff and vessels to counteract the ever-evolving security threat and to comply with
Best Management Practices to Deter Piracy and Enhance Maritime Security in the Red Sea, Gulf of Aden, the Gulf of Guinea region,
Indian Ocean and Arabian Sea add to the cost of operations of our ships.
The “war risks” areas are established by the trading committee. Our vessels often trade in “war risk” areas due to the nature
of our business. Due to the above issues when vessels trade in such areas, the insurance premiums are increased significantly to cover
for the additional risks. In such circumstances, crew and security equipment costs, including costs which may be incurred to the extent
we employ onboard security guards, could increase. We may not be adequately insured to cover losses from these incidents, which
could have a material adverse effect on us.
In addition, hijacking as a result of an act of piracy against our vessels, or vessels we may acquire, or an increase in cost or
unavailability of insurance for our vessels, or vessels we may acquire, could have a material adverse impact on our business, results of
operations, cash flows, financial condition, and ability to pay dividends and may result in loss of revenues, increased costs, and
decreased cash flows to our customers, which could impair their ability to make payments to us under our charters. The above factors
could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Increase in frequency of immigrant salvage operations in the Mediterranean and off North-West Africa could adversely affect
our business.
In recent years, the number of immigrants attempting to cross the Mediterranean from North Africa to Europe in unseaworthy
vessels has increased significantly. This has also become the case off North-West Africa. Many of the vessels are in such a poor
condition that they capsize and sink, incur engine problems or are otherwise incapacitated en route to Europe. As a result, commercial
ships may, if witnessing an immigrant vessel in distress, deviate from the task and course and conduct a salvage operation. Such
salvage operation may prove costly in terms of time and resources spent and can thus prove a substantial cost for the commercial
vessel and may pose risks to the safety of the crew, vessel and cargo. If we are not able to mitigate this potential exposure, and
dependent on the number of such salvage operations which must be carried out in the future, this could have a material adverse effect
on our future performance, results of operations, cash flows and financial position.
Rising fuel, or bunker, prices may adversely affect our profits.
9
Since we primarily employ our vessels in the spot market, we expect that fuel, or bunkers, will typically be the largest
expense in our shipping operations for our vessels. The cost of fuel, including the fuel efficiency or capability to use lower priced fuel,
can also be an important factor considered by charterers in negotiating charter rates. While we believe that we can transfer increased
cost to the customer and will experience a competitive advantage as a result of increased bunker prices due to the greater fuel
efficiency of our vessels compared to the average global fleet, changes in the price of fuel may adversely affect our profitability. The
price and supply of fuel is unpredictable and fluctuates based on events outside our control, including geopolitical developments, such
as but not limited to the conflicts between Russia and Ukraine, the armed conflict in Israel and Gaza, supply and demand for oil and
gas, actions by OPEC, and other oil and gas producers, economic or other sanctions levied against oil and gas producing countries,
war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may
become much more expensive in the future, which may reduce the profitability and competitiveness of our business versus other forms
of transportation, such as truck or rail.
We are subject to complex laws and regulations, including environmental laws and regulations that can adversely affect our
results of operations, cash flows and financial position.
Our vessels operate worldwide and are thus subject to numerous international laws, rules, regulations, conventions and treaties.
Moreover, our vessels are registered, flagged, and call in ports in multiple countries where the applicable flag and/or port state rules,
regulations and laws can differ. This complex web of rules, regulations, conventions, treaties and laws can be dynamic and influence the
cost of owning and operating our vessels.
The various requirements we might have to comply with are discussed throughout and include, but are not limited to:
•International requirements such as those from the International Maritime Organization, or IMO, like the International
Convention for the Safety of Life at Sea of 1974, or SOLAS, the International Ship and Port Facility Security Code, or the
ISPS Code, and the International Convention for the Prevention of Pollution from Ships of 1973, as from time to time
amended, or MARPOL, including the designation of Emission Control Areas, or ECAs, the International Convention for
the Control and Management of Ships’ Ballast Water and Sediments, or the BWM Convention, the Maritime Labor
Convention 2006, or the MLC 2006, adopted by the International Labour Organization, or ILO, the International
Convention on Load Lines of 1966, the International Convention on Civil Liability for Oil Pollution Damage of 1969,
generally referred to as CLC, the International Convention on Civil Liability for Bunker Oil Pollution Damage, or
Bunker Convention;
•United States, or U.S., requirements such as the U.S. Oil Pollution Act of 1990, or OPA, the Comprehensive
Environmental Response, Compensation and Liability Act, or CERCLA, the U.S. Clean Water Act, the U.S. Clean Air
Act, the U.S. Outer Continental Shelf Lands Act, the U.S. Maritime Transportation Security Act of 2002, or the MTSA,
and those enforced by the U.S. Environmental Protection Agency, or the EPA, and the U.S. Coast Guard, or the USCG;
and
•European Union, or EU, regulations regarding greenhouse gas emissions.
These numerous and sometimes conflicting laws and regulations include, among others, data privacy requirements (in
particular the European General Data Protection Regulation, enforceable as from May 25, 2018 and the EU-US Privacy Shield
Framework, as adopted by the European Commission on July 12, 2016), labor relations laws, tax laws, anti-competition regulations,
import and trade restrictions, export requirements, U.S. laws such as the FCPA and other U.S. federal laws and regulations established
by the office of Foreign Asset Control, local laws such as the United Kingdom Bribery Act or other local laws which prohibit corrupt
payments to governmental officials or certain payments or remunerations to customers.
Compliance with environmental laws, regulations, and standards, where applicable, may require installation of costly
equipment or operational changes and may affect the resale value or useful lives of our vessels, or vessels we acquire, or resale prices
or useful lives of our vessels or require reductions in capacity, vessel modifications, or operational changes or restrictions. We may
also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs
relating to air emissions, the management of ballast waters, maintenance and inspection, development and implementation of
emergency procedures, and insurance coverage or other financial assurance of our ability to address pollution incidents. These costs
could have a material adverse effect on our business, results of operations, cash flows, and financial condition. A failure to comply
with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions, or the suspension or
termination of our operations. Failure to comply with these requirements could lead to decreased availability of or more costly
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insurance coverage for environmental matters or result in the denial of access to certain jurisdictional waters or ports, or detention in
certain ports. Furthermore, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant
time and attention of our senior management team (“Senior Management Team”). Though we have implemented monitoring
procedures and required policies, guidelines, contractual terms and audits, these measures may not prevent or detect failures by our
agents or intermediaries regarding compliance.
Environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which
could subject us to liability without regard to whether we were negligent or at fault. Under OPA, for example, owners, operators, and
bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around
the United States. To avoid liability in those cases, parties may have to show they fall into an exception and took all reasonable
precautionary steps to prevent a pollution incident. Thus, for remediation of environmental damage, the liability can include fines,
penalties, criminal liability and costs for natural resource damages. In our case, these could harm our reputation with current or
potential charterers of our product tankers.
We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills
and other pollution incidents. Although we arrange insurance to cover environmental risks, there can be no assurance that such
insurance will be sufficient to cover all the risks or that any claims will not have a material adverse effect on our future performance,
results of operations, cash flows and financial position.
Please see “Item 4. Information on the Company—B. Business Overview—Environmental and Other Regulations in the
Shipping Industry” for a discussion of the environmental and other regulations applicable to us.
We are subject to international safety, environmental and recycling regulations and requirements imposed by classification
societies that can adversely affect our results of operations, cash flows and financial position.
The operation of our vessels, or vessels we acquire, is affected by the requirements set forth in the United Nations’
International Maritime Organization’s International Management Code for the Safe Operation of Ships and Pollution Prevention, or
ISM Code. The ISM Code requires ship owners, ship managers, and bareboat charterers to develop and maintain an extensive “Safety
Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and
procedures for safe operation and for dealing with emergencies. We expect that any vessels that we acquire in the future will be ISM
Code-certified when delivered to us. The failure of a shipowner or bareboat charterer to comply with the ISM Code may subject it to
increased liability, invalidate existing insurance, or decrease available insurance coverage for the affected vessels (and any available
insurance coverage may be a higher cost) and may result in a denial of access to, or detention in, certain ports, including United States
and European Union ports.
In addition, the hull and machinery of every commercial vessel must be classed by a classification society authorized by its
country of registry. The classification society certifies that a vessel is safe and seaworthy in accordance with the applicable rules and
regulations of the country of registry of the vessel and the International Convention for Safety of Life at Sea. If a vessel does not
maintain its class and/or fails any annual survey, intermediate survey, or special survey, the vessel will be unable to trade between
ports and will be unemployable, which will negatively impact our revenues and results from operations and may breach one or more
covenants in our loan agreements.
The 2009 Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships (the “Hong
Kong Convention”), aims to ensure ships, being recycled once they reach the end of their operational lives, do not pose any
unnecessary risks to the environment, human health and safety. In June 2023, the Hong Kong Convention was ratified by the required
number of countries, and thus will enter into force in June 2025. Upon the Hong Kong Convention’s entry into force, each ship sent
for recycling will have to carry an inventory of its hazardous materials. Ships will be required to have surveys to verify their inventory
of hazardous materials initially, throughout their lives and prior to the ship being recycled.
On November 20, 2013, the European Parliament and the Council of the EU adopted the EU Ship Recycling Regulation, or
ESSR, which retains the requirements of the Hong Kong Convention and requires that certain commercial seagoing vessels flying the
flag of an EU member state may be recycled only in facilities included on the European list of permitted ship recycling facilities.
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Moreover, vessels are required to set up and maintain an Inventory of Hazardous Materials from December 31, 2018 for EU
flagged new ships and from December 31, 2020 for EU flagged existing ships and Non-EU flagged ships calling at a port or anchorage
of an EU member state. Such a system includes Information on the hazardous materials with a quantity above the threshold values
specified in relevant EU Resolution and are identified in ship’s structure and equipment. This inventory should be properly maintained
and updated, especially after repairs, conversions or unscheduled maintenance on board the ship.
Under the ESSR, commercial EU-flagged vessels of 500 gross tonnage and above may be recycled only at shipyards included
on the European List of Authorised Ship Recycling Facilities (the “European List”). As of December 31, 2024, all our EU-flagged
vessels met this weight specification. The combined capacity of the European List facilities may prove insufficient to absorb the total
recycling volume of EU-flagged vessels. This circumstance, taken in tandem with the possible decrease in cash sales, may result in
longer wait times for divestment of recyclable vessels as well as downward pressure on the purchase prices offered by European List
shipyards. Furthermore, facilities located in the major ship recycling countries generally offer significantly higher vessel purchase
prices, and as such, the requirement that we utilize only European List shipyards may negatively impact revenue from the residual
values of our vessels.
In addition, on December 31, 2018, the European Waste Shipment Regulation, or EWSR, requires that non-EU flagged ships
departing from EU ports be recycled only in Organization for Economic Cooperation and Development (OECD) member countries. In
March 2018, the Rotterdam District Court ruled that the sale of four recyclable vessels by third-party Dutch ship owner Seatrade to cash
buyers, who then reflagged and resold the vessels to non-OECD country recycling yards, were effectively indirect sales to non-OECD
country yards, in violation of the EWSR. If European Union Member State courts widely adopt this analysis, it may negatively impact
revenue from the residual values of our vessels and we may be subject to a heightened risk of non-compliance, due diligence obligations
and costs in instances where we sell older ships to cash buyers.
For more information, please see “Item 4. Information on the Company—B. Business Overview—Environmental and Other
Regulations in the Shipping Industry”.
Several countries have announced a ban on using open-loop scrubbers in their ports and inland waters.
To comply with IMO 2020 0.5% global sulfur cap, shipowners have different options: switching to low-sulfur fuels, burning
distillates, using LNG or installing an exhaust gas cleaning system, commonly known as a scrubber, on board their vessels. Scrubbers
are currently an accepted measure in complying with IMO 2020. Scrubbers can be designed either as “closed-loop” or “open-loop”.
Open-loop scrubbers discharge the “cleaned” washwater into the ocean. We have opted to install hybrid-prepared open-loop scrubbers
on board all of our vessels, which in the future can be refitted at further costs into a hybrid scrubber that can operate as both open and
closed loops. It has been widely discussed whether scrubbers in general, and in particular open-loop scrubbers, represent an
environmentally sound option. Some ports and regions, including Singapore, China, Malaysia, Germany, Kenya and certain states
within the U.S., have already prohibited the discharge of washwater from open-loop scrubbers. Prior to investing in scrubbers, we
evaluated scrubber economics, and the effects of local regulations have already been considered to only have a limited negative impact
on the investment at this time. Further material restrictions on the use of open-loop scrubbers would likely result in vessels having to
use low-sulfur fuel for longer periods, which in general comes at a higher cost compared to using closed-loop scrubbers.
Climate change and greenhouse gas regulations may adversely impact our operations and markets.
Due to concern over the risk of climate change, a number of countries and the IMO have adopted, or are considering the
adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures may include, among others,
adoption of cap and trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. Since
January 1, 2020, IMO regulations have required vessels to comply with a global cap on the sulfur in fuel oil used on board of 0.5%,
down from the previous cap of 3.5%. Additionally, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce
greenhouse gas emissions from ships. The initial strategy identifies “levels of ambition” to reduce greenhouse gas emissions and notes
that technological innovation, alternative fuels and/or energy sources for international shipping will be integral to achieve the
ambitions.
The European Commission has added shipping to the Emission Trading Scheme (ETS) as of 2024 with a phase-in period.
Shipowners will need to purchase and surrender a number of emission allowances that represent their MRV-recorded carbon emission
exposure for a specific reporting period. The person or organization responsible for the compliance with the Emissions Trading System
("EU ETS") should be the shipping company, defined as the shipowner or any other organization or person, such as the manager or the
bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner. The regulation phase is 40% for
verified emissions from 2024, 70% for 2025 and 100% for 2026. Compliance with the Maritime EU ETS will result in additional
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compliance and administration costs to properly incorporate the provisions of the Directive into our business routines. Additional EU
regulations which are part of the EU’s Fit-for-55, could also affect our financial position in terms of compliance and administration
costs when they take effect.
As of January 2025, the FuelEU Maritime regulation came into force as a part of the EU’s Fit-for-55. This requires shipping
companies to gradually lower the GHG intensity in the fuels being consumed on voyages involving EU ports. Shipping companies are
thus required to purchase more expensive fuels such as biofuels for lowering the GHG intensity. Failure in doing so will trigger
penalty payments to obtain compliance.
Territorial taxonomy regulations in geographies where we are operating and are regulatorily liable, such as EU Taxonomy,
might jeopardize the level of access to capital. For example, EU has already introduced a set of criteria for economic activities which
should be framed as ‘green’, called EU Taxonomy. As long as we are an EU-based company meeting the Non-Financial Reporting
Directive prerequisites, we will be eligible for reporting our Taxonomy eligibility and alignment. Based on the current version of the
Regulation, companies that own assets shipping fossil fuels are considered as not aligned with EU Taxonomy. The outcome of such
provision might be either an increase in the cost of capital and/or gradually reduced access to financing as a result of financial
institutions’ compliance with EU Taxonomy.
Additionally, MEPC 75 proposed draft amendments requiring that, on or before January 1, 2023, all ships above 400 gross
tonnage must have an approved Ship Energy Efficiency Management Plan, or SEEMP, on board. For ships above 5,000 gross tonnage,
the SEEMP would need to include certain mandatory content. Effective January 1, 2023, MEPC 75 amended MARPOL Annex I to
prohibit the use and carriage for use as fuel of heavy fuel oil by ships in Arctic waters on and after July 1, 2024.
MEPC 76 adopted amendments to the International Convention on the Control of Harmful Anti-Fouling Systems on Ships,
2001, or the AFS Convention, which have been entered into force on January 1, 2023. From this date, all ships shall not apply or re-
apply anti-fouling systems containing cybutryne on or after January 1, 2023; all ships bearing an anti-fouling system that contains
cybutryne in the external coating layer of their hulls or external parts or surfaced on January 1, 2023 shall either: remove the anti-
fouling system or apply a coating that forms a barrier to this substance leaching from the underlying non-compliance anti-fouling
system.
In addition, although the emissions of greenhouse gases from international shipping currently are not subject to the Kyoto
Protocol to the United Nations Framework Convention on Climate Change, which required adopting countries to implement national
programs to reduce emissions of certain gases, or the Paris Agreement, a new treaty may be adopted in the future that includes
restrictions on shipping emissions. Compliance with changes in laws, regulations and obligations relating to climate change affects the
propulsion options in subsequent vessel designs and could increase our costs related to acquiring new vessels, operating and maintaining
our existing vessels and require us to install new emission controls, acquire allowances or pay taxes related to our greenhouse gas
emissions or administer and manage a greenhouse gas emissions program. Revenue generation and strategic growth opportunities may
also be adversely affected. If not in compliance with certain key indicators, then we also face the risk of losing the ability to obtaining
financing or re-financing with “green” or “sustainability” loans.
For more information, please see “Item 4. Information on the Company—B. Business Overview—Environmental and Other
Regulations in the Shipping Industry”.
Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our
Environmental, Social and Governance policies may impose additional costs on us or expose us to additional risks.
Companies across all industries are facing increasing scrutiny relating to their Environmental, Social and Governance (“ESG”)
policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are
increasingly focused on ESG practices, especially as they relate to the environment health and safety, diversity, labor conditions and
human rights in recent years, and have placed increasing importance on the implications and social cost of their investments. Failure to
adapt to or comply with evolving investor, lender or other industry shareholder expectations and standards or the perception of not
responding appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may
damage such a company’s reputation or stock price, resulting in direct or indirect material and adverse effects on the company’s
business and financial condition.
The increase in shareholder proposals submitted on environmental matters and, in particular, climate-related proposals in
recent years indicates that we may face increasing pressures from investors, lenders and other market participants, who are increasingly
focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result,
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we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders
remain invested in us and make further investments in us. If we do not meet these standards, our business and/or our ability to access
capital could be harmed.
Additionally, certain investors and lenders may exclude oil transport companies, such as us, from their investing portfolios
altogether due to environmental, social and governance factors. These limitations in both the debt and equity capital markets may affect
our ability to grow as our plans for growth may include accessing the equity and debt capital markets. If those markets are unavailable,
or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business
strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to
service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and
comply with wide ranging ESG requirements. Members of the investment community are also increasing their focus on ESG
disclosures, including disclosures related to greenhouse gases and climate change in the energy industry in particular, and diversity and
inclusion initiatives and governance standards among companies more generally. As a result, we may face increasing pressure regarding
our ESG disclosures. The occurrence of any of the foregoing could have an adverse effect on our business and financial condition.
Moreover, from time to time, in alignment with our sustainability priorities, we may establish and publicly announce goals and
commitments in respect of certain ESG items. While we may create and publish voluntary disclosures regarding ESG matters from time
to time, many of the statements in those voluntary disclosures are based on hypothetical expectations and assumptions that may or may
not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long
timelines involved and the lack of an established single approach to identifying, measuring and reporting on many ESG matters. If we
fail to achieve or improperly report on our progress toward achieving our environmental goals and commitments, the resulting negative
publicity could adversely affect our reputation and/or our access to capital.
Finally, organizations that provide information to investors on corporate governance and related matters have developed
ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their
investment and voting decisions. Unfavorable ESG ratings and recent activism directed at shifting funding away from companies with
fossil fuel-related assets could lead to increased negative investor sentiment toward us and our industry and to the diversion of
investment to other, non-fossil fuel markets, which could have a negative impact on our access to and costs of capital.
Declines in charter rates and other market deterioration could cause us to incur impairment charges.
In accordance with IFRS, we review the carrying amounts of assets on a quarterly basis to determine any indication of
impairment either due to a significant decline in market value or in the cash flows expected to be generated by the vessels. In case of
such indication, the recoverable amounts of the assets are estimated as the higher of the net realizable value and the value in use in
accordance with the requirements of applicable accounting standards. The value in use is the present value of the future cash flows
expected to derive from an asset. For the purpose of assessing net realizable values, our Senior Management Team estimates the market
values of the individual vessels, for which the most important parameters are the vessels’ tons deadweight, the shipyard they were built
at and age. Our Senior Management Team uses internal as well as external sources of information, including two internationally
recognized shipbrokers’ valuations.
Accordingly, the carrying values of our vessels may not represent their fair market value at any point in time because the
market prices of second-hand vessels tend to fluctuate with changes in charter rates and the cost of newbuildings. In 2024, the value of
our product tanker fleet, based on independent broker values, decreased by approximately 4.6% (when excluding vessels sold and/or
acquired during 2024). As a result of further declines in charter rates or vessel values, we may in the future need to record impairment
losses and loss from sale of vessels, which could have a material adverse effect on our future performance, results of operations, cash
flows and financial position. Please see the consolidated financial statements as of and for the year ended December 31, 2024 and the
accompanying notes included herewith for details on the impact of changes in charter rates and other key assumptions.
If our vessels suffer damage due to the inherent operational risks of the product tanker industry, we may experience
unexpected dry-docking costs and delays or total loss of our vessels.
The operation of an ocean-going vessel carries inherent risks. Our vessels and their cargoes will be at risk of being damaged or
lost because of events such as marine and environmental disasters, bad weather and other acts of God, business interruptions caused by
mechanical failures, unexpected tank corrosion, grounding, fire, explosions and collisions, human error, war, terrorism, piracy, diseases,
crew strikes and/or boycotts and other circumstances or events. Changing economic, regulatory and political conditions in some
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countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy,
terrorism, labor strikes and boycotts.
Damage to the environment could also result from our operations, particularly through spillage of fuel, lubricants or other
chemicals and substances used in operations, or extensive uncontrolled fires. These hazards may result in death or injury to persons, loss
of revenue or property, payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships and
reputation, delay or rerouting, governmental fines, penalties or restrictions, any of which may subject us to litigation. As a result, we
could be exposed to substantial liabilities not recoverable under our insurances. Further, the involvement of our vessels in a serious
accident could harm our reputation as a safe and reliable vessel operator and lead to a loss of business.
In addition, international shipping is subject to various security and customs inspection and related procedures in countries of
origin and destination and trans-shipment points. Inspection procedures can result in the seizure of the cargo and/or our vessels, delays
in the loading, offloading or delivery and the levying of customs duties, fines or other penalties against us. It is possible that changes to
inspection procedures could impose additional financial and legal obligations on us. Furthermore, changes to inspection procedures
could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of
cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our future performance,
results of operations, cash flows and financial position.
The protection & indemnity insurance coverage that we have arranged for our vessels covers the vessel owner’s liabilities
towards the owner of any damaged cargo, subject to standard international conventions limiting such liability. If our vessels suffer
damage, they may need to be repaired at a dry-docking facility. The costs of dry-dock repairs are unpredictable and may be substantial.
We may have to pay dry-docking costs that our insurance does not cover in full. The loss of earnings while these vessels are being
repaired and repositioned as well as the actual cost of these repairs would decrease the Company’s earnings. In addition, space at dry-
docking facilities is sometimes limited and not all dry-docking facilities are conveniently located. We may be unable to find space at a
suitable dry-docking facility or the vessels may be forced to travel to a dry-docking facility that is not conveniently located in relation to
the vessels’ positions. The loss of earnings while these vessels are forced to wait for space or to sail to more distant dry-docking
facilities could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
If labor interruptions are not resolved in a timely manner, they could have a material adverse effect on our business, results of
operations, cash flows and financial position.
We employ masters, officers and crews to man our vessels. We have in the past implemented and will potentially continue in
the future to implement restructuring measures including divesting or closing down business activities, reducing our workforce and
negotiating collective agreements with trade unions. Restructurings and other factors such as disagreements concerning ordinary or
extraordinary collective bargaining may damage our reputation and the relationship with our employees and lead to labor disputes or
any other labor interruption, including work stoppages, strikes and/or work disruptions. If not resolved in a timely and cost-effective
manner, industrial action or other labor unrest could prevent or hinder our operations from being carried out as we expect and could
have a material adverse effect on our future performance, results of operations, cash flows, financial position, distribution of dividends
or the trading price of our Class A common shares.
Our operations outside the United States expose us to global risks, such as political instability, terrorist or other attacks, war,
international hostilities, global public health concerns and economic sanctions restrictions, which may affect the seaborne
transportation industry and could adversely affect our business.
We are an international company and primarily conduct our operations outside of the United States, and our business, results
of operations, cash flows, financial condition and ability to pay dividends, if any, in the future may be adversely affected by changing
economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover,
we operate in a sector of the economy that is likely to be adversely impacted by the effects of political conflicts, including the current
political instability in the Middle East, including in Israel and Gaza, Ukraine, the South China Sea region and other geographic
countries and areas, geopolitical events, terrorist or other attacks, war (or threatened war) and international hostilities. The response of
the United States and others to terrorist attacks, as well as the threat of future terrorist attacks around the world, continues to cause
uncertainty in the world’s financial markets and may affect our business, operating results, and financial condition. Continuing
conflicts and recent developments in Ukraine, the Middle East, and increased tensions between the U.S. and China, Russia, Iran and
certain terrorist organizations, as well as the presence of U.S. or other armed forces in various other regions, may lead to additional
acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial
markets. As a result of the above, insurers have increased premiums and reduced or restricted coverage for losses caused by terrorist
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acts generally. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at
all. Any of these occurrences could have a material adverse impact on our operating results, revenues and costs. Additionally, events
in other jurisdictions, could impact global markets, including foreign exchange and securities markets; any resulting changes in
currency exchange rates, tariffs, treaties and other regulatory matters could in turn adversely impact our business and operations.
In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt
international shipping, particularly in the Arabian Gulf region, in the Black Sea in connection with the conflicts between Russia and
Ukraine, and in the Red Sea in connection with the recent conflicts between Israel and Hamas. Acts of terrorism and piracy have also
affected vessels trading in regions such as the South China Sea and the Gulf of Aden off the coast of Somalia, among others.
Similarly, the escalation of the recent geopolitical conflict in the Middle East and the related drone and missile attacks of
commercial vessels in the important trade choke point of the Red Sea have led to a redirection of increasing numbers of vessels sailing
around the Cape of Good Hope instead of transiting the Suez Canal and Red Sea, increasing vessel sailing times and thereby demand for
vessels. A solution to this conflict would remove additional demand for vessels.
Beginning in February of 2022, the United States, the United Kingdom and the European Union, among other countries, also
announced various economic sanctions against Russia in connection with the aforementioned conflicts in the Ukraine region. The
ongoing conflict could result in the imposition of further economic sanctions or new categories of export restrictions against
individuals or entities in or connected to Russia. While in general much uncertainty remains regarding the global impact of the conflict
in Ukraine, it is possible that such tensions could adversely affect the Company’s business, financial condition, operating results, and
cash flows. However, even though the likelihood (as well as timing) of reversal of sanctions is very uncertain, a potential removal of
these sanctions could lead to a (partial) return of trade flows to the pre-sanction levels and thereby a lower demand for tankers, that
could adversely affect our earnings. While much uncertainty remains regarding the global impact of the war in Ukraine, it is possible
that such tensions could adversely affect our business, financial condition, results of operation, and cash flows. Furthermore, it is
possible that third parties with whom we have charter contracts or banking relationships may be impacted by events in Russia and
Ukraine, which could adversely affect our operations.
The United States has issued several Executive Orders that prohibit certain transactions related to Russia, including
prohibitions on the import of certain Russian energy products into the United States (including crude oil, petroleum, petroleum fuels,
oils, liquefied natural gas and coal), and all new investments in Russia by U.S. persons, among other prohibitions and export controls,
and has issued numerous determinations authorizing the imposition of sanctions on persons who operate or have operate in the energy,
metals and mining, and marine sectors of the Russian Federation economy, among others. Increased restrictions on these sectors, or
the expansion of sanctions to new sectors, may pose additional risks that could adversely affect our business and operations.
Furthermore, the United States, in conjunction with the G7, have implemented a Russian petroleum “price cap policy” which
prohibits a variety of specified services related to the maritime transport of Russian Federation origin crude oil and petroleum
products, including trading/commodities brokering, financing, shipping, insurance (including reinsurance and protection and
indemnity), flagging, and customs brokering. An exception exists to permit such services when the price of the seaborne Russian oil
into non-EU countries does not exceed the relevant price cap; but implementation of this price exception relies on a recordkeeping and
attestation process that requires each party in the supply chain of seaborne Russian oil to demonstrate or confirm that oil has been
purchased at or below the price cap. Further, effective as of February 27, 2025, the United States has also prohibited the provision of
petroleum services in certain specified circumstances, including for the provision of services for products purchased at or below the
aforementioned price caps. Violations of the petroleum services prohibition or the price cap policy, including the risk that information,
documentation, or attestations provided by parties in the supply chain are later determined to be false or insufficient may pose
additional risks adversely affecting our business.
Our business could also be adversely impacted by trade tariffs, trade embargoes or other economic sanctions that limit trading
activities by the United States or other countries against countries in the Middle East, Asia or elsewhere as a result of terrorist attacks,
hostilities or diplomatic or political pressures, including as a result of ongoing tensions involving Russia, Iran, and China and the
current conflict in the Middle East.
Any of these occurrences could have a material adverse impact on our future performance, results of operations, cash flows
and financial position.
If our vessels call at ports located in countries or territories that are the subject of sanctions or embargoes imposed by the U.S.
government, the European Union, the United Nations or other governmental authorities, or engage in other transactions or
dealings that would be violative of applicable sanctions laws, it could lead to monetary fines or other penalties and adversely
affect our reputation and the market for our Class A common shares and its trading price.
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Although we intend to maintain compliance with all applicable sanctions and embargo laws, and we endeavor to take
precautions reasonably designed to mitigate such risk, it is possible that, in the future, our vessels may call at ports located in sanctioned
countries or territories, or engage in other such transactions or dealings that would be violative of applicable sanctions, on our
charterers’ instructions and/or without our consent. If such activities result in a violation of sanctions or embargo laws, we could be
subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our ordinary shares could be adversely
affected.
The applicable sanctions and embargo laws and regulations vary in their application, and by jurisdiction, as they do not all
apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be
amended or expanded over time. The U.S., U.K., and EU have enacted new sanctions programs in recent years. Additional countries or
territories, as well as additional persons or entities within or affiliated with those countries or territories, have, and in the future will,
become the target of sanctions. These require us to be diligent in ensuring our compliance with sanctions laws. The past few years
have seen increased implementation of sanctions and embargoes imposed against trading with certain countries by in particular the
United States, the European Union, the United Kingdom, and the United Nations. Our operations are currently and may in the future
become subject to various economic and trade sanctions.
Further, our lenders may determine that any non-compliance with applicable sanctions and embargoes imposed by the United
Kingdom, the European Union, the United Nations, or the United States constitute an event of default under current or future debt
facility agreements. An event of default may lead to an acceleration of the repayment of debt under the facility in question and, due to
the cross-default provisions, under all other facilities as well, which could have a material adverse effect on our future performance,
results of operations, cash flows and financial position, and could lead to bankruptcy or other insolvency proceedings.
Charterers and other parties that we have previously entered into contracts with regarding our vessels may be affiliated with
persons or entities that are now or may soon be the subject of sanctions or embargoes imposed by the United States, the United
Kingdom, the EU, and/or other international bodies. If we determine that such sanctions require us to terminate existing or future
contracts to which we, or our subsidiaries, are a party or if we are found to be in violation of such applicable sanctions, our results of
operations may be adversely affected, or we may suffer reputational harm.
As a result of Russia’s war against Ukraine and the war between Israel and Hamas, the U.S., EU and United Kingdom, together
with numerous other countries, have imposed significant economic sanctions which may adversely affect our ability to operate in the
region and also restrict parties whose cargo we carry.
Although we believe that we have been in compliance with all applicable sanctions and embargo laws and regulations in 2024,
and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future. Any such violation could
result in fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business
and could result in our reputation and the market for our securities to be adversely affected and/or in some investors deciding, or being
required, to divest their interest, or not to invest, in us. In addition, certain institutional investors may have investment policies or
restrictions that prevent them from holding securities of companies that have contracts with countries identified by the U.S. government
as state sponsors of terrorism. The determination by these investors not to invest in, or to divest from, our Class A common shares may
adversely affect the price at which our Class A common shares trade. Additionally, some investors may decide to divest their interest, or
not to invest, in our company simply because we do business with companies that do business in sanctioned countries. Moreover, our
charterers may violate applicable sanctions and embargo laws and regulations, and those violations could in turn negatively affect our
reputation. In addition, our reputation and the market for our securities may be adversely affected if we engage in certain other
activities, such as entering into charters with individuals or entities that are not controlled by the governments of countries or territories
that are the subject of certain U.S. sanctions or embargo laws, or engaging in operations associated with those countries or territories
pursuant to contracts with third parties that are unrelated to those countries or territories or entities controlled by their governments.
Investor perception of the value of our Class A common shares may also be adversely affected by the consequences of war, the effects
of terrorism, civil unrest and governmental actions in these and surrounding countries, which may have a material adverse effect on our
future performance, results of operations, cash flows and financial position.
Maritime claimants could arrest or attach one or more of our vessels, which would have a negative effect on our cash flows.
Crew members, suppliers of goods and services to a vessel, shippers of cargo, secured lenders, time charter-in counterparties
and other parties may be entitled to a maritime lien against the relevant vessel for unsatisfied debts, claims or damages.
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In many jurisdictions, a maritime lien holder may enforce its lien by arresting or attaching a vessel and commencing
foreclosure proceedings. In addition, in some jurisdictions a claimant may arrest both the vessel which is subject to the claimant’s
maritime lien and any “associated” vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability
against one vessel in the fleet for claims relating to another of our vessels. Under some of our present charters, if the vessel is arrested or
detained as a result of a claim against us, we may be in default of our charter and the charterer may terminate the charter, which will
negatively impact our revenues and cash flows. The arrest or attachment of one or more of our vessels could under certain
circumstances constitute an event of default under our financing agreements or interrupt operations and require us to pay a substantial
sum of money to have the arrest lifted, which could result in a loss of earnings and have a material adverse effect on our future
performance, results of operations, cash flows and financial position.
Governments could requisition our vessels during a period of war or emergency, which may have an adverse effect on our
future performance, results of operations, cash flows and financial position.
A government of a vessel’s registry could requisition for title or seize one or more of our vessels. Requisition for title occurs
when a government takes control of a vessel and becomes the owner. Such government could also requisition one or more of our vessels
for hire. Requisition for hire occurs when a government takes control of a vessel and effectively becomes the charterer at dictated
charter rates. Generally, requisitions occur during a period of war or emergency. Even if we would be entitled to compensation in the
event of a requisition of one or more of our vessels, the amount and timing of the payment would be uncertain. Although none of our
vessels have been requisitioned by a government for title or hire, a government requisition of one or more of our vessels in the future
may adversely affect our future performance, results of operations, cash flows and financial position.
Technological innovation and quality and efficiency requirements from our customers could reduce our charter hire income
and the value of our vessels.
Our customers, in particular those in the oil industry, have a high and increasing focus on quality and compliance standards
with their suppliers across the entire supply chain, including the shipping and transportation segment. Our continued compliance with
these standards and quality requirements is vital for our operations. Charter hire rates and the value and operational life of a vessel are
determined by a number of factors including the vessel’s efficiency, operational flexibility and physical life. Efficiency includes speed,
fuel economy and the ability to load and discharge cargo quickly. Flexibility includes the ability to enter harbors, utilize related docking
facilities and pass through canals and straits. The length of a vessel’s physical life is related to its original design and construction, its
maintenance and the impact of the stress of operations. More technologically advanced tankers have been built since our vessels, which
have an average age of 11 years as of December 31, 2024, were constructed and tankers with further advancements may be built that are
even more efficient or more flexible or have longer physical lives, including new vessels powered by alternative fuels or which are
otherwise perceived as more environmentally friendly by charterers. We face competition from companies with more modern vessels
with more fuel efficient designs than our vessels, and if new vessels are built that are more efficient or more flexible or have longer
physical lives than the current eco vessels, competition from the current eco vessels and any more technologically advanced vessels
could adversely affect the amount of charter hire payments we receive for our vessels and the resale value of our vessels could
significantly decrease. In these circumstances, we may also be forced to charter our vessels to less creditworthy charterers, either
because the oil majors and other top tier charters will not charter older and less technologically advanced vessels or will only charter
such vessels at lower contracted charter rates than we are able to obtain from these less creditworthy, second tier charterers. Similarly,
technologically advanced vessels are needed to comply with environmental laws the investment in which along with the foregoing could
have a material adverse effect on our results of operations, charter hire payments, resale value of vessels, cash flows and financial
condition.
Technological developments which affect global trade flows and supply chains may affect the demand for our vessels.
By reducing the cost of labor through automation and digitization and empowering consumers to demand goods whenever and
wherever they choose, technology is changing the business models and production of goods in many industries. Consequently, supply
chains are being pulled closer to the end-customer and are required to be more responsive to changing demand patterns. As a result,
fewer intermediate and raw inputs are traded, which could lead to a decrease in shipping activity. If automation and digitization
become more commercially viable and/or production becomes more regional or local, total containerized trade volumes would
decrease, which would adversely affect demand for maritime fuels and hence demand for our services. Supply chain disruptions
caused by geopolitical events, rising tariff barriers and environmental concerns may also accelerate these trends.
The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
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Our vessels may call in ports where smugglers attempt to hide drugs and other contraband on vessels, with or without the
knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel
and whether with or without the knowledge of any of our crew, we may face reputational damage and governmental or other regulatory
claims or restrictions which could have an adverse effect on our business, results of operations and financial condition.
Risks Related to Our Company
If we are unable to operate our vessels profitably, we may be unsuccessful in competing in the highly competitive international
product tanker market, which would negatively affect our financial condition and our ability to expand our business.
Our ability to achieve positive cash flows is subject to freight rates, financial, regulatory, legal, technical and other factors,
many of which are beyond our control. In addition, the operation of product tankers and transportation of petroleum products is
extremely competitive, and reduced demand for transportation of oil and oil products could lead to increased competition. Competition
arises primarily from other product tanker owners, including major oil companies as well as independent product tanker companies,
some of whom have greater resources than we do. Competition for the transportation of oil and oil products can be intense and depends
on price, location, size, age, condition and the acceptability of the product tanker and its operators to the charterers. We will have to
compete with other product tanker owners, including major oil companies as well as independent product tanker companies. Our ability
to operate our vessels profitably depends on a variety of factors, including, but not limited to (i) loss or reduction in business from
significant customers, (ii) unanticipated changes in demand for transportation of crude oil and petroleum products, (iii) changes in
production of or demand for oil and petroleum products, generally or in particular regions, (iv) greater than anticipated levels of tanker
newbuilding orders or lower than anticipated levels of tanker recycling, (v) increases in the cost of bunkers, and (vi) changes in rules
and regulations applicable to the tanker industry, including legislation adopted by international organizations such as IMO and the EU
or by individual countries. If we are unable to operate our vessels profitably, our financial condition and ability to expand our business
would be negatively affected.
We are dependent on spot charters and any decrease in spot charter rates in the future may adversely affect our earnings.
We employ the majority of our vessels on spot voyage charters or short-term time charters and generate a significant portion of
our revenue from the spot market. The spot charter market may fluctuate significantly based upon product tanker and oil supply and
demand. The successful operation of our vessels in the competitive spot charter market depends on, among other things, obtaining
profitable spot charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling ballast to pick up
cargo. The spot market is very volatile, and, in the past, there have been periods when spot charter rates have declined below the
operating cost of vessels. For example, over the past five years, quarterly MR rates expressed as an average time charter equivalent have
ranged from a low of approximately $12,377/day to a high of approximately $40,583/day. During 2024, our product tanker fleet
realized average spot TCE earnings of $36,061/day. If future spot charter rates decline, we may be unable to operate our vessels trading
in the spot market profitably, meet our obligations, including payments on indebtedness, or pay dividends in the future. Furthermore, as
charter rates for spot charters are fixed for a single voyage, which may last up to several weeks, during periods in which spot charter
rates are rising, we will generally experience delays in realizing the benefits from such increases, which may have a material adverse
effect on our future performance, results of operations, cash flows and financial position.
Our ability to renew the charters on our vessels on the expiration or termination of our current charters, or on vessels that we
may acquire in the future, or the charter rates payable under any replacement charters and vessel values will depend upon, among other
things, economic conditions in the sectors in which our vessels operate at that time, changes in the supply and demand for vessel
capacity and changes in the supply and demand for the seaborne transportation of energy resources.
We are subject to certain risks with respect to entering into new time charter-in contracts due to our dependence on spot
charters.
We have the opportunity to charter-in additional vessels for longer or shorter periods. Because we employ the majority of our
vessels on spot voyage charters or short-term time charters, we may be exposed to changes in the freight rates that are significantly
below the hire to be agreed in a time charter-in contract. This exposure could have a material adverse effect on our future performance,
results of operations, cash flows and financial position.
We are subject to certain risks with respect to our counterparties on contracts, and failure of such counterparties to meet their
obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
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We have entered, and may enter in the future, into various contracts that are material to the operation of our business, including
bunker, Interest rate and foreign exchange hedging contracts, employ vessels on Contracts of Affreightment, or COAs, time charters and
voyage charters, and enter into newbuilding contracts with shipyards. Such agreements subject us to counterparty risks. The ability and
willingness of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are
beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore
industries, the overall financial condition of the counterparty, charter rates received for specific types of vessels and various expenses. In
addition, in depressed market conditions, our charterers and customers may no longer need a vessel that is currently under charter or
contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the
terms of their existing charter agreements or avoid their obligations under those contracts, and it may be difficult for us to secure
substitute employment for such vessel. Furthermore, any new charter arrangements we secure in the spot market or on time charters may
be at lower rates. Should a counterparty fail to honor its obligations under agreements with us or attempt to renegotiate our agreements,
we could sustain significant losses, which could have a material adverse effect on our future performance, results of operations, cash
flows, financial position and ability to pay dividends to holders of our common shares in the amounts anticipated or at all and
compliance with covenants in our loan agreements. To reduce our counterparty risk, we perform a credit check on the prospective
customers, however, we cannot guarantee that this process reveals the embedded default risk.
Charterers are sensitive to the commodity markets and may be impacted by market forces affecting commodities and/or
uncertain industry conditions. In addition, in depressed market conditions, charterers may have incentive to renegotiate their charters or
default on their obligations under charters. Should a charterer in the future fail to honor its obligations under agreements with us, it may
be difficult to secure substitute employment for such vessel, and any new charter arrangements we secure on the spot market or on
charters may be at lower rates, depending on the then existing charter rate levels, compared to the rates currently being charged for our
vessels. In addition, if the charterer of a vessel in our fleet that is used as collateral under one or more of our loan agreements defaults on
its charter obligations to us, such default may constitute an event of default under our loan agreements, which may allow the bank to
exercise remedies under our loan agreements.
Although we assess the creditworthiness of our counterparties, a prolonged period of difficult industry conditions could lead to
changes in a counterparty’s liquidity and increase our exposure to credit risk and bad debts. In addition, we may offer extended payment
terms to our customers in order to secure contracts, which may lead to more frequent collection issues and adversely affect our financial
results and liquidity.
We have received cargo claims as a result of a customer’s inability to honor its indemnification obligations, and failure to
recover damages for these claims could adversely affect our business with an immaterial effect.
TORM has received two cargo claims, both relating to one of TORM’s customers having issued indemnities to allow TORM
for discharge of cargoes, without the customer being able to honor those indemnity obligations. Both cases involved irregular activities
by the customer in relation to the handling of bills of lading. Legal action has been initiated by TORM in the United Kingdom and in
India against the customer and a number of individual owners and management representatives. During 2022 and 2023, we settled both
of the cargo claims. Failure to recover damages from claims could adversely affect our business although with an immaterial effect.
TORM’s mitigation activities include, but are not limited to, credit assessment of all customers and contract clauses requiring
documentation of the receiver stated in the bills of lading. TORM has adopted a policy that in some cases will require the customer to
document that a discharge to a party - other than the receiver/consignee stated in the bill of lading - is in agreement with such receiver/
consignee.
We are subject to certain risks with respect to our counterparties on our newbuilding construction contracts, and the failure of
our counterparties to meet their obligations under our newbuilding contracts could cause us to suffer losses or otherwise
adversely affect our business.
Timely delivery of the any newbuildings we may acquire in the future, are subject to our counterparties meeting their
obligations. We are therefore exposed to the risk of failure, cost overruns, delayed delivery, technical problems, quality or engineering
problems and other counterparty risks. A number of shipping construction companies have reportedly been experiencing financial
challenges. Any such financial challenges may affect operations and the timely delivery of newbuildings. Furthermore, a cancellation
due to financial difficulties or bankruptcy of the yard could imply that pre-delivery installments are not recovered or are recovered only
after long arbitration that can last occasionally several years.
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Measures have been taken to supervise the quality of the work completed at the yard where our newbuildings are being
constructed. In the past we have obtained refund guarantees for the pre-delivery installments as security for pre-delivery installment
payments paid.
We can provide no assurance that these, or any other measures we may take, will fully mitigate these risks, and any failure by a
counterparty to meet its obligations in relation to the newbuildings may result in delays or cancellations of the delivery of the
newbuildings, renegotiation of terms, delayed renewal of our product tanker fleet and consequent deterioration of our competitive
position, any of which may result in significant losses for us which could have a material adverse effect on our future performance,
results of operations, cash flows and financial position.
An inability to effectively time investments in and divestments of vessels could prevent the implementation of our business
strategy and negatively impact our results of operations and financial condition.
Our strategy is to own and operate a fleet large enough to provide global coverage, but no larger than what the demand for our
services can support over a longer period by both contracting newbuildings and through acquisitions and disposals in the second-hand
market. Our business is greatly influenced by the timing of investments and/or divestments and contracting of newbuildings. If we are
unable to identify the optimal timing of such investments, divestments or contracting of newbuildings in relation to the shipping value
cycle due to capital restraints, this could have a material adverse effect on our competitive position, future performance, results of
operations, cash flows and financial position.
An increase in operating costs would decrease our earnings and have a material adverse effect on our future performance,
results of operations, cash flows and financial position.
Our vessel operating expenses include the costs of crew, provisions, deck and engine stores, insurance, security measures and
maintenance and repairs and lubricants. Those expenses depend on a variety of factors, many of which are beyond our control and
subject to development in the market of the respective input. Voyage expenses include bunkers (fuel), port and canal charges. If our
vessels suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-dock repairs are unpredictable and can be
substantial. Some of these costs, primarily relating to insurance, crewing and enhanced security measures, have been increasing on a
relative basis and may increase further in the future. Increases in any of these expenses could decrease our earnings and available cash.
When purchasing and managing second-hand vessels, we are exposed to unforeseen operating costs and vessels off-hire.
Second-hand vessels are typically acquired without a warranty period, and while we generally inspect second-hand vessels prior to
purchase, such inspections may not fully reveal the condition of the vessel. We may therefore be required to perform repair and
maintenance resulting in additional operating costs. Any such hidden defects or problems, when detected may be expensive to repair,
and if not detected, may result in accidents or other incidents for which we may become liable to third parties.
A substantial portion of our revenues is derived from a limited number of customers, and the loss of any of these customers
could result in a significant loss of revenues and cash flow.
We currently derive substantially all of our revenues from a limited number of customers. During 2024, 20 customers
accounted for approximately 69% of our revenue. If these customers cease doing business or do not fulfill their obligations under the
charters of our vessels, due to the increasing financial pressure on these customers or otherwise, and we are not able to find a
replacement charter, our results of operations and cash flows could be adversely affected. Further, if we encounter any difficulties in our
relationships with these charterers, our results of operations, cash flows and financial condition could be adversely affected.
We may not be able to meet our ongoing operations and working capital needs and may not be able to obtain additional
financing in the future on acceptable terms or at all.
As of December 31, 2024, TORM had available liquidity including undrawn committed facilities of $614.8 million,
comprising of cash and cash equivalents including restricted cash of $291.2 million and undrawn committed credit facilities
amounting to $323.6 million. Restricted cash was $19.3 million.
If we do not generate sufficient cash flows from our operations to finance our ongoing operations and working capital needs,
including funding for, among other things, our newbuilding commitments, we may need to procure additional funding in the future in
the public or private equity or debt capital markets. Adequate sources of funding may not be available when needed or may not be
available on terms acceptable to us. Our ability to obtain such additional capital or financing will in part depend on prevailing market
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conditions as well as the financial position of our business and our operating results, which may affect our efforts to arrange additional
financing on satisfactory terms. If new shares are issued, it may result in a dilution of the existing shareholders. There can be no
assurance that we will be able to maintain or obtain required loan or equity financing to meet any additional working capital or capital
investment needs.
In line with industry practice, our suppliers provide us with short-term credit, or short-term supply credits, to purchase, among
other things, bunkers and other petroleum products. If our short-term supply credits are reduced or withdrawn, this could have a material
adverse effect on our business, results of operations, cash flows and financial position.
In addition, if available and satisfactory funding is insufficient at any time in the future, we may be unable to respond to
competitive pressures or customers’ requirements regarding vessel maintenance and fleet age or take advantage of business
opportunities. Failure to obtain additional financing at all or at a higher than anticipated cost could have a material adverse effect on our
business, results of operations, cash flows and financial position and could lead to bankruptcy or other insolvency proceedings.
As our product tanker fleet ages, we are exposed to increased operating costs and decreased competitiveness, which could
adversely affect our earnings, and the risks associated with older vessels could adversely affect our ability to obtain profitable
charters.
Our owned vessels had an average age of 11 years as of December 31, 2024. The recent introduction of eco-designs for vessels
emphasizes that there is a continuous need for us to focus on cost optimizing measures to remain competitive, which may require us to
more rapidly upgrade our product tanker fleet in the future. We may not be able to fund or secure additional financing to complete the
acquisition of new or second-hand vessels required to renew and upgrade our product tanker fleet, which may lead to deterioration of
our product tanker fleet’s performance.
In general, the cost of maintaining a vessel in good operating condition increases with the age of the vessel, and the current age
of our fleet means that we must spend substantial resources on maintenance. It is also difficult to estimate with certainty the
maintenance and operating costs that will be incurred for an older vessel and there is a risk that these costs will exceed expectations.
Further, older vessels are typically less fuel-efficient than more recently constructed vessels due to improvements in engine technology.
This difference in fuel-efficiency is likely to be compounded going forward as a result of the IMO’s lower sulfur fuel requirements
currently in effect. Cargo insurance rates increase with the age of a vessel, as older vessels may be less desirable to charterers and may
be restricted in the type of activities in which the vessels can engage. Some oil companies chartering our vessels have stricter
compliance and maintenance requirements on vessels of 15 years of age or older and therefore such vessels’ tradability may decrease.
Governmental regulations, including environmental regulations, safety or other equipment standards related to the age of vessels may
require expenditures for alterations, or the addition of new equipment, to our vessels and may restrict the type of activities in which our
vessels may engage. As our vessels age, market conditions might not justify those expenditures or enable us to operate our vessels
profitably during the remainder of their useful lives. As a result, regulations and standards could have a material adverse effect on our
business, financial condition, results of operations, cash flows and ability to pay dividends.
Our strategy has been to create a balanced portfolio based on return on invested capital of vessel types and age, the increasing
average age of our product tanker fleet, the potential for more fuel-efficient vessels to enter the market, uncertainties regarding our
maintenance costs going forward and our willingness or ability to renew our product tanker fleet could have a material adverse effect on
our competitive position, future performance, results of operations, cash flows and financial position. We have several mitigating
activities in place such as early maintenance schedules, Condition Assessment Program (CAP1) etc.
Any failure to pass vessel inspections by classification societies and other private and governmental entities and operate our
vessels may have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Poor performance in the new OCIMF inspection regime (SIRE 2.0) may cause TORM to experience a decline in tradability and
lead to additional vessel inspections.
Our vessels are subject to inspections from government and private entities, and we are required to obtain permits, licenses and
certificates for the operation of our vessels as well as vetting or other types of commercial and operational approvals. In addition, the
hull and machinery of every commercial vessel must be classed by a classification society authorized by the vessel’s country of registry.
Classification societies are non-governmental, self-regulating organizations and certify that a vessel is safe and seaworthy in accordance
with the applicable rules and regulations of the country of registry of the vessel. A vessel must undergo various mandatory surveys. A
vessel’s machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year
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period. The Company’s vessels are on survey cycles for hull inspection and continuous survey cycles for machinery inspection. Every
vessel is subject to statutory annual, intermediate and special surveys in a five-year cycle, this will include two surveys of the vessel’s
underwater areas. If any vessel fails any survey, the vessel may be unable to trade between ports and therefore be unemployable, which
may have a material adverse effect on our future performance, results of operations, cash flows and financial position. We could also be
in violation of provisions in our charters, insurance coverage, covenants in our loan agreements and ship registration requirements.
Our vessels also undergo inspections with a view towards compliance under the Ship Inspection Report Programme (SIRE)
and the United States Coast Guard requirements. During the third quarter of 2024, the Oil Companies International Marine Forum
(OCIMF) implemented a more comprehensive inspection process by introducing its Ship Inspection Report Program 2.0 (SIRE 2.0).
This new program facilitates a risk-based approach assessing the safety and quality of a vessel and its crew on an ongoing basis. TORM
allocates resources to implement the new standards and is well prepared for the more comprehensive requirements. However, poor
performance in these inspections may cause TORM to experience a decline in tradability and lead to additional vessel inspections.
If we cannot meet our customers’ quality and compliance requirements, we may not be able to operate our vessels profitably.
Customers, and in particular those in the oil industry, have a high and increasing focus on quality and compliance standards
with their suppliers across the entire value chain, including the shipping and transportation segment. Our continuous compliance with
these standards and quality requirements is vital for the Company’s operations. Related risks could materialize in multiple ways,
including a sudden and unexpected breach in quality and/or compliance concerning one or more vessels, a continuous decrease in the
quality concerning one or more vessels occurring over time. Moreover, continuously increasing requirements from oil industry
constituents can further complicate our ability to meet the standards. Any non-compliance by the Company, either suddenly or over a
period of time, on one or more vessels, or an increase in requirements by oil operators above and beyond what we deliver, may have a
material adverse effect on our future performance, results of operations, cash flows and financial position.
Obligations associated with being a U.S.-listed public company require significant resources and management attention, and we
incur increased costs as a result of being a U.S.-listed public company.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and
the other rules and regulations of the SEC, including Sarbanes-Oxley, and the listing and other requirements of Nasdaq New York. The
various financial and other reporting obligations place significant demands on our management, administrative, operational and
accounting resources and cause us to incur significant legal, accounting and other expenses that we would not otherwise incur. These
rules and regulations increase our legal and financial compliance costs and may divert management’s attention to ensure compliance and
make some activities more time-consuming and costly. We may need to upgrade our systems or create new systems, implement
additional financial and management controls, reporting systems and procedures, create or outsource an internal audit function and hire
additional accounting and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to
comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. We cannot
accurately predict the amount of the additional costs we may incur in the future, the timing of such costs or the degree of impact that our
management’s attention to these matters will have on our business.
Any failure to maintain effective internal control over financial reporting could have a material adverse effect on our business,
prospects, liquidity, results of operations and financial condition. While we did not identify any material weaknesses or significant
deficiencies in our internal controls under the current assessment, we cannot be certain at this time that our internal controls will be
considered effective in future assessments and that our independent registered public accounting firm would reach a similar conclusion.
Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Class A common
shares from Nasdaq New York and/or Nasdaq Copenhagen, fines, sanctions and other regulatory action.
Sarbanes-Oxley requires, among other things, that we maintain and periodically evaluate our internal control over financial
reporting as well as disclosure controls and procedures. Section 404(a) of the Sarbanes-Oxley Act requires that our management assess
and report annually on the effectiveness of our internal controls over financial reporting and identify any material weaknesses in our
internal controls over financial reporting. Compliance with Section 404(a) requires substantial accounting expenses and significant
management efforts. The costs of compliance with the foregoing requirement may have a material adverse effect on our future
performance, results of operations, cash flows and financial condition. Additionally, Section 404(b) of the Sarbanes-Oxley Act requires
the external auditor to attest to, and report on, our management’s assessment of our internal controls over financial reporting, which will
increase the overall cost of compliance.
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Failure to obtain or retain highly skilled personnel, including key executives, key employees or key consultants, could
adversely affect our operations.
We require highly skilled personnel to operate our business. There can be no assurance that we will be able to attract and
retain such employees on reasonable terms in the future. Our ability to attract and retain employees and management in the future may
be affected by circumstances beyond our control. Competition for skilled and other labor required for our operations has increased in
recent years as the number of ocean-going vessels in the worldwide fleet has increased. If this expansion continues and is coupled with
improved demand for seaborne shipping services in general, shortages of qualified personnel could further create and intensify upward
pressure on wages and make it more difficult for us to staff and service vessels. In addition, we employ staff and vessel crews in a
number of countries, all of which are covered by international rules of employment. Changes are made on an ongoing basis to
international rules of employment and this may have a material influence on our flexibility in manning our vessels.
There can be no guarantee that the services of the current directors and Senior Management Team will be retained, or that
suitably skilled and qualified individuals can be identified and employed, which may adversely impact our ability to commercial and
financial performance. The loss of the services of any of the directors or other members of the Senior Management Team may have a
material adverse effect on our commercial and financial performance as well.
Such developments could adversely affect our ability to attract and retain qualified employees and management on reasonable
terms in the future and, in turn, could adversely affect our future performance, results of operations, cash flows and financial position.
U.S. tax authorities could treat us as a ‘‘passive foreign investment company’’, which could have adverse U.S. federal income
tax consequences to U.S. shareholders.
A foreign corporation will be treated as a ‘‘passive foreign investment company,’’ or PFIC, for U.S. federal income tax
purposes if either (1) at least 75% of its gross income for any taxable year consists of certain types of ‘‘passive income’’ or (2) at least
50% of the average value of the corporation’s assets produce or are held for the production of those types of ‘‘passive income’’. For
purposes of these tests, ‘‘passive income’’ includes dividends, interest and gains from the sale or exchange of investment property and
rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a
trade or business. For the purposes of these tests, income derived from the performance of services does not constitute ‘‘passive
income’’. U.S. shareholders of a PFIC are subject to certain reporting obligations and a disadvantageous U.S. federal income tax regime
with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the
sale or other disposition of their shares in the PFIC.
Based on our current and proposed method of operation, we do not believe that we are or that we expect to become, a PFIC
with respect to any taxable year. In this regard, we intend to treat the gross income we derive or are deemed to derive from our time
chartering and voyage chartering activities as services income rather than rental income. Accordingly, we believe that our income from
these activities does not constitute ‘‘passive income’’, and the assets that we own and operate in connection with the production of that
income do not constitute assets that produce or are held for the production of “passive income”.
Although there is no direct legal authority under the PFIC rules addressing our method of operation, there is substantial legal
authority supporting our position, consisting of the Code, legislative history, case law and United States Internal Revenue Service, or
IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for
other tax purposes. However, it should be noted that there is also authority that characterizes time charter income as rental income rather
than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept our
position, and there is a risk that the IRS or a court of law could determine that we are a PFIC. Moreover, no assurance can be given that
we would not constitute a PFIC for any future taxable year if there were to be changes in the nature and extent of our operations or the
composition of our income or assets change. If the IRS were to find that we are or have been a PFIC for any taxable year, our U.S.
shareholders will face adverse U.S. federal income tax consequences and will incur certain information reporting obligations that may
be onerous. Under the PFIC rules, unless those shareholders make an election available under the Code (which election could itself have
adverse tax consequences for such shareholders), such shareholders would be liable to pay U.S. federal income tax at the then prevailing
income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common
shares, as if the excess distribution or gain had been recognized ratably over the shareholder’s holding period of the common shares.
Please see “Item 10. Additional Information—E. Taxation –U.S. Federal Income Taxation of U.S. Holders—Passive Foreign
Investment Company Status and Significant U.S. Federal Income Tax Consequences” for a more comprehensive discussion.
We may have to pay tax on U.S. source income, which would reduce our earnings.
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Under the U.S. Internal Revenue Code of 1986, or the Code, 50% of the gross shipping income of a vessel owning or
chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not
both begin and end, in the United States may be subject to a 4% U.S. federal income tax without allowance for deduction, unless that
corporation qualifies for exemption from tax under Section 883 of the Code or under the terms of a U.S. income tax treaty.
We and/or one or more of our subsidiaries (collectively referred to as “we” for purposes of this paragraph) may qualify for
exemption from tax under the terms of the U.S.-U.K. Income Tax Treaty or the U.S.-Denmark Income Tax Treaty. Whether we so
qualify depends, among other things, on whether we satisfy the Limitation on Benefits article of the applicable U.S. income tax treaty.
In particular, we would generally satisfy the Limitation on Benefits article if we can establish that we are engaged in the active conduct
of a trade or business in the U.K. or Denmark, whichever is applicable, our U.S. source shipping income is derived in connection with,
or is incidental to, such trade or business, and such trade or business activity in the applicable treaty jurisdiction is substantial in relation
to our trade or business activity in the United States. Given the legal and factual uncertainties in making the foregoing determination,
there can be no assurance that we will be able to qualify for exemption from tax under a U.S. income tax treaty, or that the IRS or a
court of law will agree with our determination in this regard.
If we or our subsidiaries are not entitled to the exemption under Section 883 of the Code or under the terms of a U.S. income
tax treaty for any taxable year, we and our subsidiaries would be subject to a 4% U.S. federal income tax on gross U.S. source shipping
income for such taxable year. The imposition of this taxation could have a negative effect on our business and result in decreased
earnings available for distribution to our shareholders. For example, if the benefits of Section 883 and the applicable U.S. income tax
treaties were unavailable for our taxable year ended December 31, 2024, we estimate that our U.S. federal income tax liability for such
taxable year would have increased by approximately $8.7 million, although our U.S. federal income tax liability for future taxable years
would vary depending upon the amount of U.S. source shipping income that we earn in each such year. See “Item 10. Additional
Information—E. Taxation—United States Federal Income Taxation of the Company” for a more comprehensive discussion.
Changes to the tonnage tax or the corporate tax regimes applicable to us, or to the interpretation thereof, may impact our
future operating results.
TORM is currently subject to a tonnage tax schemes in Denmark, UK and the U.S. If our participation in the tonnage tax
scheme is abandoned, or if our level of investments and activities is significantly reduced (e.g. from significant or fully disposal of the
Danish owned fleet), we may have to pay, in part or in full, a non-current tax liability related to held over gains, which as of December
31, 2024 is $ 45.2 million.
Additional taxes may be payable as a result of a change in other tax laws of any country in which we operate or a change in
complex tax laws that affect our international operations.
In the event that tonnage tax schemes or other tax laws are changed in the future, our overall tax burden could increase, which
could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Moreover, through our acquisition of Marine Exhaust Technology A/S, we are exposed to changes to the corporate tax regimes
of Denmark, China and Hong Kong.
Insurance may be difficult to obtain, or if obtained, may not be adequate to cover our losses that may result from our operations
due to the inherent operational risks of the product tanker industry.
The operation of ocean-going vessels represents a potential risk of significant losses and liabilities caused by adverse weather
conditions, mechanical failures, human error, war, terrorism, piracy and other circumstances or events. In the course of the fleet’s
operation, various casualties, accidents and other incidents, including an oil spill or emission of other environmentally hazardous agents
from a vessel, may occur that may result in significant financial losses and liabilities for us. An accident involving any of the fleet’s
vessels could result in death or injury to persons, loss of property, environmental damage, delays in delivery of cargo, loss of revenue
from termination of contracts or unavailability of vessels, fines or penalties, higher insurance rates, litigation and damage to our
reputation and customer relationships.
In order to reduce the exposure to these risks, we carry insurance to protect us against most of the accident-related risks
involved in the conduct of our business, including marine hull and machinery insurance, protection and indemnity insurance, including
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pollution risks, crew insurance and war risk insurance. Changes in the insurance markets attributable to the risk of terrorism in certain
locations around the world could make it difficult for us to obtain certain types of coverage. Geopolitical tensions, regulatory changes
and climate-related risks may also affect the availability and cost of insurance. Incidents may occur where we may not have sufficient
insurance coverage, and some claims may not be covered. Furthermore, insurance costs may increase as a consequence of unforeseen
incidents or other events beyond our control. In addition, in the future particularly in adverse market conditions it may not be possible to
procure adequate insurance coverage or only on commercially unacceptable terms.
Any significant loss or liability for which we have not or have not been able to take out adequate insurance, or events causing
an increase of insurance costs could have a material adverse effect on our future performance, results of operations, cash flows and
financial position.
We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material
adverse effect on us.
We and our activities are subject to both U.K. and foreign laws and regulations many of which include legal standards, which
are subject to interpretation, and we are party to agreements and transactions, involving matters of assessment of interests of various
stakeholders and valuation of assets, liabilities and contractual rights and obligations. Furthermore, we may be subject to the jurisdiction
of courts or arbitration tribunals in many different jurisdictions.
Our counterparties and other stakeholders or authorities may dispute our compliance with laws and regulations or contractual
undertakings or the assessments made by us in connection with our business and the entry into agreements or transactions. The outcome
of any such dispute or legal proceedings is inherently uncertain and may include payment of substantial amounts in legal fees and
damages or that a transaction or agreement is deemed invalid or voidable. Such proceedings or decisions could have a material adverse
effect on our future performance, results of operations, cash flows and financial position. With respect to any litigation, our insurance
may not reimburse us or may not be sufficient to reimburse us for the expenses or losses we may suffer in contesting and concluding
such lawsuit. If cases or proceedings in which we may be involved are determined to our disadvantage, it may result in fines, default
under our debt facilities, damages or reputational damage and could have a material adverse effect on our future performance, results of
operations, cash flows and financial position.
Fluctuations in exchange rates and non-convertibility of currencies could result in losses to us.
As a result of our international operations, we are exposed to fluctuations in foreign exchange rates due to parts of our revenues
being received and operating expenses paid in currencies other than United States dollars. We use United States dollars as the functional
currency because the majority of the Company’s transactions are denominated in United States dollars. Thus, the Company’s exchange
rate risk is related to cash flows not denominated in United States dollars. The primary risk relates to transactions denominated in
Danish Krone or DKK, Euro or EUR, Indian Rupee or INR, Singapore Dollar or SGD, or other major currencies, which relate to
administrative and operating expenses.
We have historically generated almost all revenues and incurred the majority part of our expenses in United States dollars. The
remaining balances were in DKK, EUR, INR, SGD and other major currencies. Accordingly, we may experience currency exchange
losses if we have not fully hedged our exposure to a foreign currency. A change in exchange rates could have a material adverse impact
on our future performance, results of operations, cash flows and financial position.
Investment in derivative instruments such as freight forward agreements could result in losses to us.
We use the derivative markets and take positions in derivative instruments, such as forward freight agreements (“FFAs”), for
the purposes of hedging our exposure to fluctuations in the charter market, interest rates, foreign exchange rates and bunker prices. Our
financing agreements set forth limitations on our level of forward freight agreements exposure and prohibit speculation on interest rates,
foreign exchange and bunker swaps. From time to time, we may take positions in such derivative instruments, and as a result we may
incur derivative exposure that could have a material adverse effect on our future performance, results of operations, cash flows and
financial position. If liquidity in these derivative markets decreases or disappears, it could make it difficult or more expensive for us to
perform such hedging, which could have a material adverse effect on our future performance, results of operations, cash flows and
financial position.
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U.S. and other non-U.K. holders of our Class A common shares may not be able to exercise pre-emptive subscription rights or
participate in future offerings.
Holders of our Class A common shares have certain pre-emption rights with respect to certain of our issuances unless those
rights are disapplied by virtue of a resolution of the shareholders at a general meeting. Securities laws of certain jurisdictions may
restrict the ability for shareholders in such jurisdictions to participate in any future issuances of shares carried out on a pre-emptive
basis. Shareholders residing or domiciled in the United States, as well as certain other countries, may not be able to exercise their pre-
emption rights or participate in future capital increases or securities issuances, including in connection with an offering below market
value, unless we decide to comply with local requirements and, in the case of the United States, unless a registration statement is
effective, or an exemption from the registration requirements of the Securities Act of 1933, as amended, or the Securities Act, is
available with respect to such rights.
In such cases, shareholders resident in such non-U.K. jurisdictions may experience a dilution of their shareholding, possibly
without such dilution being offset by any compensation received in exchange for subscription rights. No assurance can be given that
local requirements will be complied with or that any registration statement would be filed in the United States or other relevant
jurisdictions, or that another exemption from the registration requirements of the Securities Act or laws of other relevant jurisdictions
would apply, so as to enable the exercise of such holders’ pre-emption rights or participation in any future securities issuances.
Because we are a non-U.S. corporation, you may not have the same rights that a creditor of a U.S. corporation may have, and it
may be difficult to serve process on or enforce a U.S. judgment against us and our officers and directors.
We are an English company, and our executive offices are located outside of the United States. Our officers and the majority of
our directors reside outside of the United States. In addition, substantially all of our assets and the assets of our officers and directors are
located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any
of these persons or enforcing any judgments obtained in U.S. courts to the extent assets located in the United States are insufficient to
satisfy the judgments. In addition, original actions or actions for the enforcement of judgments of U.S. courts with respect to civil
liabilities solely under the federal securities laws of the United States may not be enforceable in England.
We may be exposed to fraudulent behavior, which may have a material adverse effect on our future performance, results of
operations, cash flows and financial position.
The risk of fraud is inherent in all industries and is not specific to the shipping industry. However, historically, the shipping
industry has experienced an increased risk of fraud and fraudulent behavior. Potential fraud risks include purposeful manipulation and
misrepresentation of financial statements, misappropriation of tangible assets, intangible assets and proprietary business opportunities,
corruption including bribery and kickbacks as well as cyberattacks. We have established a system of internal controls to prevent and
detect fraud and fraudulent behavior, consisting of segregation of duties, authorizations for trading, purchase and approval, codes of
ethics and conduct, close monitoring of our financial position and a whistleblower facility. Moreover, we have implemented a fraud
awareness campaign and instituted additional fraud prevention processes in cooperation with leading fraud prevention specialists.
However, there can be no assurance that our fraud prevention measures are sufficient to prevent or mitigate our exposure to
fraud or fraudulent behavior in the future, and any such behavior can have a material adverse effect on our future performance, results of
operations, cash flows and financial position.
Cybersecurity incidents can affect the confidentiality, availability, and integrity of our IT systems, and could negatively impact
our business, including our ability to service customers, and may have a material adverse effect on our compliance, reputation,
future performance, results of operations, cash flows, and financial position.
We employ a 24/7 Security Operations Center (SOC) with real-time monitoring to detect and respond to potential cyber-
attacks. In addition, we continuously scan our systems for new vulnerabilities, conduct regular IT assessments and perform annual
penetration tests to identify evolving threats.
We have increased investments in our cybersecurity by establishing a dedicated IT Risk and Security team. These
investments include, but are not limited to, security solutions (e.g. a vulnerability management solution), security services (e.g. 24/7
incident response service), and user awareness training, such as phishing simulations.
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Despite our preventive and detective IT security controls, there is no guarantee that these will prevent a cybersecurity
incident from occurring. For this reason, we have also created business continuity plans to allow our operations to continue for one
week following a cybersecurity incident where a majority of our IT services are compromised. Additionally, we have created disaster
recovery plans to ensure that we are capable to restore our critical IT services following a cybersecurity attack. All plans and
procedures are being reviewed and tested on an annual basis. Following this year's assessment, the potential loss of revenue from a
cybersecurity attack that would cause a two-week compromise on our systems would be considered minor.
We are not aware of any material risks from cybersecurity threats, that are reasonably likely to materially affect the
Company, including our business strategy, results of operations or financial condition.
For additional information on our cybersecurity policies, please see "Item 16K. Cybersecurity."
Risks Relating to Our Indebtedness
We have a significant amount of financial debt and servicing our current or future indebtedness limits funds available for other
corporate purposes.
As of December 31, 2024, we had interest-bearing debt, which includes mortgage debt and bank loans, finance lease
liabilities net of loan receivables of $1,238.8 million and cash and cash equivalents including restricted cash of $291.2 million. Net
debt totaled $947.6 million.
We may also incur additional debt in the future. This level of debt could adversely affect our ability to obtain additional
financing for working capital or other capital expenditures on favorable terms. Future creditors may subject us to certain limitations on
our business and future financing activities as well as certain financial and operational covenants. Such restrictions may prevent us from
taking actions that otherwise might be deemed to be in the best interest of us and our shareholders.
In January 2024, TORM issued five-year senior unsecured bonds of $200 million (the “Bonds”). The Bonds will carry a fixed
coupon of 8.25%, payable semi-annually. The net proceeds from the issuance of the Bonds was used to partly finance the acquisition
of five of the eight LR2 eco vessels announced in November 2023 and for general corporate purposes. Each potential investor in the
Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
(i) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds; (ii) have access to and knowledge of the
appropriate analytical tools to evaluate an investment in the Bonds; (iii) have sufficient financial resources and liquidity to bear the
risks associated with investment in the Bonds; (iv) understand the terms of the Bonds and the behavior of the relevant financial
markets; and (v) be able to evaluate possible scenarios for economic interest rate and other factors that may affect its investment. Our
ability to make scheduled payments on or to refinance its obligations under the Bonds will depend upon our financial and operating
performance, which in turn, will be subject to prevailing economic and competitive conditions and to financial and business factors,
many of which may be beyond the Issuer's control.
Debt service obligations require us and will require us in the future to dedicate a substantial portion of our cash flows from
operations to payments on principal and interest on our interest-bearing debt, which could limit our ability to obtain additional
financing, make capital expenditures and acquisitions and/or carry out other general corporate activities in the future. Any such
obligations may also limit our flexibility in planning for, or reacting to, changes in our business and the industry where we operate or
detract from our ability to successfully withstand a downturn in our business or the economy in general.
Our ability to service our debt will, among other things, depend on our future financial and operating performance, which will
be affected by prevailing economic conditions as well as financial, business, regulatory, competitive, technical and other factors, some
of which are beyond our control. If our cash flow is not sufficient to service our current or future indebtedness, we will be forced to take
action such as reducing or delaying business activities, acquisitions or investments, selling assets, restructuring or seeking additional
capital, which may not be available to us on acceptable terms or at all. We may not be able to effect any of these remedies on
satisfactory terms, without the consent of our existing lenders or at all. Additionally, a default under any indebtedness or other financial
agreement by a subsidiary may constitute an event of default under other borrowing arrangements pursuant to cross-default provisions.
Our inability to service and repay our debt upon maturity could have a material adverse effect on our future performance, results of
operations, cash flows and financial position and could lead to bankruptcy or other insolvency proceedings.
Our financial and operational flexibility is restricted by the covenants contained in our debt facilities, and we may be unable to
comply with the restrictions and financial covenants imposed in such facilities.
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Our current debt facilities impose restrictions on our financial and operational flexibility. Our debt facilities impose, and any
future debt facility may impose, covenants and other operating and financial restrictions on our ability to, among other things, pay
dividends, charter-in vessels, incur additional debt, sell vessels or refrain from procuring the timely release of arrested vessels. Our debt
facilities require us to maintain various financial ratios, including a specified minimum liquidity requirement, a minimum equity
requirement and a collateral maintenance requirement. Our ability to comply with these restrictions and covenants is dependent on our
future performance and our ability to operate our fleet and may be affected by events beyond our control, including fluctuating vessel
values. We may therefore need to seek permission from our lenders in order to engage in certain corporate actions.
Failure to comply with the covenants and financial and operational restrictions under our debt facilities may lead to an event of
default under those agreements. An event of default may lead to an acceleration of the repayment of debt. In addition, any default or
acceleration under our existing debt facilities or agreements governing our other existing or future indebtedness is likely to lead to an
acceleration of the repayment of debt under any other debt instruments that contain cross-acceleration or cross-default provisions. If all
or a part of our indebtedness is accelerated, we may not be able to repay that indebtedness or borrow sufficient funds to refinance that
debt, which could have a material adverse effect on our future performance, results of operations, cash flows and financial position and
could lead to bankruptcy or other insolvency proceedings.
Such restrictions may prevent us from taking actions that otherwise might be deemed to be in the best interest of the Company
and our shareholders, and it may further affect our ability to operate our business moving forward, particularly our ability to incur debt,
make capital expenditures or otherwise take advantage of potential business opportunities as they arise.
As of December 31, 2024, we were in compliance with the financial covenants contained in our debt facilities.
Volatility of interest rate benchmarks under our financing agreements could affect our profitability, earnings and cash flow.
As certain of our current financing agreements have, and our future financing arrangements may have, floating interest rates,
typically based on the Secured Overnight Financing Rate ("SOFR"), movements in interest rates could negatively affect our financial
performance.
In order to manage our exposure to interest rate fluctuations under SOFR or any other variable interest rate, we have and may
from time to time use interest rate derivatives to effectively fix some of our floating rate debt obligations. No assurance can however
be given that the use of these derivative instruments, if any, may effectively protect us from adverse interest rate movements. The use
of interest rate derivatives may affect our results through mark to market valuation of these derivatives. Also, adverse movements in
interest rate derivatives may require us to post cash as collateral, which may impact our free cash position.
Volatility in applicable interest rates among our financing agreements presents a number of risks to our business, including
potential increased borrowing costs for future financing agreements or unavailability of or difficulty in attaining financing, which
could in turn have an adverse effect on our profitability, earnings and cash flow.
Change of control and mandatory repayment provisions contained in certain of our debt facilities may lead to a foreclosure of
our vessels.
The terms of certain of our debt facilities require us to repay the outstanding borrowings thereunder in full if there is a change
of control, which would occur if: (i) Njord Luxco or any funds solely managed by Oaktree ceases to be able, through its appointees to
the board of directors of the Company (the “Board of Directors”), to control our Board of Directors or ceases to own or control at least
33.34% of the maximum number of votes eligible to be cast at a general meeting, or (ii) another person or group of persons acting in
concert gains direct or indirect control of more than 50% of the shares or otherwise has the power to cast more than 50% of the votes at
a general meeting of the Company, appoint or remove the chairman of our Board of Directors or the majority of the members of our
Board of Directors direct our operating and financial policies with which our directors are obliged to comply. Such change of control
may occur as a result of either a sale of shares by Njord Luxco or by a share capital increase resulting in a dilution of Njord Luxco’s
shareholding in the Company.
Njord Luxco is not restricted by us from selling their shares, and there can be no assurance that they will retain their holdings
in us. We can give no assurance that Njord Luxco will continue to hold a significant interest in us. Any mandatory prepayment as a
result of a change of control under certain of our debt facilities could lead to the foreclosure of all or a portion of our fleet and could
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have a material adverse effect on our future performance, result of operations, cash flows and financial position and could lead to
bankruptcy or other insolvency proceedings.
Risks Relating to an Investment in Our Class A Common Shares
The majority of our Class A common shares are held by a limited number of shareholders, which may create conflicts of
interest.
A large portion of our Class A common shares are beneficially held by a limited number of shareholders, including Njord
Luxco, a company affiliated with Oaktree and its affiliates. Njord Luxco is our controlling shareholder. As of the date of this annual
report and based on public fillings, Oaktree owns 40,581,120 Class A common shares, or approximately 41.49% of our issued and
outstanding Class A common shares, excluding treasury shares. One or a limited number of shareholders may have the ability, either
acting alone or together as a group, to influence or determine the outcome of specific matters submitted to our shareholders for approval,
including the election and removal of directors and amendments to the Articles of Association such as changes to our issued share
capital or any merger or acquisition. Our Articles of Association contain certain restrictions on us undertaking certain actions unless the
approval by certain of our directors and/or a particular majority of our shareholders is obtained. Such restrictions may hamper or impede
our ability to take certain corporate actions in a timely manner or at all. Any changes to the composition of the Board of Directors may
lead to material changes to our business going forward.
In its capacity as our controlling shareholder, Njord Luxco may also have interests that differ from those of other shareholders.
In addition, Njord Luxco holds the Class C share, which has 350,000,000 votes at the general meetings on specified matters, including
the election of members to the Board of Directors (including the Chairman but excluding the Deputy Chairman) and certain
amendments to the Articles of Association proposed by the Board of Directors. When the votes carried by the Class C share are
combined with the votes carried by the Class A common shares, each held by Njord Luxco, such votes would represent approximately
87.22% of the votes that may be cast on resolutions on which the Class C share may vote.
The Class C share votes may only be cast on resolutions in respect of the appointment or removal of directors (excluding the
Deputy Chairman) and certain amendments to the Articles of Association proposed by the Board of Directors. The Class C share votes
may not be cast on resolutions in respect of any amendments to reserved matters as specified in our Articles of Association (unless those
reserved matters also constitute changes to our Articles of Association on which the Class C share is entitled to vote), pre-emptive rights
of shareholders, rights attached to the Class B share and other minority protection rights provisions contained in our Articles of
Association. Please see “Item 10. Additional Information—A. Share Capital —Our Shares—Class C Share”. The Class C share will be
automatically redeemed when Njord Luxco and its affiliates cease to beneficially own at least one third of our issued Class A common
shares. The voting rights attached to the Class C share have the practical effect of allowing Njord Luxco to control our Board of
Directors and to make amendments to the Articles of Association proposed by the Board of Directors, other than amendments to the
minority protections, even when Njord Luxco holds only a third of our issued Class A common shares.
The interests of Njord Luxco may conflict with the interests of the other shareholders. In addition, conflicts of interest may
exist or occur among the major shareholders themselves.
Further, Njord Luxco, companies affiliated with Njord Luxco and companies affiliated with Njord Luxco’s indirect parent,
Oaktree, hold substantial commercial and financial interests in other shipping companies, including companies that are active in the
same markets as us, and with whom we might compete from time to time. Any material conflicts of interest between us and Njord
Luxco, Oaktree and/or other shareholders may not be settled in our favor and may have a material adverse effect on our future
performance, results of operations, cash flows and financial position.
An active and liquid market for our Class A common shares may not develop or be sustained.
TORM plc’s Class A common shares trade on both Nasdaq New York and Nasdaq Copenhagen. Active and liquid trading
markets generally result in lower bid ask spreads and more efficient execution of buy and sell orders for market participants. Since the
listing of our Class A common shares on Nasdaq New York, a limited number of our Class A common shares have traded on Nasdaq
New York. If a more active trading market for our Class A common shares does not develop, the price of the Class A common shares
may be more volatile, and it may be more difficult and time-consuming to complete a transaction in the Class A common shares, which
could have an adverse effect on the realized price of the Class A common shares, or we could be delisted from Nasdaq New York. We
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cannot predict the price at which our Class A common shares will trade and cannot guarantee investors can sell their shares at or above
the issuance price. There is no assurance that a more active and liquid trading market for our Class A common shares will develop or be
sustained in the United States.
We cannot guarantee that our Board of Directors will declare dividends.
Our Board of Directors may, in its sole discretion, from time to time, declare and pay cash dividends in accordance with our
Articles of Association, applicable law and in accordance with loan agreements. We can only distribute dividends to shareholders out of
funds legally available for such payments. Our Board of Directors makes determinations regarding the payment of dividends in its sole
discretion, and there is no guarantee that we will be able to or decide to pay dividends to shareholders in the future. Pursuant to our
distribution policy, we intend to distribute on a quarterly basis excess liquidity above a fixed threshold cash level as at the balance sheet
day. For each quarter, the threshold cash level will be determined as the product of cash requirement per vessel and the number of
owned and leased vessels in our fleet as at the balance sheet day. Excess liquidity is determined as our readily available liquidity less the
threshold cash level. The cash requirement per vessel has been fixed at: $1.8 million since September 30, 2022. Any changes to our
dividend policy could adversely affect the market price of our common shares. For a description of the amended distribution policy
approved by the Board of Directors on March 7, 2024, please see “Item 8. Financial Information—A. Consolidated Statements and
Other Financial Information—Distribution Policy”.
In addition, the markets in which we operate our vessels are volatile, and we cannot predict with certainty the amount of cash,
if any, that will be available for distribution as dividends in any period. We may also incur expenses or liabilities or be subject to other
circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as
a result of the risks described herein. If additional financing is not available to us on acceptable terms, our Board of Directors may
determine to finance or refinance acquisitions with cash from operations, which would reduce the amount of any cash available for the
payment of dividends. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Distribution
Policy”.
Additional factors that could affect our ability to pay dividends include statutory and contractual limitations on the ability of
our subsidiaries to pay dividends to us, including under current or future debt arrangements, economic conditions, including
macroeconomic impacts on our business and financial condition, such as inflationary pressure, and other factors the Board of Directors
may deem relevant.
We may issue additional securities without shareholder approval, which may dilute ownership interests of existing shareholders
and may depress the market of our securities.
We may issue additional securities of equal or senior rank to existing securities, without shareholder approval, in a number of
circumstances. At the Company’s 2024 Annual General Meeting of Shareholders, our Board of Directors was granted certain
authorizations to increase our issued share capital, both with and without pre-emption rights to the existing shareholders. These share
authorities expire on April 10, 2029.
The issuance by us of additional securities of equal or senior rank to existing securities may have the following effects:
•our existing shareholders’ proportionate ownership interest in us may decrease;
•the amount of cash available for dividends or interest payments may decrease;
•the relative voting strength of previously issued outstanding securities may be diminished; and
•the market price of our securities may decline.
In accordance with our remuneration policy, our Board of Directors has, as part of the long-term incentive program, granted
certain members of our management and employees Restricted Share Units, or RSUs, in the form of restricted stock options. The RSUs
aim at incentivizing the employees to seek to improve the performance of the Company and thereby our share price for the mutual
benefit of themselves and our shareholders. There was an aggregate of 4,456,575 RSUs outstanding as of December 31, 2024. Subject
to vesting, each RSU entitles the holder to acquire one Class A common share. The RSUs will vest over a three-year period from the
grant date with an original exercise price for each Class A common share of DKK 58.0, 220.6 or 258.4, depending on the year that the
RSUs were granted. In 2023, an incentive program was granted on similar terms as outlined above with the exceptions that the strike
price for these RSUs is set to one U.S. cent and that all the RSUs will vest on March 1, 2026. Vested RSUs may be exercised for a
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period of 360 days from each vesting date. The exercise price on the RSUs may be adjusted by the Board of Directors to reflect
dividend payments made to shareholders. Assuming full vesting and exercise of RSUs outstanding as of December 31, 2024, this
would result in the issuance of 4,456,575 additional Class A common shares representing approximately 4.6% of our issued and
outstanding Class A common shares. Please see “Item 10. Additional Information-A. Share Capital-Restricted Share Units”.
Our share price may be highly volatile, and future sales of our Class A common shares could cause the market price of our
Class A common shares to decline.
The market price of TORM plc’s shares, has historically fluctuated over a wide range and may continue to fluctuate
significantly in response to many factors, such as actual or anticipated fluctuations in our operating results, changes in financial
estimates by securities analysts, economic and regulatory trends, general market conditions, rumors and other factors, many of which
are beyond our control. The stock market experiences extreme price and volume fluctuations. If the volatility in the market continues or
worsens, it could have a material adverse effect on the market price of our Class A common shares and impact a potential sale price if
holders of our Class A common shares decide to sell their shares.
In addition, a large proportion of our Class A common shares are held by a limited number of shareholders. A potentially
limited free float due to shareholder concentration may have a negative impact on the liquidity of our Class A common shares and may
result in a low trading volume, which could have an adverse effect on the market price and result in increased volatility.
Further, future sales or availability for sale of our Class A common shares may materially affect the price of our Class A
common shares. Sales of substantial amounts of Class A common shares, including sales by Njord Luxco, or the perception that such
sales could occur, may adversely affect the market price of our Class A common shares.
In addition, the market price and trading volume of our Class A common shares have very recently and at certain other times in
the past exhibited, and may continue to exhibit, extreme volatility, including within a single trading day. A proportion of our common
shares may be traded by short sellers which may put pressure on the supply and demand for our Class A common shares, creating
further price volatility. In particular, a possible “short squeeze” due to a sudden increase in demand of our common shares that largely
exceeds supply may lead to sudden extreme price volatility in our Class A common shares. Investors may purchase our common shares
to hedge existing exposure in our common shares or to speculate on the price of our common shares. Speculation on the price of our
common shares may involve long and short exposures. To the extent aggregate short exposure exceeds the number of common shares
available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our common shares
for delivery to lenders of our common shares. Those repurchases may in turn, dramatically increase the price of our common shares
until investors with short exposure are able to purchase additional common shares to cover their short position. This is often referred to
as a “short squeeze.” Following such a short squeeze, once investors purchase the shares necessary to cover their short position, the
price of our common shares may rapidly decline. A short squeeze could lead to volatile price movements in our shares that are not
directly correlated to the performance or prospects of our company and could cause purchasers of our common shares to incur
substantial losses.
In addition, some companies that have experienced volatility in the market price of their common shares have been subject to
securities class-action litigation. If instituted against us, such litigation could result in substantial costs and diversion of management’s
attention and resources, which could materially and adversely affect our business, financial condition, operating results and growth
prospects. There can be no guarantee that the price of our common shares will remain at or rise above its post-Distribution level or that
future sales of our common shares will not be at prices lower than those initially distributed or sold to investors.
We are thus unable to predict when such instances of trading volatility will occur or how long such dynamics may last.
Therefore, we cannot assure you that you will be able to sell any of our Class A common shares you may have purchased at a price
greater than or equal to its original purchase price, or that you will be able to sell our common shares at all.
Future issuances and sales of our Class A common shares could cause the market price of our Class A common shares to
decline.
As of the date of this annual report, our issued (and fully paid up) share capital is $978,140.53, which is represented by
97,814,051 Class A common shares (which includes 493,371 treasury shares), one Class B share and one Class C share. Issuances and
sales of a substantial number of Class A common shares in the public market, or the perception that these issuances or sales could occur,
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may depress the market price for our Class A common shares. Such sales could also impair our ability to raise additional capital through
the sale of our equity securities in the future. Our shareholders may incur dilution from any future equity offering.
Risks Related to Being an English Company Listing Class A Common Shares
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation organized in
Delaware.
We are incorporated under the laws of England and Wales. The rights of holders of our Class A common shares are governed
by English law, including the provisions of the U.K. Companies Act 2006, or the "U.K. Companies Act", and by our Articles of
Association. These rights may differ in certain respects from the rights of shareholders in typical U.S. corporations organized in
Delaware. The principal differences are set forth in “Description of Class A Common Shares” contained in Exhibit 2.4 to this report.
We are subject to the United Kingdom Bribery Act, the U.S. Foreign Corrupt Practices Act and potentially other anti-
corruption laws that apply in the countries where we do business, as well as export control laws, customs laws, sanctions laws
and other laws impacting our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties,
other remedial measures and legal expenses, which could adversely affect our business, results of operations and financial
condition.
Our operations are subject to anti-corruption laws, including the United Kingdom Bribery Act 2010 (“Bribery Act”), the U.S.
Foreign Corrupt Practices Act, as amended (the “FCPA”), and potentially other anti-corruption laws that apply in countries where we
do business. We and our commercial partners operate in a number of jurisdictions that may pose a risk of potential Bribery Act or
FCPA violations, and we participate in collaborations and relationships with third parties whose actions could potentially subject us to
liability under the Bribery Act, FCPA, or other anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future
regulatory requirements to which our internal operations might be subject or the manner in which existing laws might be administered
or interpreted.
We are also subject to other laws and regulations governing our international operations, including regulations administered by
the governments of the United Kingdom and the United States, and authorities in the European Union, including applicable export
controls, economic sanctions, customs requirements, anti-boycott requirements, and currency exchange regulations (collectively, “Trade
Control Laws”).
While we maintain policies and procedures reasonably designed to ensure compliance with applicable anti-corruption laws and
Trade Control Laws, there is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-
corruption laws (including the Bribery Act or the FCPA) or other legal requirements, including Trade Control Laws. If we are not in
compliance with the Bribery Act, the FCPA and/or other anti-corruption laws or Trade Control Laws, we may be subject to criminal and
civil penalties, disgorgement and other sanctions, remedial measures and legal expenses, which could have an adverse impact on our
business, financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the Bribery
Act, the FCPA, other anti-corruption laws or Trade Control Laws by the United Kingdom, the U.S. or other authorities could also have a
material adverse impact on our reputation, our future performance, results of operations, cash flows and financial position.
U.S. investors may have difficulty enforcing civil liabilities against the Company, our directors or members of our Senior
Management Team and the experts named in the Company's annual report.
We are incorporated under the laws of England and Wales. Several of our directors reside outside the United States, and all or
a substantial portion of the assets of such persons are located outside the United States. As a result, it may be difficult for you to serve
legal process on us or our directors or have any of them appear in a U.S. court. The United States and the United Kingdom do not
currently have a treaty providing for the recognition and enforcement of judgments, other than arbitration awards, in civil and
commercial matters. The enforceability of any judgment of a U.S. federal or state court in England will depend on the laws and any
treaties in effect at the time, including conflicts of laws principles (such as those bearing on the question of whether an English court
would recognize the basis on which a U.S. court had purported to exercise jurisdiction over a defendant). In this context, there is doubt
as to the enforceability in England of civil liabilities based solely on the federal securities laws of the United States. In addition, awards
for punitive damages in actions brought in the United States or elsewhere may be unenforceable in the England. An award for monetary
33
damages under the U.S. securities laws would likely be considered punitive if it did not seek to compensate the claimant for loss or
damage suffered and was intended to punish the defendant.
Civil liabilities based upon the securities and other laws of the United States may not be enforceable in original actions instituted
in England or in actions instituted in England to enforce judgments of U.S. courts.
Civil liabilities based upon the securities and other laws of the United States may not be enforceable in original actions
instituted in England or in actions instituted in England to enforce judgments of U.S. courts. Actions for the enforcement of judgments
of U.S. courts might be successful only if the English court confirms the jurisdiction of the U.S. court and is satisfied that:
•the effect of the enforcement judgment is not manifestly incompatible with English public policy or natural justice;
•the judgment was not obtained on the basis of fraud;
•the judgment did not violate the human rights of the defendant;
•the judgment is final and conclusive;
•the judgment is not incompatible with a judgment rendered in England or with a subsequent judgment rendered abroad
that might be enforced in England;
•a claim was not filed outside England after the same claim was filed in England, while the claim filed in England is still
pending;
•the judgment was not obtained on the basis of fraud;
•the English courts did not have jurisdiction to rule on the matter; and
•the judgment submitted to the English court is authentic.
English law and provisions in our Articles of Association may have anti-takeover effects that could discourage an acquisition of
us by others, even if an acquisition would be beneficial to our shareholders, and may prevent attempts by our shareholders to
replace or remove our current management.
Certain provisions of English law and our Articles of Association may have the effect of delaying or preventing a change in
control of us or changes in our management. For example, English law and our Articles of Association include provisions that establish
an advance notice procedure for shareholder approvals to be brought before a general meeting of our shareholders, including proposed
nominations of persons for election to our Board of Directors. Such provisions could delay or prevent hostile takeovers and changes in
control or changes in our management. In addition, these provisions may adversely affect the market price of our Class A common
shares or inhibit fluctuations in the market price of our Class A common shares that could otherwise result from actual or rumored
takeover attempts.
The U.K. City Code on Takeovers and Mergers, (the "Takeover Code"), applies to the Company. If at the time of a takeover
offer the Takeover Code still applies, we would be subject to a number of rules and restrictions, including - but not limited to - the
following: (i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we might not, without
the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing
shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of information to all bona fide
competing bidders.
Njord Luxco holds over 50% of our voting share capital, and therefore, if the Takeover Panel were to determine that we were
subject to the Takeover Code, Njord Luxco would be able to increase its aggregate holding in us without triggering the requirement
under Rule 9 of the Takeover Code to make a cash offer for the outstanding shares in the Company.
Changing laws and evolving reporting requirements could have an adverse effect on our business.
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We are subject to data protection laws under United Kingdom legislation, and any breaches of such legislation could adversely
affect our business, reputation, results of operations and financial condition. Our ability to obtain, retain and otherwise manage personal
data is governed by data protection and privacy requirements and regulatory rules and guidance. In the United Kingdom, we must
comply with the Data Protection Act 2018 in relation to processing certain personal data. The application of data privacy laws is often
uncertain, and as business practices are challenged by regulators, private litigants and consumer protection agencies, it is possible that
these laws may be interpreted and applied in a manner that is inconsistent with our data protection practices. Additionally, under
European data protection laws, distributing personal data into the United States may constitute an offense. Any breaches of such
legislation could have a material adverse effect on our business, reputation, results of operations and financial condition. For more
information on our cybersecurity policies, please see "Item 16K. Cybersecurity."
Pre-emption rights for U.S. and other non-United Kingdom holders of shares may be unavailable.
In the case of certain increases in our issued share capital, under English law, existing holders of shares are entitled to pre-
emption rights to subscribe for such shares, unless shareholders disapply such rights by a special resolution at a shareholders’ meeting.
These pre-emption rights have been disapplied by TORM plc’s shareholders in respect of certain new issuances, see “Item 10.
Additional Information—A. Share Capital”, and we shall propose equivalent resolutions in the future once the initial period of
disapplication has expired. In any event, U.S. Holders of common shares in U.K. companies are customarily excluded from exercising
any such pre-emption rights they may have, unless a registration statement under the Securities Act is effective with respect to those
rights, or an exemption from the registration requirements thereunder is available. We do not intend to file any such registration
statement, and we cannot assure prospective U.S. investors that any exemption from the registration requirements of the Securities Act
or applicable non-U.S. securities laws would be available to enable U.S. or other non-U.K. holders to exercise such pre-emption rights
or, if available, that we will utilize any such exemption.
Our tax liabilities may change in the future.
While we believe that being incorporated in England and Wales and resident for tax purposes in the United Kingdom should
help us maintain a competitive worldwide effective corporate tax rate, we cannot give any assurance as to what our effective tax rate
will be. This is, among other things, because of uncertainties regarding the tax policies of all the jurisdictions where we operate our
business and uncertainties regarding the application to our structure, which is complex, of the tax laws of various jurisdictions,
including, without limitation, Denmark, the United States and the United Kingdom. Because of this uncertainty, our actual effective tax
rate may vary from our expectation and that variance could be material. The G20 and the Organization for Economic Co-Operation and
Development are currently focused on the taxation of multinational corporations as part of the Base Erosion and Profit Shifting Project,
or BEPS. The implementation of BEPS outcomes in the jurisdictions in which we operate may have an impact on our effective tax rate,
which, in turn, could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Changes in tax laws and unanticipated tax liabilities could materially and adversely affect the taxes we pay, results of
operations and financial results.
We are subject to income and other taxes in the United States and foreign jurisdictions, and our results of operations and
financial results may be affected by tax and other initiatives around the world. For instance, there is a high level of uncertainty in
today’s tax environment stemming from global initiatives put forth by the OECD two-pillar base erosion and profit shifting project. In
October 2021, members of the OECD put forth two proposals: (i) Pillar One reallocates profit to the market jurisdictions where sales
arise versus physical presence; and (ii) Pillar Two compels multinational corporations with €750 million or more in annual revenue to
pay a global minimum tax of 15% on income received in each country in which they operate. The reforms aim to level the playing
field between countries by discouraging them from reducing their corporate income taxes to attract foreign business investment. Over
140 countries agreed to enact the two-pillar solution to address the challenges arising from the digitalization of the economy and, in
2024, these guidelines were declared effective and must now be enacted by those OECD member countries.
We are subject to Pillar Two per as of January 1, 2024 as our revenue exceeded the threshold of €750 million in 2022 and
2023. As the majority of our companies’ revenue consists of shipping income, it is assessed that this income will be excluded from the
Global Anti-Base Erosion (GloBE) income with reference to the shipping carveout described in Article 3.3 of the model rules.
Based on our fiscal year for 2024, we have prepared a preliminary Transitional Country-by-Country Reporting (CbCR) Safe
Harbor assessment concluding that we expect to be eligible for the Transitional CbCR Safe Harbor in a majority of jurisdictions in
which we are present. As of December 31, 2024, the calculated top-up tax does not have a material impact on our financial results.
35
TORM plc and certain of its subsidiaries have entered and may in the future enter into internal agreements which must be at
market value or on terms no more favorable than would have been agreed if the transaction was not conducted on an intra-
group basis.
We have global operations, and the functions related to owning and operating a global scale product tanker fleet are spread
across various subsidiaries, including crewing, technical maintenance, chartering and ownership of vessels. Cross-border business
within our foreign subsidiaries and TORM plc can be complicated. We will likely enter into further agreements by and among our
subsidiaries on the one hand and TORM plc on the other hand in the future. To ensure compliance with transfer pricing regulations,
such transactions must in general be conducted on arm’s length basis. We believe that these transactions are on arm’s length terms, but
no assurance can be given that we would not have been able to secure more favorable terms from third parties.
Regarding any cross-border transactions, we may face significant compliance challenges with the regulations and
administrative requirements around transfer pricing, as they differ from country to country. Tax authorities are increasingly
sophisticated in the way they operate and are focusing more closely on transfer pricing in companies that transact cross-border business.
The Danish Tax Authorities may challenge whether TORM plc is entitled to Danish withholding tax exemption on dividends
from TORM A/S.
TORM plc is a tax resident of the United Kingdom and owns 100% of the shares of TORM A/S and should be entitled to the
benefit of the double tax treaty entered into between Denmark and the United Kingdom. The double tax treaty reduces dividend
withholding tax to nil for wholly-owned subsidiaries (where the relevant conditions are satisfied). In order for the double tax treaty to
apply, TORM plc must be considered the beneficial owner of the dividends and must not be subject to Danish anti-abuse rules.
The Danish tax authorities have, in a binding ruling from May 2024, confirmed that a non-Danish holding company, located in
a state with whom Denmark has a double tax treaty, was the beneficial owner of a dividend distribution from a Danish subsidiary. In
their ruling, the Danish tax authorities emphasized that the dividend received was not in any way determined or pre-determined to be
distributed further up the chain from the non-Danish company.
We believe that the group structure, the level of business activity carried out in the United Kingdom by TORM plc, the
economic risk of TORM plc and TORM plc’s right to dispose of dividends received and that no part of the dividend from TORM A/S to
TORM plc is pre-determined to be distributed up the chain from TORM plc, justify that TORM plc is the beneficial owner of dividends
received from TORM A/S, that TORM plc is not a conduit entity and that Danish anti-abuse rules should not apply.
Consequently, we believe that dividends distributed from TORM A/S to TORM plc should be exempt from Danish dividend
withholding tax according to the double tax treaty entered into between Denmark and the United Kingdom (so long as a claim is made
and the treaty relief is granted). If all of the applicable conditions in the double tax treaty between the United Kingdom and Denmark are
not fulfilled, Danish withholding taxes of 27% (potentially reduced to 22%) will be triggered on such dividend distributions.
ITEM 4. INFORMATION ON THE COMPANY
A.History and Development of the Company
The Company
The Company was founded as TORM A/S in 1889 by Captain Ditlev E. Torm and Christian Schmiegelow. Within the first ten
years, the fleet of TORM A/S consisted of four vessels, and in 1905 TORM A/S became listed on the Copenhagen Stock Exchange. As
of the date of this annual report, we operate a fleet of 94 owned or chartered-in vessels and our Class A common shares are listed on
both Nasdaq Copenhagen and Nasdaq New York under the symbols “TRMD A” and “TRMD,” respectively.
36
TORM plc is a public limited company incorporated under the laws of England and Wales on October 12, 2015 under the
name Anchor Admiral Limited with company number 09818726. Anchor Admiral Limited was renamed TORM Limited on November
26, 2015, and TORM Limited was renamed TORM plc on January 20, 2016. TORM plc’s registered office is at 4th Floor | 120 Cannon
Street London, EC4N 6AS, United Kingdom. Our telephone number at this address is +44 203 795 2794. Our main commercial and
technical activities are managed out of our office at Tuborg Havnevej 18, DK-2900 Hellerup, Denmark. Our telephone number at that
address is +45 39 17 92 00. We also have nine offices located in Mumbai (India), New Delhi (India), Pune (India), Manila (Philippines),
Cebu (Philippines), Singapore (Singapore), Houston (Texas, USA), Wilmington (Delaware, USA) and Dubai (United Arab Emirates).
Our website is www.torm.com. The SEC maintains an Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The address of the SEC’s Internet site is www.sec.gov. None of the
information contained on these websites is incorporated into or forms a part of this annual report.
In December 2017, we effected a direct listing of our Class A common shares on Nasdaq New York. Our Class A common
shares commenced trading on Nasdaq New York under the symbol “TRMD” on December 11, 2017. As a result of our listing on
Nasdaq New York, our Class A common shares may be traded on both Nasdaq New York and Nasdaq Copenhagen. All of our
outstanding Class A common shares are identified by CUSIP G89479 102 and ISIN GB00BZ3CNK81.
Acquisitions, Dispositions, Deliveries and Capital Investments
Vessel Acquisitions
During the fourth quarter of 2023, we entered into an agreement for four 2015-2016 MR eco product tanker vessels for a total
cash consideration of $75.0 million and the issuance of 2.68 million common shares. We took delivery of each of the four MR eco
product tanker vessels: TORM Diana (November 27, 2023), TORM Dagmar (December 13, 2023), TORM Denise (January 3, 2024)
and TORM Danica (January 5, 2024).
On November 9, 2023, we announced the acquisition of eight eco LR2 vessels built in 2010-2012 for a total cash
consideration of $399 million, consisting of cash consideration of $239 million and the issuance of approximately 5.5 million shares.
We took delivery of all eight LR2 vessels: TORM Gwendolyn (January 3, 2024), TORM Gabriella (January 8, 2024), TORM
Gwyneth (January 11, 2024), TORM Ganga (January 22, 2024), TORM Gitte (January 22, 2024), TORM Gemma (March 18, 2024),
TORM Gloria (March 20, 2024) and TORM Grace (April 1, 2024).
On March 7, 2024, TORM we announced the agreement to purchase one 2011-built LR2 eco vessel for a total cash
consideration of $51.5 million consisting of cash consideration of $30.9 million and the issuance of approximately 0.6 million shares.
The vessel TORM Genesis was delivered on April 24, 2024.
On July 15, 2024, we announced the acquisition of eight second-hand MR vessels for a total consideration of $340 million,
consisting of cash consideration of $238 million and the issuance of approximately 2.65 million shares. We took delivery of TORM
Diwata (July 29, 2024), TORM Durga (September 2, 2024), TORM Damini (September 5, 2024), TORM Dulce (October 3, 2024),
TORM Doris (October 28, 2024), TORM Dagny (October 31, 2024), TORM Daphne (November 25, 2024) and TORM Deborah
(November 26, 2024).
Previous years
During January 2023, we entered into two agreements to acquire seven 2011 - 2013 LR1 vessels for a total cash consideration
of $233.0 million. All vessels are built at well-known Korean and Chinese shipyards and were financed by sale and leaseback
agreements with a Chinese financial institution. During 2023, we took delivery of the seven LR1 vessels, TORM Emilie (February 22,
2023), TORM Eva (March 3, 2023), TORM Integrity (March 21, 2023), TORM Innovation (March 24, 2023), TORM Emma (March
28, 2023), TORM Evelyn (April 19, 2023) and TORM Evolve (May 4, 2023).
On March 16, 2023, we entered into an agreement to purchase three 2013-built MR eco product tanker vessels for a total cash
consideration of $48.5 million and the issuance of 1.42 million Class A common shares. The MR vessels, TORM Beatrice, TORM
Birgitte and TORM Belis, which were all built at a "tier 1" Korean yard, have fuel-efficient eco vessel specifications and were
delivered to us on May 15, 2023, May 16, 2023 and June 5, 2023, respectively. The cash portion of the consideration was financed
through traditional bank financing, and in connection with each of the three deliveries, we issued one third of the total share issuance,
corresponding to 50% of the total consideration.
37
On August 9, 2022, we took delivery of TORM Hannah, a secondhand LR2 vessel, that we purchased during the second
quarter ended June 30, 2022. TORM Hannah was financed by a sale and leaseback agreement.
In January 2022, the LR2 newbuilding, TORM Houston, was delivered.
Vessel Dispositions
During the second quarter of 2024, we sold one MR vessel, TORM Eric, that was delivered to its new owner on June 5, 2024.
In late November 2024 and early December 2024, TORM entered into agreements to sell one 2005-built MR vessel (TORM
Helvig) and one 2006-built MR vessel (TORM Republican), respectively, that were delivered to the new owners on December 23,
2024 and December 30, 2024, respectively.
For a description of recent acquisitions and dispositions, please see “Item 4. — A. History and Development of the Company
— Recent Developments.”
Previous years
During the second quarter of 2023, we sold one MR vessel, TORM Sara, that was delivered to its new owner on May 22,
2023.
During the third quarter of 2023, we sold one MR vessel, TORM Freya, that was delivered to its new owner on August 21,
2023 and two LR1 vessels, TORM Estrid and TORM Ismini, that were delivered to their new owners on November 1, 2023 and
November 9, 2023, respectively.
During the fourth quarter of 2023, we sold one LR2 vessel, TORM Marina, that was delivered to its new owner on November
23, 2023, and we sold three MR vessels, TORM Kansas, TORM Thyra, and TORM Hardrada, that were delivered to their new owners
on December 4, 2023, December 11, 2023 and December 27, 2023, respectively.
During the fourth quarter of 2023, we sold two LR1 vessels, TORM Signe and TORM Sofia, that were delivered to their new
owners on January 8, 2024 and January 9, 2024, respectively, as well as one MR vessel, TORM Loke, which was delivered to its new
owner on January 5, 2024.
During the fourth quarter of 2021, we completed the sale and leaseback of eight of the planned nine refinancings of existing
MR vessels built from 2010 to 2012 with a Chinese financial institution. In the first quarter of 2022, we completed the sale and
leaseback transaction of the last of the nine MR vessels.
TORM divested eight of the oldest vessels in our fleet from the fourth quarter of 2021 until the end of the third quarter of
2022. Of these eight, we entered into agreements to sell seven of our vessels with an average age of approximately 18 years for a total
consideration of $88 million. As a result of this sale, we have fully exited the Handysize segment. In the second quarter of 2022,
TORM delivered four vessels including TORM Emilie, an LR1 vessel sold in December 2021, TORM Tevere (Handysize vessel),
TORM Gudrun (LR2 vessel) and TORM Horizon (MR vessel). In the third quarter of 2022, TORM delivered the remaining four
previously sold vessels including TORM Gyda (our last Handysize vessel), TORM Valborg (LR2 vessel), TORM Ingeborg (LR2
vessel) and TORM Moselle (MR vessel).
Scrubber Investments
As of December 31, 2024, we successfully installed scrubbers on 78 of our vessels. Further we plan to install scrubbers on an
additional 9 vessels in 2025, thus 87 vessels are expected to be fitted with scrubbers before the end of 2025, with the remaining vessels
continuing to use compliant fuels with 0.5% sulfur content.
Sale and Leaseback Transactions
There were no sale and leaseback transactions in 2024.
Previous years
38
In the first quarter of 2023, we took delivery of five LR1 vessels built in 2011-2013, TORM Emilie, TORM Eva, TORM
Integrity, TORM Innovation and TORM Emma, financed by sale and leaseback financing transactions which included purchase
options during the lease period.
In the second quarter of 2023, we took delivery of two LR1 vessels built in 2011, TORM Evelyn and TORM Evolve,
financed by sale and leaseback financing transactions which included purchase options during the lease period.
In the third quarter of 2022, we took delivery of the second-hand LR2 vessel, TORM Hannah, purchased in the second
quarter of 2022 and subsequently entered into a sale and leaseback financing transaction which included purchase options during the
lease period.
Time Charter Agreements
During 2024, we entered into four new time charter-out contracts for four LR2 vessels, TORM Genesis, TORM Grace,
TORM Hermia and TORM Houston, at a rate of $ 44,000 per day.
Previous years
During the third quarter of 2023, we entered into two two-year time charter-out contracts for two LR2 vessels at a rate of
$43,000 per day.
For information about our financing agreements, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity
and Capital Resources—Our Financing Agreements”.
Recent Developments
After the end of 2024, TORM sold the MR vessels TORM Ragnhild, TORM Resilience and TORM Thames to new owners
with expected delivery during the remaining part of Q1 2025.
TORM’s Board of Directors has on the date of this report approved an interim dividend for the fourth quarter of USD 0.60
per share to be paid to the shareholders corresponding to an expected total dividend payment of USD 58.4m. The distribution for the
quarter is equivalent to 75% of net profit and reflects the Distribution Policy. The payment date is 02 April 2025 to all shareholders on
record as of 20 March 2025, and the ex-dividend date is 19 March 2025 for the shares listed on Nasdaq OMX Copenhagen and 20
March 2025 for the shares listed on Nasdaq New York. The dividend payment will not be recognized as a liability and there are no tax
consequences.
39
B. Business Overview
Our Business
We are one of the world’s largest carriers of refined oil products. Our activities are primarily the transportation of clean
petroleum products, such as gasoline, jet fuel, kerosene, naphtha and gas oil, and occasionally dirty petroleum products, such as fuel
oil. We are active in all larger vessel classes of the product tanker market from Medium Range (MR) to Long Range 2 (LR2) tankers.
For an overview of the specifications of our fleet, reference is made to “TORM Fleet development” on page 38 of our Annual Report
2024. See “Item 4. Information on the Company-B. Business Overview.”
We have an extensive in-house operating and management platform which performs commercial, administrative and
technical management for our vessels. Through this integrated platform, we handle the commercial management of all our vessels and
the technical management of all our owned vessels, other than three vessels technically managed by an unaffiliated third party. In
addition, we conduct all vessel sale and purchase activities in-house, leveraging relationships with shipbrokers, shipyards, financial
institutions and other shipowners.
Environmental, Social and Governance
For further information on environmental, social and governance issues, reference is made to pages 40-153 of the Annual
Report 2024 and TORM’s separate Responsibility Report that can be found on our webpage www.torm.com. None of the information
contained on this website is incorporated into or forms a part of this annual report.
Our Business Strategy
For information on our business strategy, reference is made to “Business Model and Strategic Choices” on pages 8 - 15 of the
Annual Report 2024.
The Product Tanker Industry
For information on the product tanker industry, reference is made to “Market Review” on pages 23 - 24 of the Annual Report
2024. For information on the risks associated with operating within the product tanker market, see “Item 3. Key Information—D. Risk
Factors— Risks Related to Our Business and Our Industry.”
Our Fleet
The following table sets forth summary information regarding our fleet of owned product tankers, including the vessels that we
charter in as of December 31, 2024.
Vessel Name | Type | DWT | Year Built | Ownership | Shipyard(1) | ||||||
TORM GABRIELLA | LR2 | 119,456 | 2010 | Owned | Hyundai | ||||||
TORM GANGA | LR2 | 119,456 | 2010 | Owned | Hyundai | ||||||
TORM GEMMA | LR2 | 119,456 | 2012 | Owned | Hyundai | ||||||
TORM GENESIS | LR2 | 119,456 | 2011 | Owned | Hyundai | ||||||
TORM GITTE | LR2 | 119,456 | 2010 | Owned | Hyundai | ||||||
TORM GLORIA | LR2 | 119,456 | 2011 | Owned | Hyundai | ||||||
TORM GRACE | LR2 | 119,456 | 2012 | Owned | Hyundai | ||||||
TORM GWENDOLYN | LR2 | 119,456 | 2010 | Owned | Hyundai | ||||||
TORM GWYNETH | LR2 | 119,456 | 2010 | Owned | Hyundai | ||||||
TORM HANNAH | LR2 | 109,999 | 2016 | Leased (7) | GSI Nansha | ||||||
TORM HELLERUP | LR2 | 114,000 | 2018 | Leased (3) | GSI Nansha | ||||||
TORM HELENE | LR2 | 114,000 | 2021 | Leased (5) | GSI Nansha | ||||||
TORM HERMIA | LR2 | 114,000 | 2018 | Owned | GSI Nansha | ||||||
TORM HERDIS | LR2 | 114,000 | 2018 | Leased (3) | GSI Nansha | ||||||
40
Vessel Name | Type | DWT | Year Built | Ownership | Shipyard(1) | ||||||
TORM HILDE | LR2 | 114,000 | 2018 | Owned | GSI Nansha | ||||||
TORM HOUSTON | LR2 | 114,000 | 2022 | Leased (6) | GSI Nansha | ||||||
TORM KIARA | LR2 | 114,445 | 2015 | Leased (3) | Hyundai | ||||||
TORM KIRSTEN | LR2 | 114,445 | 2015 | Owned | Hyundai | ||||||
TORM KRISTINA | LR2 | 114,323 | 2015 | Owned | Hyundai | ||||||
TORM MAREN | LR2 | 109,672 | 2008 | Owned | Dalian Shipbuilding | ||||||
TORM MATHILDE | LR2 | 109,672 | 2008 | Owned | Dalian Shipbuilding | ||||||
TORM VENTURE | LR1 | 73,700 | 2007 | Owned | New Century SB | ||||||
TORM ELISE | LR1 | 75,000 | 2020 | Owned | GSI Nansha | ||||||
TORM ELIZABETH | LR1 | 75,000 | 2020 | Owned | GSI Nansha | ||||||
TORM EVELYN | LR1 | 74,606 | 2011 | Leased (4) | Hyundai Mipo | ||||||
TORM EVOLVE | LR1 | 74,554 | 2011 | Leased (4) | Hyundai Mipo | ||||||
TORM EVA | LR1 | 74,552 | 2011 | Leased (4) | Hyundai Mipo | ||||||
TORM EMMA | LR1 | 75,000 | 2012 | Leased (5) | STX SB | ||||||
TORM EMILIE | LR1 | 75,013 | 2013 | Leased (5) | STX SB | ||||||
TORM INTEGRITY | LR1 | 73,800 | 2013 | Leased (5) | New Times SB | ||||||
TORM INNOVATION | LR1 | 73,847 | 2013 | Leased (5) | New Times SB | ||||||
TORM ADVENTURER | MR | 46,042 | 2007 | Owned | Brod. Trogir | ||||||
TORM AGNES | MR | 49,999 | 2011 | Leased (3) | GSI Liwan | ||||||
TORM AGNETE | MR | 49,999 | 2010 | Leased (3) | GSI Liwan | ||||||
TORM ALEXANDRA | MR | 49,999 | 2010 | Leased (2) | GSI Liwan | ||||||
TORM ALICE | MR | 49,999 | 2010 | Leased (2) | GSI Liwan | ||||||
TORM ALLEGRO | MR | 46,184 | 2012 | Owned | Brod. Trogir | ||||||
TORM ALMENA | MR | 49,999 | 2010 | Leased (3) | GSI Liwan | ||||||
TORM AMALIE | MR | 49,999 | 2011 | Leased (3) | GSI Liwan | ||||||
TORM AMORINA | MR | 46,184 | 2012 | Owned | Brod. Trogir | ||||||
TORM ANABEL | MR | 49,999 | 2012 | Leased (5) | GSI Liwan | ||||||
TORM ARAWA | MR | 49,999 | 2012 | Leased (5) | GSI Liwan | ||||||
TORM ASLAUG | MR | 49,999 | 2010 | Leased (3) | GSI Liwan | ||||||
TORM ASTRID | MR | 49,999 | 2012 | Leased (6) | GSI Liwan | ||||||
TORM ATLANTIC | MR | 49,999 | 2010 | Leased (3) | GSI Liwan | ||||||
TORM AUSTRALIA | MR | 51,737 | 2011 | Owned | Hyundai Mipo | ||||||
TORM CAVATINA | MR | 46,200 | 2010 | Owned | Brod. Trogir | ||||||
TORM CORRIDO | MR | 46,156 | 2011 | Owned | Brod. Trogir | ||||||
TORM DISCOVERER | MR | 45,012 | 2008 | Owned | Brod. Trogir | ||||||
TORM DIWATA | MR | 49,746 | 2014 | Owned | Hyundai Mipo | ||||||
TORM INDIA | MR | 49,999 | 2010 | Owned | Hyundai Mipo | ||||||
TORM LAURA | MR | 49,999 | 2008 | Owned | GSI Liwan | ||||||
TORM LEADER | MR | 46,070 | 2009 | Owned | Brod. Trogir | ||||||
TORM LENE | MR | 49,999 | 2008 | Owned | GSI Liwan | ||||||
TORM LILLY | MR | 49,999 | 2009 | Owned | GSI Liwan | ||||||
TORM LOTTE | MR | 49,999 | 2009 | Owned | GSI Liwan | ||||||
TORM LOUISE | MR | 49,999 | 2009 | Owned | GSI Liwan | ||||||
TORM MALAYSIA | MR | 51,737 | 2011 | Owned | Hyundai Mipo | ||||||
TORM NEW ZEALAND | MR | 51,737 | 2011 | Owned | Hyundai Mipo | ||||||
TORM BIRGITTE | MR | 49,995 | 2013 | Owned | STX SB | ||||||
TORM BELIS | MR | 49,995 | 2013 | Owned | STX SB | ||||||
TORM BEATRICE | MR | 49,995 | 2013 | Owned | STX SB | ||||||
TORM PHILIPPINES | MR | 49,999 | 2010 | Owned | Hyundai Mipo | ||||||
TORM RAGNHILD | MR | 46,187 | 2005 | Owned | STX SB (Jinhae) | ||||||
TORM RESILIENCE | MR | 49,999 | 2005 | Owned | STX SB (Jinhae) | ||||||
TORM SINGAPORE | MR | 51,737 | 2011 | Owned | Hyundai Mipo | ||||||
TORM SOLUTION | MR | 49,999 | 2019 | Owned | GSI Nansha | ||||||
TORM SOVEREIGN | MR | 49,999 | 2017 | Owned | Hyundai Mipo | ||||||
TORM SPLENDID | MR | 49,999 | 2020 | Owned | GSI Nansha | ||||||
TORM STELLAR | MR | 49,999 | 2020 | Owned | GSI Nansha | ||||||
41
Vessel Name | Type | DWT | Year Built | Ownership | Shipyard(1) | ||||||
TORM STRENGTH | MR | 49,999 | 2019 | Owned | GSI Nansha | ||||||
TORM STRONG | MR | 49,999 | 2019 | Owned | GSI Nansha | ||||||
TORM SUBLIME | MR | 49,999 | 2019 | Owned | GSI Nansha | ||||||
TORM SUCCESS | MR | 49,999 | 2019 | Owned | GSI Nansha | ||||||
TORM SUPREME | MR | 49,999 | 2017 | Owned | Hyundai Mipo | ||||||
TORM THAMES | MR | 47,036 | 2005 | Owned | Hyundai Mipo | ||||||
TORM THOR | MR | 49,842 | 2015 | Owned | Sungdong SB | ||||||
TORM THUNDER | MR | 49,842 | 2015 | Owned | Sungdong SB | ||||||
TORM TIMOTHY | MR | 49,842 | 2015 | Owned | Sungdong SB | ||||||
TORM TITAN | MR | 49,842 | 2016 | Owned | Sungdong SB | ||||||
TORM TORINO | MR | 49,842 | 2016 | Owned | Sungdong SB | ||||||
TORM TROILUS | MR | 49,842 | 2016 | Owned | Sungdong SB | ||||||
TORM VOYAGER | MR | 45,916 | 2008 | Owned | Brod. Trogir | ||||||
TORM DANICA | MR | 49,999 | 2015 | Owned | Hyundai Mipo | ||||||
TORM DENISE | MR | 49,999 | 2015 | Owned | Hyundai Mipo | ||||||
TORM DAGMAR | MR | 49,999 | 2015 | Owned | Hyundai Mipo | ||||||
TORM DIANA | MR | 49,999 | 2016 | Owned | Hyundai Mipo | ||||||
TORM DURGA | MR | 49,680 | 2014 | Owned | Hyundai Mipo | ||||||
TORM DAMINI | MR | 49,746 | 2014 | Owned | Hyundai Mipo | ||||||
TORM DORIS | MR | 49,680 | 2015 | Owned | Hyundai Mipo | ||||||
TORM DAGNY | MR | 49,635 | 2015 | Owned | Hyundai Mipo | ||||||
TORM DEBORAH | MR | 49,680 | 2015 | Owned | Hyundai Mipo | ||||||
TORM DAPHNE | MR | 49,746 | 2015 | Owned | Hyundai Mipo | ||||||
TORM DULCE | MR | 49,680 | 2014 | Owned | Hyundai Mipo | ||||||
(1) As used in this annual report, Hyundai refers to Hyundai Heavy Industries Co. Ltd., South Korea; Dalian Shipbuilding refers to
Dalian Shipbuilding Industry Co. Ltd., China; New Century SB refers to New Century Shipbuilding Co. Ltd., China; STX SB refers to
STX Offshore and Shipbuilding Co. Ltd., South Korea; Hyundai Mipo refers to Hyundai Mipo Dockyard Co. Ltd., South Korea; GSI
refers to Guangzhou Shipyard International Co., Ltd, China (either Nansha or Liwan); Brod. Trogir refers to Brodotrogir Shipyard
Trogir, Croatia; Sungdong SB refers to Sungdong Shipbuilding & Marine Engineering Co. Ltd., South Korea; STX SB (Jinhae) refers
to STX Shipbuilding Co., Ltd., South Korea; and New Times SB refers to New Times Shipbuilding Co., Ltd., China.
(2) Vessels were sold and leased back on bareboat charter with contract expirations in 2026. We have a purchase option for the
individual vessels. No sales were recorded under IFRS and hence the vessels have not been derecognized from our balance sheet and
we recorded a corresponding financial liability for the cash we received.
(3) Vessels were sold and leased back on bareboat charter with a contract expiration in 2029. We have a purchase obligation for the
individual vessels. No sales were recorded under IFRS and hence the vessels have not been derecognized from our balance sheet and
we recorded a corresponding financial liability for the cash we received.
(4) Vessels were sold and leased back on bareboat charter with a contract expiration in 2030. We have a purchase obligation for the
vessels. No sale was recorded under IFRS and hence the vessel has not been derecognized from our balance sheet and we recorded a
corresponding financial liability for the cash we received.
(5) Vessels were sold and leased back on bareboat charter with a contract expiration in 2031. We have a purchase obligation for the
vessels. No sale was recorded under IFRS and hence the vessel has not been derecognized from our balance sheet and we recorded a
corresponding financial liability for the cash we received.
(6) Vessel was sold and leased back on bareboat charter with a contract expiration in 2032. We have a purchase option for the
individual vessel. No sale was recorded under IFRS and hence the vessel has not been derecognized from our balance sheet and we
recorded a corresponding financial liability for the cash we received.
(7) Vessel was sold and leased back on bareboat charter with a contract expiration in 2033. We have a purchase option for the
individual vessel. No sale was recorded under IFRS and hence the vessel has not been derecognized from our balance sheet and we
recorded a corresponding financial liability for the cash we received.
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Employment of Our Product Tanker Fleet
Our current strategy is to employ our vessels worldwide primarily in the spot market. We believe that this will enable us to take
advantage of potential increases in product tanker hire rates in the near term. We may seek to employ some of our vessels on longer-
term time charter contracts, if customer needs and expected returns make this more attractive. Employing vessels on longer-term
contracts may provide us with the benefits of stable cash flows and high utilization rates. In addition, from time to time, we may employ
our vessels on shorter-term charters and under COAs and we may enter into forward freight agreements. Reference is made to the
Glossary on page 276 of the Annual Report 2024 for the definitions of Spot Market, Time Charter, COA and Bareboat Charter.
Coverage of Our Fleet
For information on the coverage of our Fleet, including the definitions of certain key terms related to the coverage of our Fleet,
reference is made to “Market Drivers and Outlook” on pages 34 - 35 of the Annual Report 2024 and to the Glossary on page 276 of the
Annual Report 2024.
Management of Our Fleet
For information on management of our fleet, reference is made to “Business Model and Strategic Choices” on pages 8 - 15 of
the Annual Report 2024.
Customers
Tanker
We generate revenue by charging customers for the transportation of primarily refined oil products and occasionally crude
oil. Many of our largest customers in the product tanker (“Tanker”) segment are companies operating in the oil industry such as major
oil companies, state-owned oil companies and international trading houses. The Tanker segment is comprised of TORM’s LR1, LR2
and MR vessels, which are operated collectively as a combined internal pool, employed principally in the spot market and actively
managed to meet the needs of our customers in that market, particularly regarding the location of vessels meeting required
specifications. Since the disposal of the TORM’s last two Handysize vessels, in 2022, the Tanker segment excludes Handysize vessels.
All vessels in the Tanker segment can handle multiple sizes of refined oil cargos and sail all seas and oceans, over both short and long
distances. Given the technical specifications and capacity of the vessels, the Tanker segment is relatively homogenous with a very
high degree of interoperability.
Marine Engineering
On September 1, 2022, TORM purchased 75% of the shares in Marine Exhaust Technology A/S for a cash consideration of $
2.0 million and thereby obtaining a controlling interest in its joint venture entity Marine Exhaust Technology (Hong Kong) Ltd. As
such, TORM provides services in the marine engineering ("Marine Engineering”) segment which consist of developing and producing
advanced green marine equipment. Some of TORM’s contracts with customers relate to the sale of marine engineering equipment with
installation services. Customers obtain control of the marine engineering equipment with installation services when the goods are
delivered to the customer, they have completed commissioning and delivery has been accepted by the customers. When without
installation services, customers obtain control of the marine engineering equipment when the goods are delivered to and have been
accepted by the customers.
Customer Concentration
During 2024, our 20 largest customers accounted for approximately 69% of our total revenue. No customer in the tanker
segment accounted for more than 10% of our total revenues.
Competition
We operate in markets that are highly competitive. We compete for charters on the basis of price, vessel location, size, age
and condition of the product tankers as well as our reputation as an operator. We compete primarily with owners and operators of
product tankers in the MR, LR1 and LR2 fleets. We believe that the ownership of product tankers is fragmented and divided among
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major oil companies and independent product tanker owners. The fragmented competitive landscape can be illustrated by our market
position. Although we have one of the largest owned fleets, according to industry sources, our owned fleet constitutes approximately
3% of the existing global product tanker fleet (in dwt terms).
TORM considers the global product tanker market as a whole, and as the individual vessels are not limited to specific parts of
the world, the Group has only one geographical segment for the Tanker segment. Further, the internal management reporting does not
provide geographical information for either the Tanker segment or the Marine Engineering segment. Consequently, geographical
segment information on revenue from external customers or non-current segment assets for the Tanker segment or the Marine
Engineering segment are not provided.
Seasonality
Historically, oil trade—and consequently, charter rates—rose during winter and eased in summer, driven by seasonal demand
fluctuations in the Northern Hemisphere. However, the product tanker industry has become less affected by these patterns, as
geopolitical developments and other market dynamics now play a more dominant role.
Patents, Licenses and Trademarks
We have no material patents and do not use any licenses other than ordinary information technology licenses.
We have trademark registered the rights to our Company’s name (TORM) and logo (the TORM flag) in all relevant
jurisdictions including Denmark, the European Union, Bahrain, Brazil, Singapore, the United Arab Emirates and the United States.
We have registered our primary domains: www.torm.com, www.torm.dk and www.torm.eu. None of the information
contained on our websites is incorporated into or forms a part of this annual report.
Environmental and Other Regulations in the Shipping Industry
Government regulation and laws significantly affect the ownership and operation of our fleet. We are subject to international
conventions and treaties, national, state and local laws and regulations in force in the countries in which our vessels and other vessels
we may acquire may operate or are registered relating to safety and health and environmental protection including the storage,
handling, emission, transportation and discharge of hazardous and non-hazardous materials, and the remediation of contamination and
liability for damage to natural resources. Compliance with such laws, regulations and other requirements entails significant expenses,
including vessel modifications and implementation of certain operating procedures.
A variety of government and private entities subject our vessels (and other vessels we may acquire) to both scheduled and
unscheduled inspections. These entities include the local port authorities (applicable national authorities such as the United States
Coast Guard (“USCG”), harbor masters or equivalent), classification societies, flag state administrations (countries of registry) and
charterers, particularly terminal operators. Certain of these entities require us to obtain permits, licenses, certificates and other
authorizations for the operation of our vessels and other vessels we may acquire. Failure to maintain necessary permits or approvals
could require us to incur substantial costs or result in the temporary suspension of the operation of one or more of the vessels in our
product tanker fleet or lead to the invalidation or reduction of our insurance coverage. We believe that the heightened levels of
environmental and quality concerns among insurance underwriters, regulators and charterers have led to greater inspection and safety
requirements on all vessels and may accelerate the recycling of older vessels throughout the industry. Each of our vessels is inspected
by a surveyor of the classification society once every year within the window period for the annual survey, every two to three years for
intermediate survey and every four to five years for special surveys. Should any defects be found, the classification surveyor generally
issues a notation or recommendation for appropriate repairs, which have to be made by the shipowner within the time limit effected.
Vessels may be required, as part of the annual and intermediate survey process, to be dry-docked for inspection of the underwater
parts of the vessel and for necessary repair stemming from the inspection. Special surveys frequently require dry-docking.
Increasing environmental concerns have created a demand for product tankers that conform to stricter environmental
standards. We are required to maintain operating standards for all of our vessels and other vessels we may acquire that emphasize
operational safety, quality maintenance, continuous training of our officers and crews and compliance with applicable local, national,
and international regulations. We believe that the operation of our vessels is in substantial compliance with applicable environmental
laws and regulations, and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the
conduct of our operations. However, because such laws and regulations frequently change and may impose increasingly stricter
requirements, we cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the
resale value or useful lives of our vessels and other vessels we may acquire. In addition, a future serious marine incident that causes
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significant adverse environmental impact could result in additional legislation or regulation that could negatively affect our
profitability.
International Maritime Organization
The IMO is a specialized agency of the United Nations responsible for setting global standards for the safety, security and
environmental performance of vessels engaged in international shipping. The IMO’s primary objective is to create a regulatory
framework for the shipping industry that is fair and effective, and universally adopted and implemented. The IMO has adopted several
international conventions that regulate the international shipping industry, including, but not limited to, the International Convention
on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocols in 1976, 1984 and 1992, and amended in 2000,
or the CLC, the International Convention on Civil Liability for Bunker Oil Pollution Damage of 2001, or the Bunker Convention, the
International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto,
collectively referred to as MARPOL 73/78 and herein as “MARPOL,” adopted the International Convention for the Safety of Life at
Sea of 1974 (“SOLAS Convention”), the International Convention on Standards of Training, Certification and Watchkeeping for
Seafarers (“STCW”) and the International Convention on Load Lines of 1966 (the “LL Convention”). MARPOL establishes
environmental standards relating to oil leakage or spilling, garbage management, sewage, air emissions, the handling and disposal of
noxious liquids and the handling of harmful substances in packaged forms. MARPOL is applicable to dry bulk and LNG carriers as
well as oil tankers, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil
leakage or spilling; Annexes II and III relate to harmful substances carried in bulk in liquid or in packaged form, respectively;
Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI
was separately adopted by the IMO in September of 1997; new emissions standards, titled IMO-2020, took effect on January 1, 2020.
In 2013, the IMO’s Marine Environmental Protection Committee, or the “MEPC,” adopted a resolution amending MARPOL
Annex I Condition Assessment Scheme, or “CAS.” These amendments became effective on October 1, 2014, and require compliance
with the 2011 International Code on the Enhanced Programme of Inspections during Surveys of Bulk Carriers and Oil Tankers, or
“ESP Code,” which provides for enhanced inspection programs. CAS is not applicable to our vessels. In January 2023, amendments to
the ESP Code relating to thickness measurements at the first renewal survey of double hull oil tankers became effective. For ships
older than 15 years, we carry our voluntary CAP (Condition Assessment program) rating along with ESP. We may need to make
certain financial expenditures to maintain CAP Rating.
Air Emissions
In September 1997, the IMO adopted Annex VI to MARPOL to address air pollution from vessels. Effective May 2005,
Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from all commercial vessel exhausts and prohibits “deliberate
emissions” of ozone depleting substances (such as halons and chlorofluorocarbons), emissions of volatile compounds from cargo tanks
and the shipboard incineration of specific substances. Annex VI also includes a global cap on the sulfur content of fuel oil and allows
for special areas to be established with more stringent controls on sulfur emissions, as explained below. Emissions of “volatile organic
compounds” from certain tankers and the shipboard incineration (from incinerators installed after January 1, 2000) of certain
substances (such as polychlorinated biphenyls, or PCBs), are also prohibited. We believe that all our vessels are currently compliant in
all material respects with these regulations.
The MEPC adopted amendments to Annex VI regarding emissions of sulfur oxide, nitrogen oxide, particulate matter and
ozone depleting substances, which entered into force on July 1, 2010. The amended Annex VI seeks to further reduce air pollution by,
among other things, implementing a progressive reduction of the amount of sulfur contained in any fuel oil used on board ships. On
October 27, 2016, MEPC 70 agreed to implement a global limit of 0.5% m/m sulfur oxide emissions limit (reduced from 3.50%)
starting from January 1, 2020. This limitation can be met by using low-sulfur compliant fuel oil, alternative fuels or certain exhaust
gas cleaning systems. Ships are now required to obtain bunker delivery notes and International Air Pollution Prevention (“IAPP”)
Certificates from their flag states that specify sulfur content. Additionally, at MEPC 73, amendments to Annex VI to prohibit the
carriage of bunkers above 0.5% sulfur on ships became effective on March 1, 2020. Fuels with higher sulfur content than required by
Reg. 14 of Annex VI can still be delivered to a ship, provided the ship uses equivalent measures, such as scrubbers, pursuant to
Regulation 4. Additional amendments to Annex VI revising, among other terms, the definition of “Sulphur content of fuel oil” and
“low-flashpoint fuel” and pertaining to the sampling and testing of onboard fuel oil, became effective in April 2022. These regulations
subject ocean-going vessels to stringent emissions controls and may cause us to incur additional costs, which cannot be reasonably
estimated.
Sulfur content standards are even stricter within certain “Emission Control Areas,” or (“ECAs”). As of January 1, 2015, ships
operating within an ECA were not permitted to use fuel with sulfur content in excess of 0.1% m/m. Amended Annex VI establishes
procedures for designating new ECAs. Currently, the IMO has designated five ECAs, including specified portions of the Baltic Sea
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area, Mediterranean Sea area, North Sea area, North American area and United States Caribbean Sea area. The Mediterranean Sea
became an ECA on May 1, 2024, and compliance obligations will begin May 1, 2025. Ocean-going vessels in these areas will be
subject to stringent emission controls and may cause us to incur additional costs. Other certain areas including areas in China that are
subject to local regulations also impose stricter emission controls. In July 2023, MEPC 80 announced three new ECA proposals,
including the Canadian Arctic waters and the North-East Atlantic Ocean, which were adopted at MEPC 82 and will enter into force in
March 2026. If other ECAs are approved by the IMO, or other new or more stringent requirements relating to emissions from marine
diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency (“EPA”) or the states where we
operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our
operations.
The amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for marine diesel engines,
depending on their date of installation. Tier III NOx standards were designed for the control of NOx produced by vessels and apply to
ships that operate in the North American and U.S. Caribbean Sea ECAs with marine diesel engines installed and constructed on or
after January 1, 2016. Tier III requirements could apply to additional areas designated for Tier III NOx in the future. At MEPC 70 and
MEPC 71, the MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxide for ships built on or after January 1, 2021.
The EPA promulgated equivalent (and in some senses stricter) emissions standards in 2010. As a result of these designations or similar
future designations, we may be required to incur additional operating or other costs.
MEPC 70 Regulation 22A of MARPOL Annex VI became effective as of March 1, 2018 and requires ships above 5,000
gross tonnage to collect and report annual data on fuel oil consumption to an IMO database, with the first year of data collection
having commenced on January 1, 2019. The IMO used such data as part of its initial roadmap (through 2023) for developing its
strategy to reduce greenhouse gas emissions from ships, as discussed further below.
As of January 1, 2013, MARPOL made mandatory certain measures relating to energy efficiency for ships. All ships are now
required to develop and implement Ship Energy Efficiency Management Plans (“SEEMP”), and new ships must be designed in
compliance with minimum energy efficiency levels per capacity mile as defined by the EEDI. Under these measures, by 2025, all new
ships built will be 30% more energy efficient than those built in 2014. MEPC 75 adopted amendments to MARPOL Annex VI which
brought forward the effective date of the EEDI’s “phase 3” requirements from January 1, 2025 to April 1, 2022 for several ship types,
including gas carriers, general cargo ships, and LNG carriers.
MEPC 75 introduced draft amendments to Annex VI which impose new regulations to reduce greenhouse gas emissions from
ships. These amendments introduce requirements to assess and measure the energy efficiency of all ships and set the required
attainment values, with the goal of reducing the carbon intensity of international shipping. To achieve a 40% reduction in carbon
emissions by 2023 compared to 2008, shipping companies are required to include: (i) a technical requirement to reduce carbon
intensity based on a new Energy Efficiency Existing Ship Index (“EEXI”), and (ii) operational carbon intensity reduction
requirements, based on a new operational carbon intensity indicator (“CII”). The EEXI is required to be calculated for ships of 400
gross tonnage and above. The IMO and MEPC will calculated “required” EEXI levels based on the vessel’s technical design, such as
vessel type, date of creation, size and baseline. Additionally, an “attained” EEXI will be calculated to determine the actual energy
efficiency of the vessel. A vessel’s attained EEXI must be less than the vessel’s required EEXI. Non-compliant vessels will have to
upgrade their engine to continue to travel. With respect to the CII, the draft amendments would require ships of 5,000 gross tonnage to
document and verify their actual annual operational CII achieved against a determined required annual operational CII. The vessel’s
attained CII must be lower than its required CII. Vessels that continually receive subpar CII ratings will be required to submit
corrective action plans to ensure compliance. MEPC 79 adopted amendments to MARPOL Annex VI, Appendix IX to include the
attained and required CII values, the CII rating and attained EEXI for existing ships in the required information to be submitted to the
IMO Ship Fuel Oil Consumption Database. MEPC 79 also revised the EEDI calculation guidelines to include a CO2 conversion factor
for ethane, a reference to the updated ITCC guidelines, and a clarification that in case of a ship with multiple load line certificates, the
maximum certified summer draft should be used when determining the deadweight. These amendments entered into force on May 1,
2024. In July 2023, MEPC 80 approved the plan for reviewing CII regulations and guidelines, which must be completed at the latest
by January 1, 2026. This review commenced at MEPC 82 in Fall 2024, and there will be no immediate changes to the CII framework,
including correction factors and voyage adjustments, before the review is completed.
MEPC 76 amended Annex VI to impose new regulations to reduce greenhouse gas emissions from ships. These amendments
introduce requirements to assess and measure the energy efficiency of all ships and set the required attainment values, with the goal of
reducing the carbon intensity of international shipping. The requirements include (1) a technical requirement to reduce carbon
intensity based on a new EEXI, and (2) operational carbon intensity reduction requirements, based on a new operational CII. The
attained EEXI is required to be calculated for ships of 400 gross tonnage and above, in accordance with different values set for ship
types and categories. With respect to the CII, ships of 5,000 gross tonnage are required to document and verify their actual annual
operational CII achieved against a determined required annual operational CII. All ships that fall under the new CII regime will have
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to have a CII rating of C or above from 2023 in order to be compliant. Ships that have a CII rating of D for three consecutive years or
E for one year are required to submit a corrective action plan, to show how the required index (C or above) would be achieved or else
they will be deemed non-compliant. The EEXI and CII certification requirements came into effect on January 1, 2023.
Additionally, MEPC 76 adopted amendments requiring ships of 5,000 gross tonnage and above to revise their SEEMP to
include methodology for calculating the ship’s attained annual operation CII and the required annual operational CII on or before June
1, 2023. MEPC 76 also approved amendments to MARPOL Annex I to prohibit the use and carriage for use as fuel of heavy fuel oil
(or HFO) by ships in Arctic waters on and after July 1, 2024. For ships subject to Regulation 12A (oil fuel tank protection), the
prohibition becomes effective on or after July 1, 2029. MEPC 77 adopted a non-binding resolution which urges Member States and
ship operators to voluntarily use distillate or other cleaner alternative fuels or methods of propulsion that are safe for ships and could
contribute to the reduction of Black Carbon emissions from ships when operating in or near the Arctic. MEPC 79 adopted
amendments to MARPOL Annex VI, Appendix IX to include the attained and required CII values, the CII rating and attained EEXI
for existing ships in the required information to be submitted to the IMO Ship Fuel Oil Consumption Database. The amendments
entered into force on May 1, 2024. In July 2023, MEPC 80 approved the plan for reviewing CII regulations and guidelines, which
must be completed at the latest by January 1, 2026. This review commenced at MEPC 82 in Fall 2024, and there will be no immediate
changes to the CII framework, including correction factors and voyage adjustments, before the review is completed.
We may incur costs to comply with these revised standards. Additional or new conventions, laws and regulations may be
adopted that could require the installation of expensive emission control systems and could adversely affect our business, results of
operations, cash flows and financial condition.
Safety Management System Requirements
The SOLAS Convention was amended to address the safe manning of vessels and emergency training drills. The Convention
of Limitation of Liability for Maritime Claims (the “LLMC”) sets limitations of liability for a loss of life or personal injury claim or a
property claim against shipowners. We believe that our vessels are in substantial compliance with SOLAS and LLMC standards.
Under Chapter IX of the SOLAS Convention, or the International Safety Management Code for the Safe Operation of Ships
and for Pollution Prevention (the “ISM Code”), our operations are also subject to environmental standards and requirements. The ISM
Code requires the party with operational control of a vessel to develop an extensive safety management system that includes, among
other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its
vessels safely and for responding to emergencies. We rely upon the safety management system that we and our technical management
team have developed for compliance with the ISM Code. The failure of a vessel owner or bareboat charterer to comply with the ISM
Code may subject such party to increased liability, may decrease available insurance coverage for the affected vessels and may result in
a denial of access to, or detention in, certain ports.
The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This
certificate evidences compliance by a vessel’s management with the ISM Code requirements for a safety management system. No
vessel can obtain a safety management certificate unless its manager has been awarded a document of compliance, issued by each flag
state (or recognized organization on behalf of the flag administration), under the ISM Code. We have obtained applicable documents
of compliance for our offices and safety management certificates for all of our vessels as required by the IMO. The document of
compliance and safety management certificate are renewed as required.
Regulation II-1/3-10 of the SOLAS Convention governs ship construction and stipulates that ships over 150 meters in length
must have adequate strength, integrity and stability to minimize risk of loss or pollution. Goal-based standards amendments in SOLAS
regulation II-1/3-10 entered into force in 2012, and from July 1, 2016 with respect to new oil tankers and bulk carriers. The SOLAS
Convention regulation II-1/3-10 on goal-based ship construction standards for bulk carriers and oil tankers, which entered into force
on January 1, 2012, requires that all oil tankers and bulk carriers of 150 meters in length and above, for which the building contract is
placed on or after July 1, 2016, satisfy applicable structural requirements conforming to the functional requirements of the
International Goal-based Ship Construction Standards for Bulk Carriers and Oil Tankers (GBS Standards). All our vessels comply
with these requirements as applicable.
Amendments to the SOLAS Convention Chapter VII apply to vessels transporting dangerous goods and require those vessels
to be in compliance with the International Maritime Dangerous Goods Code (“IMDG Code”). Effective January 1, 2018, the IMDG
Code includes (1) the provisions for radioactive material, reflecting the latest provisions from the International Atomic Energy Agency,
(2) marking, packing and classification requirements for dangerous goods, and (3) mandatory training requirements. Amendments
which took effect on January 1, 2020 also reflect the latest material from the UN Recommendations on the Transport of Dangerous
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Goods, including (1) provisions regarding IMO type 9 tank, (2) abbreviations for segregating groups, and (3) special provisions for
carriage of lithium batteries and of vehicles powered by flammable liquids or gas. Additional amendments, which came into force on
June 1, 2022, include (1) addition of a definition of dosage rate, (2) additions to the list of high consequence dangerous goods, (3) new
provisions for medical/clinical waste, (4) addition of various ISO standards for gas cylinders, (5) a new handling code, and (6) changes
to stowage and segregation provisions.
The IMO has also adopted STCW. As of February 2017, all seafarers are required to meet the STCW standards and to be in
possession of a valid STCW certificate. Flag states that have ratified SOLAS and STCW generally employ the classification societies,
which have incorporated SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance, and to
conduct ISM audits.
The IMO’s Maritime Safety Committee and MEPC, respectively, each adopted relevant parts of the International Code for
Ships Operating in Polar Water (the “Polar Code”). The Polar Code, which entered into force on January 1, 2017, covers design,
construction, equipment, operational, training, search and rescue as well as environmental protection matters relevant to ships operating
in the waters surrounding the two poles. It also includes mandatory measures regarding safety and pollution prevention as well as
recommendatory provisions. The Polar Code applies to new ships constructed after January 1, 2017, and after January 1, 2018, ships
constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their first intermediate or renewal
survey.
Furthermore, recent actions by the IMO’s Maritime Safety Committee and United States agencies indicates that cybersecurity
regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats.
By IMO resolution, administrations are encouraged to ensure that cyber-risk management systems are incorporated by ship-owners and
managers by their first annual Document of Compliance audit after January 1, 2021. In February 2021, the U.S. Coast Guard published
guidance on addressing cyber risks in a vessel’s safety management system. This might cause companies to create additional procedures
for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. The impact of future regulations is
hard to predict at this time.
In June 2022, SOLAS also set out new amendments that took effect January 1, 2024, which include new requirements for: (1)
the design for safe mooring operations, (2) the Global Maritime Distress and Safety System (“GMDSS”), (3) watertight integrity, (4)
watertight doors on cargo ships, (5) fault-isolation of fire detection systems, (6) life-saving appliances, and (7) safety of ships using
LNG as fuel. These new requirements may impact the cost of our operations.
Pollution Control and Liability Requirements
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial
waters of the signatories to such conventions. For example, the IMO adopted the International Convention for the Control and
Management of Ships’ Ballast Water and Sediments (the “BWM Convention”) in 2004. The BWM Convention entered into force on
September 8, 2017. The BWM Convention requires ships to manage their ballast water to remove, render harmless or avoid the uptake
or discharge of new or invasive aquatic organisms and pathogens within ballast water and sediments. The BWM Convention’s
implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with
mandatory concentration limits, and require all ships to carry a ballast water record book and an international ballast water management
certificate.
On December 4, 2013, the IMO Assembly passed a resolution revising the application dates of the BWM Convention so that
the dates are triggered by the entry into force date and not the dates originally in the BWM Convention. This, in effect, makes all vessels
delivered before the entry into force date “existing vessels” and allows for the installation of ballast water management systems on such
vessels at the first International Oil Pollution Prevention (IOPP) renewal survey following entry into force of the convention.
The MEPC maintains guidelines for approval of ballast water management systems (G8). At MEPC 72, amendments were
adopted to extend the date existing vessels are subject to certain ballast water standards. Ships over 400 gross tons generally must
comply with a “D-1 standard,” requiring the exchange of ballast water only in open seas and away from coastal waters. The “D-2
standard” specifies the maximum amount of viable organisms allowed to be discharged, and compliance dates vary depending on the
IOPP renewal dates. The standards have been in force since 2019, and for most ships, compliance with the D-2 standard will involve
installing on-board systems to treat ballast water and eliminate unwanted organisms. Ballast water management systems, which include
systems that make use of chemical, biocides, organisms or biological mechanisms, or which alter the chemical or physical
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characteristics of the ballast water, must be approved in accordance with IMO Guidelines (Regulation D-3). Since September 8, 2024,
all ships must meet the D-2 standard. Costs of compliance with these regulations may be substantial. Additionally, in November 2020,
MEPC 75 adopted amendments to the BWM Convention which would require a commissioning test of the ballast water management
system for the initial survey or when performing an additional survey for retrofits. This analysis will not apply to ships that already have
an installed BWM system certified under the BWM Convention. These amendments have entered into force on June 1, 2022. In
December 2024, MEPC 79 agreed that it should be permitted to use ballast tanks for temporary storage of treated sewage and grey
water. MEPC 79 also established that ships are expected to return to D-2 compliance after experiencing challenging uptake water and
bypassing a BWM system should only be used as a last resort.
In July 2023, MEPC 80 approved a plan for a comprehensive review of the BWM Convention over the next three years and
the corresponding development of a package of amendments to the Convention. MEPC 80 also adopted further amendments relating
to Appendix II of the BWM Convention concerning the form of the Ballast Water Record Book, which are expected to enter into force
in February 2025. A protocol for ballast water compliance monitoring devices and unified interpretation of the form of the BWM
Convention certificate were also adopted. In March 2024, MEPC 81 adopted amendments to the BWM Convention concerning the use
of Ballast Water Record Books in electronic form, which are expected to enter into force in October 2025. Pursuant to the ongoing
review, in Fall 2024, MEPC 82 approved the 2024 Guidance on ballast water record keeping and reporting and the 2024 Guidance for
Administrations on the type approval process for ballast water management systems to support harmonized evaluation by
Administrations.
Once mid-ocean exchange ballast water treatment requirements become mandatory under the BWM Convention, the cost of
compliance could increase for ocean-going carriers, which may have a material effect on our operations. However, many countries
already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and
harmful species via such discharges. The U.S., for example, requires vessels entering its waters from another country to conduct mid-
ocean ballast water exchange, or undertake some alternate measure, and to comply with certain reporting requirements.
The IMO adopted the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different
Protocols in 1976, 1984, and 1992, and amended in 2000 (the “CLC”). Under the CLC and depending on whether the country in which
the damage results is a party to the 1992 Protocol to the CLC, a vessel’s registered owner may be strictly liable for pollution damage
caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol
changed certain limits on liability expressed using the International Monetary Fund currency unit, the Special Drawing Rights. The
limits on liability have since been amended so that the compensation limits on liability were raised. The right to limit liability is
forfeited under the CLC, where the spill is caused by the shipowner’s actual fault, and under the 1992 Protocol, where the spill is caused
by the shipowner’s intentional or reckless act or omission, where the shipowner knew pollution damage would probably result. The
CLC requires ships over 2,000 tons covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an
owner’s liability for a single incident. We have protection and indemnity insurance for environmental incidents. P&I Clubs in the
International Group issue the required Bunkers Convention “Blue Cards” to enable signatory states to issue certificates. All of our
vessels are in possession of a CLC State issued certificate attesting that the required insurance coverage is in force.
The IMO also adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker
Convention, to impose strict liability on ship owners (including the registered owner, bareboat charterer, manager, or operator) for
pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires
registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of
liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with
the LLMC). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in a ship’s bunkers typically is
determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
Ships are required to maintain a certificate attesting that they maintain adequate insurance to cover an incident. In jurisdictions,
such as the United States, where the CLC or the Bunker Convention has not been adopted, various legislative schemes or common law
govern, and liability is imposed either on the basis of fault or on a strict-liability basis.
In 1996, the IMO created the International Convention on Liability and Compensation for Damage in Connection with the
Carriage of Hazardous and Noxious substances by Sea, or the HNS Convention. The HNS Convention aims to ensure adequate, prompt
and effective compensation for damage that may result from shipping accidents involving hazardous and noxious substances. The HNS
Convention has not yet entered into force, but if it does, compliance with the HNS Convention could entail additional capital
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expenditures or otherwise increase the costs of our operations. The HNS Convention will enter into effect 18 months after its
ratification.
In November 2014 and May 2015, the IMO’s Maritime Safety Committee and MEPC, respectively, each adopted relevant
parts of the International Code for Ships Operating in Polar Water, or the Polar Code. The Polar Code entered into force on January 1,
2017. The Polar Code covers design, construction, equipment, operational, training, search and rescue as well as environmental
protection matters relevant to ships operating in the waters surrounding the two poles. It also includes mandatory measures regarding
safety and pollution prevention as well as recommendatory provisions. Ships intending to operate in the applicable areas must have a
Polar Ship Certificate. This requires an assessment of operating in said waters and includes operational limitations, additional safety
equipment and plans or procedures, necessary to respond to incidents involving possible safety or environmental consequences. A Polar
Water Operational Manual is also needed on board the ship for the owner, operator, master, and crew to have sufficient information
regarding the ship to assist in their decision-making process. The Polar Code applies to new ships constructed after January 1, 2017.
After January 1, 2018, ships constructed before January 1, 2017 are required to meet the relevant requirements by the earlier of their
first intermediate or renewal survey.
Anti-Fouling Requirements
In 2001, the IMO adopted the International Convention on the Control of Harmful Anti-fouling Systems on Ships, or the
“Anti-fouling Convention,” which entered into force on September 17, 2008 and prohibits the use of organotin compound coatings to
prevent the attachment of mollusks and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international
voyages will also be required to undergo an initial survey before the vessel is put into service or before an International Anti-fouling
System Certificate is issued for the first time; and subsequent surveys when the anti-fouling systems are altered or replaced. Vessels of
24 meters in length or more but less than 400 gross tonnage engaged in international voyages will have to carry a Declaration on Anti-
fouling Systems signed by the owner or authorized agent. We have obtained Anti-fouling System Certificates for all of our vessels that
are subject to the Anti-fouling Convention.
In June 2021, MEPC 76 adopted amendments to the Anti-fouling Convention to include controls on the biocide cybutryne;
ships may not apply cybutryne or re-apply anti-fouling systems containing that substance. In addition, ships are required to remove or
apply a coating to anti-fouling systems with cybutryne. Ships which are affected by this ban on cybutryne must receive an updated
IAFS Certificate no later than two years after the entry into force of these amendments. Ships which are not affected (i.e., with anti-
fouling systems which do not contain cybutryne) must receive an updated IAFS Certificate at the next Anti-fouling application to the
vessel. These amendments entered into force on January 1, 2023.
Wreck Removal
The Nairobi Convention on the Removal of Wrecks, or the Wreck Removal Convention, entered into force on April 14, 2015
and contains obligations for shipowners to effectively remove wrecks located in a member state’s exclusive economic zone or
equivalent 200 nautical miles zone. The Wreck Removal Convention places strict liability, subject to certain exceptions, on a vessel
owner for locating, marking and removing the wreck of any owned vessel deemed to be a hazard due to factors such as its proximity to
shipping routes, traffic density and frequency, type of traffic and vulnerability of port facilities as well as environmental damage. It also
makes government certification of insurance, or other form of financial security for such liability, compulsory for ships of 300 gross
tonnage and above.
Member states may intervene in certain situations. They can remove, or have removed, wrecks that pose a danger or
impediment to navigation or that may be expected to result in major harmful consequences to the marine environment, or damage to the
coastline or related interests, of one or more member states. The same applies for a ship that is about, or may reasonably be expected, to
sink or to strand as set forth in the Wreck Removal Convention. The cost of such removal and other measures falls on the vessel owner.
Should one of our vessels become a wreck subject to the Wreck Removal Convention, substantial costs may be incurred in
addition to any losses suffered as a result of the loss of the vessel.
The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may
be passed by the IMO and what effect, if any, such regulations might have on our operations.
Compliance Enforcement
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Non-compliance with the ISM Code or other IMO regulations may subject the shipowner or bareboat charterer to increased
liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or
detention in, some ports. The USCG and European Union authorities (and other authorities in a number of countries) have indicated
that vessels not in compliance with the ISM Code by applicable deadlines will be prohibited from trading in U.S. and European Union
ports, respectively. As of the date of this report, each of our vessels is ISM Code certified. However, there can be no assurance that
such certificates will be maintained in the future. The IMO continues to review and introduce new regulations. It is impossible to
predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations might have on our
operations.
United States Regulations
The U.S. Oil Pollution Act of 1990 and the Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990 (“OPA”) established an extensive regulatory and liability regime for the protection and
clean-up of the environment from oil spills. OPA affects all “owners and operators” whose vessels trade or operate within the United
States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorial sea
and its 200 nautical mile exclusive economic zone around the United States. The United States has also enacted the Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”), which applies to the discharge of hazardous substances other
than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define “owner and operator” in the case of
a vessel as any person owning, operating or chartering by demise, the vessel. Both OPA and CERCLA impact our operations.
Under OPA, vessel owners and operators are “responsible parties” and are jointly, severally and strictly liable (unless the spill
results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other
damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel). OPA defines these other
damages broadly to include:
(i)injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
(ii)injury to, or economic losses resulting from, the destruction of real and personal property;
(iii)net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or
personal property or natural resources;
(iv)loss of subsistence use of natural resources that are injured, destroyed or lost;
(v)lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural
resources; and
(vi)net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such
as protection from fire, safety or health hazards, and loss of subsistence use of natural resources.
OPA contains statutory caps on liability and damages; such caps do not apply to direct clean-up costs. Effective November
12, 2019, the USCG adjusted the limits of OPA liability for an oil tanker, other than a single-hull oil tanker, over 3,000 gross tons
liability to the greater of $2,300 per gross ton or $19,943,400 (subject to periodic adjustment for inflation). On December 23, 2022, the
USCG issued a final rule to adjust the limitation of liability under the OPA. Effective March 23, 2023, the new adjusted limits of OPA
liability for an oil tanker, other than a single-hull oil tanker, over 3,000 gross tons liability to the greater of $2,500 per gross ton or
$21,521,300 (subject to periodic adjustment for inflation). These limits of liability do not apply if an incident was proximately caused
by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee
or a person acting pursuant to a contractual relationship), or a responsible party’s gross negligence or willful misconduct. Similarly,
the limitation on liability does not apply if the responsible party fails or refuses to (i) report the incident as required by law where the
responsible party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil
removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311
(c), (e)) or the Intervention on the High Seas Act.
CERCLA contains a similar liability regime related to hazardous substances (which include petroleum products that are
contaminated with hazardous substances) whereby owners and operators of vessels are liable for clean-up, removal and remedial costs
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as well as damages for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing
the same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely
from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per
gross ton or $5.0 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any
other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the
release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release
was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply
if the responsible person fails or refuses to provide all reasonable cooperation and assistance as requested in connection with response
activities where the vessel is subject to OPA.
OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law. OPA and
CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility
sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and
operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-
insurer or a guarantee. We comply and plan to comply going forward with the USCG’s financial responsibility regulations by
providing applicable certificates of financial responsibility.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico resulted in additional regulatory initiatives or statutes, including
higher liability caps under OPA, new regulations regarding offshore oil and gas drilling and a pilot inspection program for offshore
facilities. However, several of these initiatives and regulations have been or may be revised as a result of political changes. For
example, the U.S. Bureau of Safety and Environmental Enforcement’s (“BSEE”) revised Production Safety Systems Rule (“PSSR”),
effective December 27, 2018, modified and relaxed certain environmental and safety protections under the 2016 PSSR. Additionally,
in August 2023, the BSEE released a final Well Control Rule, which strengthens testing and performance requirements, and may
affect offshore drilling operations.
In January 2021, the Biden administration issued an executive order temporarily blocking new leases for oil and gas drilling
in federal waters, but ultimately, the order was rendered ineffective by a permanent injunction issued by a Louisiana court. After being
blocked by the courts, in September 2023, the Biden administration announced a scaled back offshore oil drilling plan, including just
three oil lease sales in the Gulf of Mexico. On January 6, 2025, the Biden administration announced a ban on new offshore oil and gas
drilling in more than 625 million acres of U.S. waters on the Atlantic and Pacific coasts and in Alaska, but Louisiana-led states and
fossil fuel groups are challenging the ban. On January 20, 2025, President Trump issued an executive order revoking this ban but will
also likely face legal challenge over this revocation. With these rapid changes, compliance with any new requirements of OPA and
future legislation or regulations applicable to the operation of our vessels and other vessels we may acquire could negatively impact
the cost of our operations and adversely affect our business.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents
occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA. Some states have
enacted legislation providing for unlimited liability for oil spills, and many U.S. states that border a navigable waterway have enacted
environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or
a release of a hazardous substance. Moreover, some states have enacted legislation providing for unlimited liability for discharge of
pollutants within their waters, although in some cases, states which have enacted this type of legislation have not yet issued
implementing regulations defining tanker owners’ responsibilities under these laws. These laws have been more stringent than U.S.
federal law. The Company intends to comply with all applicable state regulations in the ports that the Company’s vessels call.
We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels.
If the damage from a catastrophic spill were to exceed our insurance coverage, it could have an adverse effect on our business and
results of operation.
Other United States Environmental Initiatives
The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) (“CAA”) requires the EPA to promulgate
standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and
recovery requirements for certain cargos when loading, unloading, ballasting, cleaning and conducting other operations in regulated port
areas. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality
standards in each state. Although state-specific SIPs may include regulations concerning emissions resulting from vessel loading and
unloading operations by requiring the installation of vapor control equipment. Our vessels operating in such regulated port areas with
restricted cargos are equipped with vapor recovery systems that satisfy these existing requirements.
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The U.S. Clean Water Act (“CWA”) prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable
waters, unless authorized by a duly issued permit or exemption, and imposes strict liability in the form of penalties for any
unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and
complements the remedies available under OPA and CERCLA. In 2015, the EPA expanded the definition of “waters of the United
States” (“WOTUS”), thereby expanding federal authority under the CWA. Following litigation on the revised WOTUS rule, in
December 2018, the EPA and Department of the Army proposed a revised, limited definition of WOTUS. In 2019 and 2020, the
agencies repealed the prior WOTUS Rule and promulgated the Navigable Waters Protection Rule (“NWPR”) which significantly
reduced the scope and oversight of EPA and the Department of the Army in traditionally non-navigable waterways. On August 30,
2021, a federal district court in Arizona vacated the NWPR and directed the agencies to replace the rule with the pre-2015 definition.
In January 2023, the revised WOTUS rule was codified in place of the vacated NWPR. On May 25, 2023, the United States Supreme
Court ruled in the case Sackett v. EPA that only wetlands and permanent bodies of water with a "continuous surface connection" to
"traditional interstate navigable waters" are covered by the CWA, further narrowing the application of the WOTUS rule. On August
2023, the EPA and U.S. Army issued the final revised WOTUS rule, effective on September 8, 2023, that largely reinstated the
pre-2015 definition and applied the Sackett ruling.
The EPA and the USCG have also enacted rules relating to ballast water discharge, compliance with which requires the
installation of equipment on our vessels and other vessels we may acquire to treat ballast water before it is discharged or the
implementation of other port facility disposal arrangements or procedures at potentially substantial costs, and/or otherwise restrict our
vessels and other vessels we may acquire from entering U.S. Waters. The EPA will regulate these ballast water discharges and other
discharges incidental to the normal operation of certain vessels within United States waters pursuant to the Vessel Incidental
Discharge Act (“VIDA”), which was signed into law on December 4, 2018 and replaces the 2013 Vessel General Permit (“VGP”)
program (which authorizes discharges incidental to operations of commercial vessels and contains numeric ballast water discharge
limits for most vessels to reduce the risk of invasive species in U.S. waters, stringent requirements for exhaust gas scrubbers, and
requirements for the use of environmentally acceptable lubricants) and current Coast Guard ballast water management regulations
adopted under the U.S. National Invasive Species Act (“NISA”), such as mid-ocean ballast water exchange programs and installation
of approved USCG technology for all vessels equipped with ballast water tanks bound for U.S. ports or entering U.S. waters. VIDA
establishes a new framework for the regulation of vessel incidental discharges under Clean Water Act (CWA), requires the EPA to
develop performance standards for those discharges within two years of enactment and requires the U.S. Coast Guard to develop
implementation, compliance and enforcement regulations within two years of EPA’s promulgation of standards. On September 20,
2024, the EPA finalized its rule on Vessel Incidental Discharge Standards of Performance, and on October 9, 2024, the EPA published
the new rule pursuant to VIDA which set discharge standards that are as least as stringent as the VGP. These new standards are
enforceable through USCG regulations, which must be promulgated within two years. Until the USCG’s regulations are final and
enforceable, non-military, non-recreational vessels greater than 79 feet in length will continue to be subject to the existing discharge
requirements under the VGP, including submission of a Notice of Intent (“NOI”) or retention of a PARI form and submission of
annual reports. We have submitted NOIs for our vessels where required. Compliance with the EPA, U.S. Coast Guard and state
regulations could require the installation of ballast water treatment equipment on our vessels and other vessels we may acquire or the
implementation of other port facility disposal procedures at potentially substantial cost or may otherwise restrict our vessels and other
vessels we may acquire from entering U.S. waters.
California legislation effective on January 1, 2021, establishes increased fines for oil spills in California State waters. The
legislation doubles certain existing fines up to a maximum of $1,000,000 for each violation, with each day or partial day of a violation
being considered a separate violation and empower courts to impose a new additional fine of up to $1,000 per gallon of oil spilt in
excess of 1,000 gallons. In each case a fine may be imposed if the violator knowingly caused, or reasonably should have known that
their actions would lead to, an oil spill into Californian State waters.
European Union Regulations
In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of
polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges
individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting
substance may also lead to criminal penalties. The directive applies to all types of vessels, irrespective of their flag, but certain
exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result in
substantial penalties or fines and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament and of the
Council of April 29, 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting and verification of carbon dioxide
emissions from maritime transport and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor
and report carbon dioxide emissions annually, which may cause us to incur additional expenses. As of January 2019, large ships
calling at EU ports have been required to collect and publish data on carbon dioxide emissions and other information. The system
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entered into force on March 1, 2018. In July 2020, the European Parliament’s Committee on Environment, Public Health and Food
Safety voted in favor of the inclusion of vessels of 5,000 gross tons and above in the EU Emissions Trading System (in addition to
voting for a revision to the monitoring, reporting, and verification of CO2 emissions). In September 2020, the European Parliament
adopted the proposal from the European Commission to amend the regulation on monitoring carbon dioxide emissions from maritime
transport.
On July 14, 2021, the European Commission published a package of draft proposals as part of its “Fit-for-55’
environmental legislative agenda and as part of the wider EU Green Deal growth strategy. There are two key initiatives relevant to
maritime arising from the Proposals: (a) a bespoke emissions trading scheme for the maritime sector (Maritime ETS), which is due to
commence in 2024 and which is to apply to all ships above a gross tonnage of 5,000; and (b) a FuelEU regulation, which seeks to
require all ships above a gross tonnage of 5,000 to carry on board a ‘FuelEU certificate of compliance’ from June 30, 2026, as
evidence of compliance with the limits on the greenhouse gas intensity of the energy used on-board by a ship and with the
requirements on the use of on-shore power supply (OPS) at berth. More specifically, Maritime ETS is to apply gradually over the
period from 2024-2026. 40% of allowances would have to be surrendered in 2025 for the year 2024; 70% of allowances would have to
be surrendered in 2026 for the year 2025; 100% of allowances would have to be surrendered in 2027 for the year 2026. Compliance is
to be on a companywide (rather than per ship) basis and “shipping company” is defined widely to capture both the ship owner and any
contractually appointed commercial operator/ship manager/charterer. The cap under the ETS would be set by taking into account EU
MRV system emissions data for the years 2018 and 2019, adjusted, from year 2021 and is to capture 100% of the emissions from
intra-EU maritime voyages; 100% of emissions from ships at berth in EU ports and 50% of emissions from voyages which start or end
at EU ports (but the other destination is outside the EU). The European Commission has also signaled that 100% of non-EU emissions
may be caught if the IMO does not introduce a global market-based measure by 2028. In addition, the MRV system is also being
revised such that the scope of ships to be monitored will now extend to those that are 400GT and more. The reason for this is because
the ETS will apply to ships that are between 400GT and 5000GT from circa 2027. Furthermore, the newly passed EU Emissions
Trading Directive 2023/ 959/EC makes clear that all maritime allowances would be auctioned and there will be no free allocation. 78.4
million emissions allowances are to be allocated specifically to maritime. From a risk management perspective, new systems,
personnel, data management systems, costs recovery mechanisms, revised service agreement terms and emissions reporting
procedures will have to be put in place, at significant cost, to prepare for and manage the administrative aspect of ETS compliance.
Responsible recycling and scrapping of ships is becoming an increasingly important issue for shipowners and charterers alike
as the industry strives to replace old ships with cleaner, more energy efficient models. The recognition of the need to impose recycling
obligations on the shipping industry is not new. In 2009, the IMO oversaw the creation of the Hong Kong Convention, which sets
standards for ship recycling. Concerned at the lack of progress in satisfying the conditions needed to bring the Hong Kong Convention
into force, the EU published its own Ship Recycling Regulation 1257/2013 (SRR) in 2013, with a view to facilitating early ratification
of the Hong Kong Convention both within the EU and in other countries outside the EU. In June 2023, Bangladesh and Liberia ratified
the Hong Kong Convention, which will finally enter into force in June 2025. Parties to the Convention now have two years to
implement the requirements of the Convention in their respective jurisdictions and ensure that the highest possible ship recycling
standards and in well run and green ship recycling yards are created/maintained. In the meantime, since the Hong Kong Convention
will come into force on June 26, 2025, the 2013 regulations are vital to responsible ship recycling in the EU. SRR requires that, from
December 31, 2020, all existing ships sailing under the flag of EU member states and non-EU flagged ships calling at an EU port or
anchorage must carry on board an Inventory of Hazardous Materials (IHM) with a certificate or statement of compliance, as
appropriate. For EU-flagged vessels, a certificate (either an Inventory Certificate or Ready for Recycling Certificate) will be
necessary, while non-EU flagged vessels will need a Statement of Compliance.
The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections
of high-risk ships, as determined by type, age and flag as well as the number of times the ship has been detained. The European Union
also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses.
The regulation also provided the European Union with greater authority and control over classification societies, by imposing more
requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply.
Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary
engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those in Annex VI
relating to the sulfur content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships
at berth in the Baltic Sea, the North Sea and the English Channel (the so called “Sox-Emission Control Area”). As of January 2020,
the EU member states must also ensure that ships in all EU waters, except the Sox-Emission Control Area, use fuels with a 0.5%
maximum sulfur content.
Greenhouse Gas Regulations
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Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United
Nations Framework Convention on Climate Change, which entered into force in 2005, and pursuant to which adopting countries have
been required to implement national programs to reduce greenhouse gas emissions. International negotiations are continuing with
respect to a successor to the Kyoto Protocol, and restrictions on shipping emissions may be included in any new treaty. In December
2009, more than 27 nations, including the U.S. and China, signed the Copenhagen Accord, which includes a non-binding commitment
to reduce greenhouse gas emissions. The 2015 United Nations Climate Change Conference in Paris resulted in the Paris Agreement,
which entered into force on November 4, 2016 and does not directly limit greenhouse gas emissions from ships. The U.S. initially
entered into the agreement, but on June 1, 2017, the Trump administration announced that the United States intends to withdraw from
the Paris Agreement and the withdrawal became effective on November 4, 2020. On January 20, 2021, the Biden administration
issued an executive order to rejoin the Paris Agreement, which the U.S. officially rejoined on February 19, 2021. In January 2025,
President Trump signed an executive order to begin the withdrawal of the United States from the Paris Agreement.
At MEPC 70 and MEPC 71, a draft outline of the structure of the initial strategy for developing a comprehensive IMO
strategy on reduction of greenhouse gas emissions from ships was approved. In accordance with this roadmap, in April 2018, nations
at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identifies “levels of
ambition” to reduce greenhouse gas emissions and notes that technological innovation, alternative fuels and/or energy sources for
international shipping will be integral to achieve the ambitions. At MEPC 77, the Member States agreed to initiate the revision of the
Initial IMO Strategy on Reduction of GHG emissions from ships, recognizing the need to strengthen the “levels of ambition.”
In July 2023, MEPC 80 adopted the 2023 IMO Strategy — on Reduction of GHG Emissions from Ships, which builds upon
the initial strategy’s levels of ambition. The revised levels of ambition include (1) further decreasing the carbon intensity from ships
through improvement of energy efficiency; (2) reducing carbon intensity of international shipping; (3) increasing adoption of zero or
near-zero emissions technologies, fuels, and energy sources; and (4) achieving a net zero GHG emissions from international shipping.
from international shipping. Furthermore, the following indicative checkpoints were adopted in order to reach net zero GHG emissions
from international shipping: (i) reduce the total annual GHG emissions from international shipping by at least 20%, striving for 30%,
by 2030, compared to 2008 levels; and (ii) reduce the total annual GHG emissions from international shipping by at least 70%,
striving for 80%, by 2040, compared to 2008 levels. In March 2024, MEPC 81 further developed the goal-based marine fuel standard
regulating the phased reduction of marine fuel’s GHG intensity as part of its mid-term measures. In Fall 2024, MEPC 82 made further
progress on the development of these mid-term measures, and the Committee is expected to approve amendments at MEPC 83 (Spring
2025) for adoption in October 2025.
As noted above, the 70th MEPC meeting in October 2016 adopted a mandatory data collection system (DCS) that requires
ships above 5,000 gross tons to report consumption data for fuel oil, hours under way, and distance traveled. Unlike the EU MRV (see
below), the IMO DCS covers any maritime activity carried out by ships, including dredging, pipeline laying, ice-breaking, fish-
catching, and off-shore installations. The SEEMPs of all ships covered by the IMO DCS must include a description of the
methodology for data collection and reporting. After each calendar year, the aggregated data are reported to the flag state. If the data
have been reported in accordance with the requirements, the flag state issues a statement of compliance to the ship. Flag states
subsequently transfer this data to an IMO ship fuel oil consumption database, which is part of the Global Integrated Shipping
Information System (GISIS) platform. IMO will then produce annual reports, summarizing the data collected. Thus, currently, data
related to the GHG emissions of ships above 5,000 gross tons calling at ports in the European Economic Area (EEA) must be reported
in two separate, but largely overlapping, systems: the EU MRV, which applies since 2018, and the IMO DCS, which applies since
2019. The proposed revision of Regulation (EU) 2015/757 adopted on February 4, 2019, aims to align and facilitate the simultaneous
implementation of the two systems, although it is still not clear when the proposal will be adopted.
IMO’s MEPC 76 adopted amendments to MARPOL Annex VI that will require ships to reduce their greenhouse gas
emissions. The Revised MARPOL Annex VI entered into force on November 1, 2022. The revised Annex VI includes carbon
intensity measures (requirements for ships to calculate their EEXI) following technical means to improve their energy efficiency and
to establish their annual operational carbon intensity indicator and rating. MEPC 76 also adopted guidelines to support implementation
of the amendments.
The EU made a unilateral commitment to reduce overall greenhouse gas emissions from its member states from 20% of 1990
levels by 2020. The EU also committed to reduce its emissions by 20% under the Kyoto Protocol’s second period from 2013 to 2020.
Starting in January 2018, large ships over 5,000 gross tonnage calling at EU ports are required to collect and publish data on carbon
dioxide emissions and other information. Under the European Climate Law, the EU committed to reduce its net greenhouse gas
emissions by at least 55% by 2030 through its “Fit-for-55” legislation package. As part of this initiative, the European Union’s carbon
market, EU ETS, has been extended to cover CO2 emissions from all large ships entering EU ports starting January 2024.
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In the United States, the EPA issued a finding that greenhouse gases endanger the public health and safety, adopted
regulations to limit greenhouse gas emissions from certain mobile sources and proposed regulations to limit greenhouse gas emissions
from large stationary sources. However, in March 2017, the Trump administration issued an executive order to review and possibly
eliminate the EPA’s plan to cut greenhouse gas emissions, and on August 13, 2020, the EPA released rules rolling back standards to
control methane and volatile organic compound emissions from new oil and gas facilities. In early 2021, the Biden administration
directed the EPA to publish a proposed rule suspending, revising, or rescinding certain of these rules. The resulting final rule was
issued in December 2023. Such rules may be subject to revision or revocation following the change in federal administration
beginning in 2025. The EPA or individual states could enact these or other environmental regulations that could affect our operations.
Any passage of climate control legislation or other regulatory initiatives by the IMO, the EU, the U.S. or other countries
where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement that restricts
emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at
this time. Even in the absence of climate control legislation, our business may be indirectly affected to the extent that climate change
may result in sea level changes or certain weather events.
Maritime Labor Convention
The ILO is a specialized agency of the UN with headquarters in Geneva, Switzerland. The ILO adopted the MLC 2006, which
entered into force on August 20, 2013. A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance are required to
ensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. These documents will provide prima
facie evidence that the vessels are in compliance with the requirements of the MLC 2006. The Maritime Labor Certificate and
Declaration of Maritime Labor Compliance will be subject to inspection by port state control when vessels enter the ports of other
countries that have ratified the MLC 2006. In addition, vessels flying the flag of countries that have not ratified the MLC 2006 are also
subject to inspection with respect to working and living conditions for seafarers when those vessels enter in port of countries where the
MLC 2006 is in force. Amendments to MLC 2006 were adopted in 2014, 2016 and 2018.
There are costs associated with complying with the MLC 2006, and the methods to be used by port state control to check and
ensure compliance are currently unclear. Given the uncertain interpretation of the MLC 2006 and the local legislation enacting it in
various countries, there are risks associated with ensuring proper compliance.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001 in the United States, there have been a variety of initiatives intended to
enhance vessel security such as the U.S. Maritime Transportation Security Act of 2002 (“MTSA”). To implement certain portions of the
MTSA, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters
subject to the jurisdiction of the United States and at certain ports and facilities, some of which are regulated by the EPA.
Similarly, Chapter XI-2 of the SOLAS Convention imposes detailed security obligations on vessels and port authorities and
mandates compliance with the International Ship and Port Facility Security Code (“the ISPS Code”). The ISPS Code is designed to
enhance the security of ports and ships against terrorism. To trade internationally, a vessel must attain an International Ship Security
Certificate (“ISSC”) from a recognized security organization approved by the vessel’s flag state. Ships operating without a valid
certificate may be detained, expelled from or refused entry at port until they obtain an ISSC. The various requirements, some of which
are found in the SOLAS Convention, include for example, on-board installation of automatic identification systems to provide a means
for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including
information on a ship’s identity, position, course, speed and navigational status; on-board installation of ship security alert systems,
which do not sound on the vessel but only alert the authorities on shore; the development of vessel security plans; ship identification
number to be permanently marked on a vessel’s hull; a continuous synopsis record kept onboard showing a vessel’s history including
the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship’s
identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and
compliance with flag state security certification requirements.
The USCG regulations, intended to align with international maritime security standards, exempt non-U.S. vessels from
MTSA vessel security measures, provided such vessels have on board a valid ISSC that attests to the vessel’s compliance with the
SOLAS Convention security requirements and the ISPS Code. Future security measures could have a significant negative financial
impact on us. We intend to comply with the various security measures addressed by MTSA, the SOLAS Convention and the ISPS
Code.
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The cost of vessel security measures has also been affected by the escalation in the frequency of acts of piracy against ships,
notably off the coast of Somalia, including the Gulf of Aden, Arabian Sea area and the West Africa area including the Gulf of Guinea.
Substantial loss of revenue and other costs may be incurred as a result of detention of a vessel or additional security measures, and the
risk of uninsured losses could significantly affect our business. Costs may be incurred in taking additional security measures in
accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP5 industry standard.
Inspection by Classification Societies
Every seagoing vessel must be “classed” by a classification society. The classification society certifies that the vessel is “in-
class,” signifying that the vessel has been built and maintained in accordance with the rules of the classification society. In addition,
where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society
will undertake them on application or by official order, acting on behalf of the authorities concerned and will certify that such vessel
complies with applicable rules and regulations of the vessel’s country of registry and the international conventions of which that country
is a member.
The classification society also undertakes on request other surveys and checks that are required by regulations and
requirements of the flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the
country concerned.
For maintenance of the class, regular and extraordinary surveys of hull, machinery, including the electrical plant, and any
special equipment classed are required to be performed as follows:
•Annual Surveys. For seagoing ships, annual surveys are conducted for the hull and the machinery, including the electrical
plant, and where applicable for special equipment classed, within three months before or after each anniversary date of the
date of commencement of the class period indicated in the certificate.
•Intermediate Surveys. Extended annual surveys are referred to as intermediate surveys and are to be carried out either at or
between the second and third Annual Surveys after Special Periodical Survey No. 1 and subsequent Special Periodical
Surveys. Those items which are additional to the requirements of the Annual Surveys may be surveyed either at or
between the second and third Annual Surveys. After the completion of the No. 3 Special Periodical Survey, the following
Intermediate Surveys are of the same scope as the previous Special Periodical Surveys.
•Special Periodical Surveys (or Class Renewal Surveys). Class renewal surveys, also known as Special Periodical Surveys,
are carried out for the ship’s hull, machinery, including the electrical plant, and for any special equipment classed, and
should be completed within five years after the date of build or after the crediting date of the previous Special Periodical
Survey. At the special survey, the vessel is thoroughly examined, including ultrasonic-gauging to determine the thickness
of the steel structures. Should the thickness be found to be less than the minimum class requirements, the classification
society would prescribe steel renewals. A Special Periodical Survey may be commenced at the fourth Annual Survey and
be continued with completion by the fifth anniversary date. Substantial amounts of money may have to be spent for steel
renewals to pass a special survey if the vessel experiences excessive wear and tear.
As mentioned above, for vessels that are more than 15 years old, the Intermediate Survey may also have a considerable
financial impact.
At an owner’s application, the surveys required for class renewal (for tankers only the ones in relation to machinery and
automation) may be split according to an agreed schedule to extend over the entire five-year period. This process is referred to as
continuous survey system. All areas subject to survey as defined by the classification society are required to be surveyed at least once
per class period, unless shorter intervals between surveys are prescribed elsewhere. The period between two subsequent surveys of each
area must not exceed five years.
Most vessels are subject also to a minimum of two examinations of the outside of a vessel’s bottom and related items during
each five-year special survey period. Examinations of the outside of a vessel’s bottom and related items are normally to be carried out
with the vessel in dry-dock, but an alternative examination while the vessel is afloat by an approved underwater inspection may be
considered. Such an examination is to be carried out in conjunction with the Special Periodical Survey, and in this case the vessel must
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be in dry-dock. For vessels older than 15 years (after the third Special Periodical Survey), the bottom survey must always be in the dry-
dock. In all cases, the interval between any two such examinations is not to exceed 36 months.
In general, during the above surveys, if any defects are found, the classification surveyor will require immediate repairs or
issue a ‘‘recommendation’’ which must be rectified by the shipowner within prescribed time limits.
Most insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in-class” by a
classification society which is a member of the International Association of Classification Societies, or IACS. All our vessels are
certified as being “in-class” by American Bureau of Shipping, Lloyds Register or Bureau Veritas who are all members of IACS. All
new and second-hand vessels that we purchase must be certified prior to their delivery under our standard purchase contracts and
memoranda of agreement. If the vessel is not certified on the scheduled date of closing, we have no obligation to take delivery of the
vessel.
For further information on environmental, social and governance issues, reference is made to pages 40-153 of the Annual
Report 2024 and TORM’s separate ESG Report that can be found on our webpage www.torm.com. None of the information contained
on this website is incorporated into or forms a part of this annual report.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo
loss or damage and business interruption due to political circumstances in foreign countries, piracy incidents, hostilities and labor
strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and
the liabilities arising from owning and operating vessels in international trade. OPA, which in certain circumstances imposes virtually
unlimited liability upon shipowners, operators and bareboat charterers of any vessel trading in the exclusive economic zone of the
United States for certain oil pollution accidents in the United States, has made liability insurance more expensive for shipowners and
operators trading in the United States market. We carry insurance coverage as customary in the shipping industry. However, not all risks
can be insured, specific claims may be rejected, and we might not be always able to obtain adequate insurance coverage at reasonable
rates.
Marine and War Risks Insurance
We have in force marine hull and machinery, war risks insurance as well as P&I, bunker and cash insurances for all of our
vessels.
Our marine hull and machinery insurance covers risks of particular and general average and actual or constructive total loss
from collision, fire, grounding, engine breakdown and other insured named perils up to an agreed amount per vessel. Our war risks
insurance covers the risks of particular and general average and actual or constructive total loss from acts of war and civil war,
terrorism, piracy, confiscation, seizure, capture, vandalism, sabotage and other war-related named perils. We have also arranged
coverage for increased value for each vessel. Under this increased value coverage, in the event of total loss of a vessel, we will be able
to recover amounts in excess of those recoverable under the hull and machinery policy in order to compensate for additional costs
associated with replacement of the loss of the vessel. Each vessel is covered up to at least its fair market value at the time of the
insurance attachment and subject to a fixed deductible per each single accident or occurrence but excluding actual or constructive total
loss.
Protection and Indemnity Insurance
Protection and indemnity insurance, P&I insurance, is provided by mutual protection and indemnity associations, or P&I
Clubs, and covers our third-party liabilities in connection with our shipping activities. This coverage includes third-party liability and
other expenses relating to injury or death of crew or passengers, loss or damage to cargo, claims arising from collisions with other
vessels, damage to third-party property, pollution arising from oil or other substances, and salvage and towing including wreck
removal. P&I insurance is a mutual maritime insurance, where the coverage (for open-end risks) is provided by mutual associations.
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Our current P&I insurance coverage for pollution is $1 billion per vessel per incident and approximately $3.1 billion per vessel
for other types of collective Overspill P&I Claims, such as wreck removal.
The 12 P&I Clubs that comprise the International Group insure approximately 90% of the world’s commercial tonnage and
have entered into a pooling agreement to reinsure each P&I Club's liabilities. The International Group’s website states that the pool
provides a mechanism for sharing all claims in excess of $10 million up to, currently, approximately $3.1 billion, with the ability to
reinstate coverage if a claim exceeds this amount.
As TORM is a member of a P&I Club which in turn is a member of the International Group, we are subject to calls payable to
the entered P&I Clubs based on our claim records as well as the claim records of all other members (shipowners) of the individual P&I
Clubs and members of the shipping pool of P&I Clubs comprising the International Group.
Any (non-oil pollution) claims which exceed the limit available under the main reinsurance contract ($2.1 billion) fall back to
the pool for distribution to each club in proportion to each club's relative "overspill limit". This calculation defines the maximum
amount that each club can be asked to contribute to an "overspill claim". In theory, this final layer of claims pooling takes the total
amount available for any one (non-oil pollution) claim to approximately $8 billion.
Permits and Authorizations
We are required by various governmental and quasi-governmental agencies to obtain certain permits, licenses and certificates
with respect to our vessels. The permits, licenses and certificates that are required depend upon several factors, including the commodity
transported, the waters in which the vessel operates, the nationality of the vessel’s crew and the age of the vessel. We have obtained all
permits, licenses and certificates currently required to permit our vessels to operate. Additional laws and regulations, environmental or
otherwise, may be adopted, which could limit our ability to do business or increase the cost of us doing business.
C. Organizational Structure
As of December 31, 2024, TORM plc, TORM A/S and other subsidiaries, owned 70 of the vessels in our product tanker fleet
and bareboat chartered in 24 vessels with an option or obligation to buy back the vessels and expect to apply the same ownership
structure for each additional vessel that we acquire in the future, through separate wholly-owned subsidiaries.
A list of our significant subsidiaries is filed herewith as Exhibit 8.1.
D. Property, Plants and Equipment
Our only material physical assets consist of our vessels. For at description of our fleet, see “Item 4. Information on the
Company B. Business Overview.” Other than our interests in the vessels, we do not own any material physical properties. We lease
offices in the London (United Kingdom), Hellerup (Denmark), Mumbai (India), New Delhi (India), Pune (India), Manila
(Philippines), Cebu (Philippines), Singapore (Singapore), Houston (Texas, USA), Wilmington (Delaware, USA), and Dubai (UAE).
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following presentation of management’s discussion and analysis of results of operations and financial condition should be
read in conjunction with our audited consolidated financial statements and related notes. You should also carefully read the following
discussion with the sections of this annual report entitled “Cautionary Statement Regarding Forward-Looking Statements”,
“Explanatory Note and Presentation of Our Financial and Operating Data”, “Item 3. Key Information—D. Risk Factors”, “Item 4.
Information on the Company—B. Business Overview”. This discussion contains forward-looking statements that reflect our current
views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors such as those set forth in “Item 3. Key Information—D. Risk Factors” and
elsewhere in this annual report.
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The audited consolidated financial statements as of and for the years ended December 31, 2024, 2023 and 2022 have been
prepared in accordance with IFRS as issued by the IASB. The financial statements are presented in U.S. Dollar millions unless
otherwise indicated. The discussion included in the following sections covers our operating results in 2024 compared with 2023. For the
discussion of our operating results in 2023 compared with 2022, reference is made to “Item 5. Operating and Financial Review and
Prospects” included in our 2023 Annual Report on Form 20-F, filed with the SEC on March 7, 2024.
This annual report includes certain financial measures that have not been prepared in accordance with IFRS and are not
recognized measures of financial performance or liquidity under IFRS. In addition to the financial information contained in this annual
report presented in accordance with IFRS, certain “non-IFRS financial measures” (as defined in Regulation G or
Item 10(e) of Regulation S-K under the Securities Act) have been included in this annual report. These non-IFRS measures should not
be considered as alternatives to operating income, cash flows from operating activities or any other performance measures derived in
accordance with IFRS. These measures have important limitations as analytical tools, and you should not consider them in isolation or
as a substitute for analysis of our results as reported under IFRS.
Non-IFRS measures
Certain non-IFRS measures included in our financial and operating data have been derived from amounts calculated in
accordance with IFRS but are not themselves IFRS measures. They should not be viewed in isolation as alternatives to the equivalent
IFRS measure, rather they should be read in conjunction with the equivalent IFRS measure. These include Time Charter Equivalent or
TCE earnings, Gross profit, Adjusted EBITDA, loan-to-value ratio and net interest-bearing debt.
Management believes that these non-IFRS measures are both useful and necessary to present in our financial and operating
data, because they are used by management for internal performance analysis, the presentation of these measures facilitates an element
of comparability with other companies, although management’s measures may not be calculated in the same way as similarly titled
measures reported by other companies, and because these measures are useful in connection with discussions with the investment
community.
Non-IFRS Measures | Year ended December 31, | ||||
(USD million) | 2024 | 2023 | |||
Time charter equivalent (TCE) earnings – Tanker segment | 1,134.8 | 1083.8 | |||
Gross profit | 895.6 | 874.1 | |||
Adjusted EBITDA | 844.2 | 846.4 | |||
Net interest-bearing debt | 947.6 | 773.4 | |||
Loan-to-value (LTV) – Tanker segment | 26.8 | % | 27.6 | % | |
Time Charter Equivalent (TCE) earnings. We define TCE earnings, a performance measure, as revenue after port expenses,
bunkers and commissions incl. freight and bunker derivatives from the Tanker segment. We report TCE earnings, a non-IFRS measure,
because we believe it provides additional meaningful information to investors in conjunction with revenue, the most directly comparable
IFRS measure, given it is a standard shipping industry performance measure used primarily to compare period-to-period changes in a
shipping company’s performance irrespective of changes in the mix of charter types (i.e. spot charters, time charters and bareboat
charters) under which the vessels may be employed between the periods. Below is presented a reconciliation from revenue to TCE
earnings.
Reconciliation to revenue - Tanker segment | Year ended December 31, | |||
(USD million) | 2024 | 2023 | ||
Revenue | 1,544.0 | 1,491.4 | ||
Port expenses, bunkers and commissions | (409.2) | (407.6) | ||
Time charter equivalent (TCE) earnings - Tanker segment | 1,134.8 | 1,083.8 | ||
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Gross profit. We define Gross profit as revenue less port expenses, bunkers and commissions, other cost of goods sold, charter
hire and operating expenses. We report Gross profit, a non-IFRS measure, because we believe it provides additional meaningful
information to investors to assess our operating performance, as Gross profit measures the net earnings from core activities.
Computation of gross profit | Year ended December 31, | |||
(USD million) | 2024 | 2023 | ||
Revenue – all segments | 1,559.2 | 1,520.4 | ||
Port expenses, bunkers and commissions and other cost of goods sold | (418.5) | (430.3) | ||
Operating expenses | (245.1) | (216.0) | ||
Gross profit | 895.6 | 874.1 | ||
EBITDA. We define EBITDA as earnings before financial income and expenses, depreciation, impairment, amortization and
taxes. EBITDA is used as a supplemental financial measure by Management and external users of financial statements, such as
lenders, to assess our operating performance as well as compliance with the financial covenants and restrictions contained in our
financing agreements. We believe that EBITDA assists Management and investors in evaluating our operations by increasing
comparability of our performance from period to period. This increased comparability is achieved by excluding the potentially
disparate effects of interest, depreciation, impairment, amortization, and taxes. These are items which could be affected by various
changing financing methods and capital structures, and which may significantly affect profit/(loss) between periods. Including
EBITDA as an alternative performance measure, benefits investor in selection between investment alternatives.
EBITDA excludes some, but not all, items that affect profit/ (loss), and these items may vary among other companies and may
therefore not be directly comparable. The following table reconciles EBITDA to net profit/ (loss), the most directly comparable IFRS
financial measure, for the periods presented.
Due to temporary fluctuations of the fair value of freight and bunker derivatives, Management believes that an adjustment for
unrealized gains/losses on freight and bunker derivatives help to increase comparability in EBITDA developments. EBITDA and the
adjusted EBITDA are calculated as follows:
Reconciliation to net profit | Year ended December 31, | |||
(USD million) | 2024 | 2023 | ||
Net profit for the year | 611.5 | 648.0 | ||
Tax | (2.0) | 4.0 | ||
Financial expenses | 74.1 | 60.9 | ||
Financial income | (24.8) | (14.3) | ||
Depreciation | 192.0 | 149.3 | ||
EBITDA | 850.8 | 847.9 | ||
Reconciliation to EBITDA | ||||
EBITDA | 850.8 | 847.9 | ||
Fair value adjustments on freight and bunker derivatives | (6.6) | (1.5) | ||
Adjusted EBITDA | 844.2 | 846.4 | ||
Net interest-bearing debt. Net interest-bearing debt is defined as borrowings (current and non-current), less loan receivables
and cash and cash equivalents, including restricted cash. Net interest-bearing debt depicts the net capital resources, which cause net
interest expenditure and interest rate risk and which, together with equity, are used to finance our investments. As such, we believe that
net interest-bearing debt is a relevant measure, which management uses to measure the overall development of our use of financing,
other than equity. Such measure may not be comparable to similarly titled measures of other companies. Net interest-bearing debt is
calculated as follows:
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Net interest-bearing debt | Year ended December 31, | |||
(USD million) | 2024 | 2023 | ||
Borrowings (current and non-current)¹⁾ | 1,243.3 | 1,073.5 | ||
Loan receivables | (4.5) | (4.5) | ||
Cash and cash equivalents, including restricted cash | (291.2) | (295.6) | ||
Net interest-bearing debt | 947.6 | 773.4 | ||
¹⁾ Borrowings include long-term and short-term borrowings, excluding capitalized loan costs for the year of USD 17.0m (2023: USD
13.9m)
Loan-to-value (LTV) ratio. Loan-to-value (LTV) ratio is defined as vessel values divided by net borrowings of the vessels.
LTV describes the net debt ratio of our vessels and is used by us to describe the financial situation, the liquidity risk as well as to
express the future possibilities to raise new capital by new loan facilities.
Loan-to-value (LTV) - Tanker segment | Year ended December 31, | ||||
(USD million) | 2024 | 2023 | |||
Vessel values, including newbuildings (broker values) | 3,582.9 | 3,080.9 | |||
Vessel values of purchased secondhand vessels not delivered (broker values) | — | 479.9 | |||
Other committed investment capital expenditure | 23.0 | 35.7 | |||
Total vessel values | 3,605.9 | 3,596.5 | |||
Borrowings | 1,241.3 | 1,067.6 | |||
- Debt on Land and buildings and Other plant and operating equipment | (8.4) | (5.4) | |||
Committed liability capital expenditure | 23.0 | 226.1 | |||
Loan receivables | (4.5) | (4.5) | |||
Cash and cash equivalents incl. restricted cash | (284.9) | (290.7) | |||
Total (loan) | 966.5 | 993.1 | |||
Loan-to-value (LTV) - Tanker segment | 26.8 | % | 27.6 | % | |
A.Operating Results
Primary Factors Affecting Results of Operations
Reference is made to “Financial Review 2024-Primary Factors Affecting Results of Operations” on page 31 of our Annual
Report 2024.
Other Important Financial and Operational Terms and Concepts of TORM plc
The Company uses a variety of other financial and operational terms and concepts. These include the following:
•Voyage expenses. Voyage expenses are all expenses related to a particular voyage, including any bunker fuel expenses,
port expenses, cargo loading and unloading expenses, canal tolls and agency fees. These expenses are subtracted from
shipping revenues to calculate Time Charter Equivalent Rates.
•Vessel operating costs. Vessel operating costs include crewing, repairs and maintenance (excluding capitalized dry-
docking), insurance, consumable stores, lube oils, communication expenses and technical management fees. The largest
components of our vessel operating costs are generally crewing and repairs and maintenance. Expenses for repairs and
maintenance tend to fluctuate from period to period because most repairs and maintenance typically occur during periodic
dry-dockings. We expect these expenses to increase as our fleet matures and to the extent that it expands.
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•Charter hire. Charter hire consists of (i) money paid to the vessel owner by a charterer for the use of a vessel under a time
charter or bareboat charter and (ii) amortization of the fair value of time charter contracts acquired. Such payments to
vessel owners are usually made during the course of the charter every 30 days in advance or in arrears by multiplying the
daily charter rate by the number of days and, under a time charter only, subtracting any time the vessel was deemed to be
off-hire. Under a bareboat charter such payments are usually made monthly and are calculated on a 360 or 365-day
calendar year basis.
•Dry-docking. We must periodically dry-dock each of our vessels for inspection and any modifications to comply with
industry certification or regulatory requirements. Generally, each vessel is dry-docked every 30 to 60 months.
•Depreciation. Depreciation expenses typically consist of charges related to the depreciation of the historical cost of our
fleet (less an estimated residual value and any impairment losses recognized) over the estimated useful lives of the vessels
and charges related to the depreciation of upgrades to vessels which are depreciated over the shorter of the vessel’s
remaining useful life or the life of the renewal or upgrade. Dry-docking costs are capitalized and depreciated on a straight-
line basis over the estimated period until the next dry-docking.
Factors You Should Consider When Evaluating the Results of TORM plc
The Company faces a number of risks associated with our industry and must overcome a variety of challenges to utilize our
competitive strengths in order to profitably implement our business strategy. These risks include, among other things: the highly cyclical
tanker industry, dependence on spot market voyage charters, fluctuating charter values, increase in fuel prices, changing economic,
political and governmental conditions affecting our industry and business, international sanctions, embargoes, import and export
restrictions, nationalizations and wars, material changes in applicable laws and regulations, full performance by counterparties,
particularly charterers, maintaining customer relationships, delay in deliveries or non-deliveries from shipyards, piracy attacks,
maintaining sufficient liquidity, financing availability and terms and management turnover. See “Item 3. Key Information—D. Risk
Factors”.
Results of Operations of TORM plc
We operate within two segments: (i) the Tanker segment and (ii) the Marine Engineering segment. The below tables have been
provided at a group level and the analysis has been broken out into segments where the movements are material.
The information below should be read in conjunction with TORM plc’s audited consolidated financial statements as of and for
the years ended December 31, 2024 and 2023 and the section of this annual report entitled “Explanatory Note and Presentation of Our
Financial and Operating Data”. Some of the information contained in this section, including information about TORM plc’s plans and
strategies for our business and our expected sources of financing, contains forward-looking statements that involve risks and
uncertainties. Current and potential investors should read “Item 3. Key Information-D. Risk Factors” for information on certain factors
that may have a material adverse effect on TORM plc’s future performance, results of operations, cash flows and financial position.
TORM plc operates in a global industry where, among other things, freight rates are denominated and settled in United States
dollars, and a majority of the cost base of TORM plc is denominated and settled in United States dollars. Consequently, TORM plc’s
financial reporting is in United States dollars.
Financial highlights for TORM plc
Reference is made to the relevant “Key Figures” on page 3 and “2024 Highlights” on pages 3 - 7 of our Annual Report 2024.
Consolidated financial information as of and for the years ended December 31, 2024 and 2023
Income statement
The table below presents financial information derived from TORM plc’s income statement for the years ended December 31,
2024 and 2023.
Financial information from Income statement for TORM plc for the years ended December 31, 2024 and 2023
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Year Ended December 31, | ||||
(USD million) | 2024 | 2023 | ||
Revenue | 1,559.2 | 1,520.4 | ||
Port expenses, bunkers and commissions and other cost of goods sold | (418.5) | (430.3) | ||
TCE earnings – Tanker segment | 1,134.8 | 1,083.8 | ||
Gross profit | 895.6 | 874.1 | ||
EBITDA | 850.8 | 847.9 | ||
Operating profit | 658.8 | 698.6 | ||
Profit before tax | 609.5 | 652.0 | ||
Net profit for the year | 611.5 | 648.0 | ||
Revenue
Total revenue was $1,559 million for the year ended December 31, 2024, which represents an increase of $39 million
compared to the year ended December 31, 2023. The increase in revenue was primarily a result of the addition of 12 vessels to the
fleet, increasing earning days in 2024 to 2,135 days equivalent to a 7.3% increase compared to earning days in 2023. This impact
more than offsets the adverse impacts of the TCE rate/day and decrease in MET revenue.
Port expenses, bunkers and commissions and other cost of goods sold
Total port expenses, bunkers and commissions and other cost of goods sold were $418 million for the year ended December
31, 2024, which represents a decrease of $12 million compared to the year ended December 31, 2023. Bunkers amounted to 67%, port
expenses to 26%, and commissions, other voyage expenses and other cost of goods sold to 7% respectively of the total port expenses,
bunkers and commissions and other cost of goods sold for the year ended December 31, 2024. Bunkers amounted to 63%, port expenses
to 31%, and commissions and other voyage expenses to 6% of the total port expenses, bunkers and commissions for the year ended
December 31, 2023. The increase can primarily be attributed to a decrease in realized gains of USD 21.2m partly offset by an increase
in unrealized gains of USD 5.2m on derivative financial instruments regarding freight and bunkers. The fair value of the contracts was
positive with USD 8.1 m as of December 31, 2024. Additionally, bunker costs and the introduction of EU Allowances (EUAs), which
allow companies to emit a certain amount of carbon dioxide equivalents, in 2024 contributed to a total of USD 10.7m in increased
expenses compared to 2023. The net increase of the aforementioned items is mainly offset by reduced port expenses of USD 23.9m.
TORM plc reported a net profit for the year ended December 31, 2024 of $612 million, compared to a net profit of $648
million for the year ended December 31, 2023, a decrease of $37 million.
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TCE earnings - Tanker Segment
LR2 | LR1 | MR | Total | ||||||
Year-end 2023 | |||||||||
Available TCE earning days | 4,490 | 4,307 | 20,355 | 29,152 | |||||
TCE per earning day, USD | 47,718 | 37,326 | 34,745 | 37,124 | |||||
TCE earnings, USD million Year-end 2023 | 214.2 | 161.2 | 708.4 | 1,083.8 | |||||
Year-end 2024 | |||||||||
Available TCE earning days | 6,859 | 3,531 | 20,897 | 31,287 | |||||
Change | 53 | % | (18) | % | 3 | % | 7 | % | |
TCE per earning day, USD | 45,053 | 37,014 | 32,948 | 36,061 | |||||
Change | (6) | % | (1) | % | (5) | % | (3) | % | |
Effect on TCE earnings from change in the available TCE earning days, USD million | 113.0 | (29.0) | 18.9 | 102.9 | |||||
Effect on TCE earnings from change in TCE per earning day, USD million | (19.9) | (1.2) | (35.9) | (57.0) | |||||
Other | 8.2 | (0.9) | (2.2) | 5.1 | |||||
TCE earnings, USD million Year-end 2024 | 315.5 | 130.1 | 689.2 | 1,134.8 |
TCE earnings were $1,135 million for the year ended December 31, 2024, representing an increase of $51 million compared to
the year ended December 31, 2023. This growth was a result of an increase in revenue along with a decrease in port expenses, bunkers,
and commissions for the Tanker segment.
During 2024, the product tanker market was strongly affected by the geopolitical conflict in the Middle East and the
subsequent Houthi attacks against commercial vessels at the Bab al-Mandeb Strait. This led to a widespread rerouting of vessels away
from the Red Sea to go around the Cape of Good Hope, increasing trade distances on top of the already longer trade routes as a result
of sanctions against Russia, officially introduced in 2023.
Prior to disruption, around 12% of global clean petroleum product volumes transited the Suez Canal. By the end of the first
quarter 2024, the number of product tankers transiting the Red Sea had fallen by 60%. Given the fact that around 45% of clean
petroleum product volume carried on LR2s normally travels through the Suez Canal, the impact on trade rerouting was strongest on
the LR2 segment. Elevated fleet utilization led to higher and volatile freight rates. Benchmark LR2 freight rates briefly touched above
USD 100,000/day in late January/early February, a level not seen since the early days of the COVID-19 pandemic. Elevated LR2
earnings triggered a number of crude tankers to clean up and enter clean product transportation, which resulted in product tanker rates
dropping from record high to more normalized levels in the second half of the year.
In 2024, TORM’s product tanker fleet realized TCE earnings of $36,061/day, down by 3% compared to 2023, as denoted in
the table above.
For details about vessel acquisitions and disposals refer “Item 4. Information of the Company-B. Business Overview-Fleet
Development”.
65
Gross profit
Year ended | Year ended | |||
December 31, | December 31, | |||
(USD million) | 2024 | 2023 | ||
Revenue | 1,559.2 | 1,520.4 | ||
Port expenses, bunkers and commissions and other cost of goods sold | (418.5) | (430.3) | ||
Operating expenses | (245.1) | (216.0) | ||
Gross profit | 895.6 | 874.1 |
TORM plc’s Gross profit for the year ended December 31, 2024 was $896 million compared to $874 million for the year
ended December 31, 2023 corresponding to an increase of $22 million. The increase was mainly driven by increase in revenue along
with a decrease in port expenses, bunkers, and commissions for the Tanker segment and an increase in the operating expenses due to
2,250 additional operating days compared to 2023 and increased operating expenses per day of 5.8% stemming from general price
increases combined with costs related to recently acquired secondhand vessels.
The total fleet of owned vessels had 1,568 off-hire and dry-docking days, corresponding to 4.8% of operating days in 2024.
This compares to 1,453 off-hire and dry-docking days in 2023 corresponding to or 4.7% of operating days. The relative share of
operating days is on par with the share in 2023, however, generally higher than in years prior to 2023. This is driven by newly
acquired vessels entering dry docking shortly after takeover.
EBITDA
Year ended | Year ended | |||
December 31, | December 31, | |||
(USD million) | 2024 | 2023 | ||
Gross profit | 895.6 | 874.1 | ||
Profit from sale of vessels | 51.3 | 50.4 | ||
Administrative expenses | (95.6) | (82.9) | ||
Other operating income and expenses | (0.5) | 6.3 | ||
Share of profit/(loss) from joint ventures | — | — | ||
EBITDA | 850.8 | 847.9 |
TORM plc’s EBITDA was $851 million for the year ended December 31, 2024, compared to $848 million for the year ended
December 31, 2023, corresponding to an increase of $3 million. The increase was mainly driven by the same factors as Gross Profit
and additionally an increase in the profit from sale of vessels and higher administrative expenses.
Administrative expenses increased to $96 million for the year ended December 31, 2024, compared to $83 million for the
year ended December 31, 2023. The primary factor was the 2024 full-year impact of the additional extraordinary retention program
granted to the Chief Executive Officer ("CEO") and certain employees as announced on March 29, 2023. Increase in share-based
payment expense was USD 7.3m compared to 2023.
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Operating profit
Year ended December 31, | Year ended December 31, | ||
(USD million) | 2024 | 2023 | |
EBITDA | 850.8 | 847.9 | |
Impairment losses and reversal of impairment on tangible assets | — | — | |
Depreciation | (192.0) | (149.3) | |
Operating profit | 658.8 | 698.6 |
TORM plc’s operating profit was $659 million for the year ended December 31, 2024, compared to an operating profit of
$699 million for the year ended December 31, 2023, corresponding to a decrease of $40 million. The decrease was mainly driven by
the same factors as EBITDA and higher depreciation expenses.
Depreciation amounted to $192 million for the year ended December 31, 2024, compared to $149 million for the year ended
December 31, 2023.
Profit before tax
Year ended December 31, | Year ended December 31, | ||
(USD million) | 2024 | 2023 | |
Operating profit | 658.8 | 698.6 | |
Financial income | 24.8 | 14.3 | |
Financial expenses | (74.1) | (60.9) | |
Profit before tax | 609.5 | 652.0 |
TORM plc’s profit before tax was $610 million for the year ended December 31, 2024, compared to $652 million for the year
ended December 31, 2023, corresponding to a decrease of $43 million.
Financial expenses increased to $74 million for the year ended December 31, 2024, compared to $61 million for the year
ended December 31, 2023, primarily due to increased borrowings mainly driven by the new $200m five-year senior unsecured bond,
and secondly by generally higher interest rates.
Financial income increased to $25 million for the year ended December 31, 2024, compared to $14 million for the year ended
December 31, 2023, due to higher interest rates and higher interest income on deposits and treasury bills.
Net Profit for the year
TORM plc reported a net profit for the year ended December 31, 2024 of $612 million, compared to a net profit of $648
million for the year ended December 31, 2023, a decrease of $37 million. The decrease is due to factors explained in all the above
explanations.
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Balance sheet
TORM’s total assets for the Group increased by USD 599.5m to USD 3,469.6m as of December 31, 2024, mainly driven by
an increase of the total assets for the Tanker segment from USD 602.6m to USD 3,456.0m. The growth in the Tanker segment was
primarily driven by an increase in vessels and capitalized dry-docking, including prepayments on vessels, of USD 676.2m as a result
of increased vessel acquisition activities during 2024. The development is mainly offset by a decrease in assets held for sale of USD
47.2m and trade receivables of USD 27.1m.
As of December 31, 2024, the carrying amount of vessels, capitalized dry-docking, and prepayments on vessels in the Tanker
segment amounted to USD 2,843.9m compared to USD 2,167.7m at end 2023. This increase was due to the delivery of 19 vessels
including capitalized dry-docking of USD 910.0m. The increase was offset by the divestment including delivery to new owners of
seven older vessels of USD 47.0m and depreciation of USD 186.7m. Based on the average broker valuations from two internationally
recognized shipbrokers, TORM’s fleet on water had a market value of USD 3,582.9m as of December 31, 2024, 26.0% above carrying
value.
In 2024, total equity for the Group increased by USD 408.8m to USD 2,074.8m. The increase was primarily driven by a
capital increase of USD 331.7m due to the issuance of new shares in connection with several partly share-based financed vessel
acquisitions during 2024. Additionally, the increase was positively impacted by the net profit for the year of USD 611.5m offset by
dividends paid of USD 553.3m.
TORM's total liabilities for the Group increased by USD 190.7m to USD 1,394.8m as of December 31, 2024, mainly driven
by an increase of the total liabilities for the Tanker segment of USD 191.0m to USD 1,383.1m. The development is primarily due to an
increase in current and non-current borrowings of USD 170.6m to USD 1,224.3m, which stem from increased net vessel acquisitions
during 2024.
B.Liquidity and Capital Resources
Overview
Reference is made to Note 2 “Liquidity, Capital Resources and Subsequent Events" on pages 209 - 210 and Note 20 “Effective
Interest Rate, Outstanding Borrowings” on pages 232 - 233 and Note 21 “Contractual Rights and Obligations” on page 233 of
our Annual Report 2024.
For the discussion of Liquidity and Capital Resources for the year ended December 31, 2023, reference is made to “Item 5.
Operating and Financial Review and Prospects” included in our 2023 Annual Report on Form 20-F, filed with the SEC on March 7,
2024.
Our primary application of cash relates to operating expenses, financial expenses (interest payment, debt repayment and
leasing payments) and capital expenditures, primarily investments in ships and other assets such as scrubbers. Payment of amounts
outstanding under our Financing Agreements (more fully discussed below) along with payment of charter hire for chartered-in vessels
and all other commitments that we have entered into are made from the cash available to us. Our primary sources of cash are cash flows
from operations, our Financing Agreements (more fully discussed below), new debt or equity financings and sale of vessels.
As of December 31, 2024, TORM had available liquidity including undrawn committed facilities of $614.8 million,
comprising of cash and cash equivalents (including restricted cash) of $291.2 million and undrawn committed credit facilities
amounting to $323.6 million. Restricted cash was $19.3 million. The undrawn committed credit facilities consist of a revolving credit
facilities of $100 million as part of the Syndicate Facility from 2023, a revolving credit facility of $149.5 million as part of the
Syndicate Facility from 2024 and a revolving credit facility of $74.1 million with HCOB.
The Company uses interest rate swaps to hedge parts of the variable interest rate risk associated with the credit facilities and a
part of the leasing agreements have fixed lease payments. At the end of 2024, TORM had fixed 82.7% of the debt then outstanding
with interest rate swaps and fixed rate leasing debt corresponding to an amount of $1,019.7 million with $498.7 million being hedged
at an interest rate of 1.29% plus margin with interest rate swaps with maturity in the period from 2025 to 2030.
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As of December 31, 2024, TORM had no short-term loans other than any short-term part of the facilities included in the table
entitled below. See “Item 5. Operating and Financial Review and Prospects B. Liquidity and Capital Resources - Our Financing
Agreements” for a description of the repayment schedule. As part of our day-to-day operations, we have accounts payables.
We are of the opinion that our working capital is adequate to meet our present requirements for the next twelve months
following the date of this annual report.
The table below gives an overview of our long-term bank loans and finance leases.
Financing Agreements, including long-term and short-term mortgage debt, bank loans and finance leases as of December 31,
2024 of TORM plc.
Total Outstanding Debt as of December 31, 2024 | Undrawn Amount as of December 31, 2024 | |||||||
Facility | Lenders | Maturity per facility | (USD millions) | (USD millions) | ||||
DSF Facility 1 | DSF | November 1, 2029 | 123.8 | - | ||||
DSF Facility 2 | DSF | November 1, 2029 | 92.0 | - | ||||
DSF Facility 3 | DSF | November 1, 2031 | 29.8 | - | ||||
KfW Facility | KfW | January 17, 2032 April 21, 2032 | 31.8 | - | ||||
Syndicate Facility 1 (herein RCF) | Danske Bank, Nordea, SEB, DNB, ING, ABN AMRO, Crédit Agricole CIB, Société Générale, BNP Paribas | June 30, 2029 | 160.0 | 100 | ||||
Syndicate Facility 2 (herein RCF) | Danske Bank, Nordea, SEB, DNB, ING, ABN AMRO, Société Générale, First Citizen Bank | September 30, 2031 | - | 149.5 | ||||
HCOB Facility (herein RCF) | HCOB | March 31, 2029 | 87.5 | 74.1 | ||||
ING Facility | ING | December 31, 2029 | 51.4 | - | ||||
BoComm Agreements (Lease) | BoComm | July 15, 2029 August 15, 2029 November 15, 2031 January 15, 2032 | 135.6 | - | ||||
Springliner Agreement (Lease) | Various | August 31, 2026 | 25.0 | - | ||||
CDBL (Lease) | November 1, 2029 December 1, 2029 December 1, 2031 January 1, 2032 | 136.5 | - | |||||
CMBFL (Lease) | April 5 and 12, 2030 May 2, 2030 March 21, 23 and 27, 2031 January 31, 2033 February 21, 2033 | 159.5 | - | |||||
Senior unsecured bond | 200.0 | - | ||||||
Other credit facilities | 2026 | 1.9 | ||||||
Total debt under the Agreements | 1,234.8 | 323.6 |
Our Financing Agreements
As of December 31, 2024, we were in compliance with the financial covenants contained in our debt facilities.
Loan agreements
Syndicate Facility ("Syndicate Facility 1")
69
On June 21, 2023, we entered into a combined secured term loan facility agreement of $344 million and working capital
facility agreement of $100 million for aggregate borrowings of $444 million (the “Syndicate Facility”). The Syndicate Facility (both the
term loan and the working capital facility) was entered into with Danske Bank, Nordea, DNB, SEB, ING, ABN AMRO, Crédit Agricole
CIB, BNP Paribas and Société Générale and refinanced 24 vessels, built from 2009 to 2020, that served as collateral under the facility.
TORM plc is the borrower and TORM A/S and vessel-owning-entities owned directly or indirectly by TORM plc are guarantors under
the Syndicate Facility. During 2024 TORM exercised extension option pushing maturity 1 year, pushing the final maturity to June 30,
2029. The Syndicate Facility bears an interest rate of SOFR compounded in arrears plus a margin of 1.85% and is payable in quarterly
installments with a balloon at maturity. The Syndicate Facility is secured by first priority mortgages over the security vessels, as well as
first priority assignments in respect of each of the vessel’s insurances and earnings and irrevocable joint and several guarantees from the
guarantors. The RCF subjects us to a commitment fee on the undrawn amount of 35% of the margin. The lenders have provided funding
commitments pro rata between both facilities.
The Syndicate Facility contains the following financial covenants:
•Equity Ratio. A ratio of equity to total assets of no less than 25%; and
•Minimum cash requirement. Minimum cash and cash equivalents, excluding restricted cash greater than or equal to the
higher of (i) $45 million and (ii) 5% of our total debt.
The drawdown was made on June 28, 2023.
Syndicate Facility 2 ("Syndicate Facility 2")
On October 8, 2024, we entered into a revolving credit facility agreement of $149.5 million. The Syndicate Facility was
entered into with Danske Bank, Nordea, DNB, SEB, ING, ABN AMRO, Société Générale and First Citizen Bank and finance 6 vessels,
built from 2012 to 2015, that served as collateral under the facility. TORM plc is the borrower and TORM A/S and vessel-owning-
entities owned directly or indirectly by TORM plc are guarantors under the Syndicate Facility. The Syndicate Facility bears an interest
rate of SOFR compounded in arrears plus a margin of 2.00% and is payable in quarterly installments with a balloon at maturity. Final
maturity date is September 30 2031. The Syndicate Facility is secured by first priority mortgages over the security vessels, as well as
first priority assignments in respect of each of the vessel’s insurances and earnings and irrevocable joint and several guarantees from the
guarantors. The RCF subjects us to a commitment fee on the undrawn amount of 35% of the margin. The lenders have provided funding
commitments pro rata between both facilities.
The Syndicate Facility 2 contains the following financial covenants:
•Equity Ratio. A ratio of equity to total assets of no less than 25%; and
•Minimum cash requirement. Minimum cash and cash equivalents, excluding restricted cash greater than or equal to the
higher of (i) $45 million and (ii) 5% of our total debt.
The facility was undrawn as of the date of this report.
HCOB Facility Agreement
On October 4, 2024, TORM entered into a secured term loan facility with HCOB for $161.5 million to refinance existing
agreements and financing additional 2 MR vessels. The facility consists of a term loan facility of $87.5 million and a revolving credit
facility of 74.1 million. The "HCOB Facility" financed 13 vessels built from 2007 to 2014, which served as collateral under the
agreement. TORM plc is the borrower and TORM A/S and vessel-owning-entities owned directly or indirectly by TORM plc are
guarantors under the HCOB Facility. The facility has a tenor of five years with a final maturity date of March 31, 2031, bears an interest
rate of SOFR compounded in arrears plus a margin of 2.55% and is payable in quarterly installments with a balloon payment at
70
maturity. The HCOB Facility is secured by first priority mortgages over the security vessels, as well as first priority assignments in
respect of each of the vessel’s insurances and earnings and irrevocable joint and several guarantees from the guarantors.
The HCOB Facility contains the following financial covenants:
•Equity Ratio. A ratio of equity to total assets of no less than 25%; and
•Minimum cash requirement. Minimum cash and cash equivalents, excluding restricted cash greater than or equal to the
higher of (i) $45 million and (ii) 5% of our total debt.
The drawdown was made on October 23, 2024.
KfW Facility
On July 29, 2019, we entered into a secured term loan facility with KfW IPEX-Bank GMBH (the “KfW Facility”), which
provided us with borrowings of up to $45.5 million to partially finance the purchase of two MR newbuildings, TORM A/S is the
borrower and the owner of the vessels under the KfW Facility and TORM plc is the guarantor. China Export & Credit Insurance
Corporation is the export credit insurance provider. The KfW Facility has a term of 12 years, bears interest at a rate of SOFR
compounded in arrears plus a margin of 1.85% per annum and is repayable in bi-annual installments and two balloon payments 12 years
after drawdown on each tranche. The KfW Facility is secured by first priority mortgages over the security vessels, as well as first
priority assignments in respect of each of the vessel’s insurances, earnings and account and irrevocable joint and several guarantees
from the guarantors. The KfW Facility contained substantially the same financial covenants, default provisions, undertakings and
restrictions as contained in the Syndicate Facility, described above.
On January 17, 2020, a drawdown for one MR vessel was made and on May 4, 2020, a drawdown on the other MR vessel was
made.
DSF Facilities Agreements
On October 21, 2020, we entered into a secured term loan facility agreement with Danmark Skibskredit A/S (the “Initial DSF
Facility”) for borrowings of up to $150.3 million. The Initial DSF Facility financed eight newer vessels, which served as collateral
under the agreement. TORM plc was the borrower and TORM A/S and vessel-owning-entities owned directly or indirectly by TORM
plc were guarantors under the Initial DSF Facility. The tenor of the facility was seven years with a final maturity date of November 1,
2027, it had an interest rate of London Interbank Offered Rate (“LIBOR”) plus a margin of 2.10% and is payable in quarterly
installments with a balloon payment at maturity. The Initial DSF Facility was secured by first priority mortgages over the security
vessels, as well as by first priority assignments in respect of each of the vessel’s insurances and earnings and irrevocable joint and
several guarantees from the guarantors.
On January 5, 2021, we agreed with DSF to add an additional facility agreement to the Initial DSF Facility (the “First DSF
Additional Facility”) for borrowings up to $56.4 million. The First DSF Additional Facility financed two MR vessels which served as
collateral under the agreement together with the vessels provided as security under the Initial DSF Facility. The facility had a tenor of
six years and ten months with a final maturity date of November 1, 2027, had an interest rate of LIBOR plus a margin of 2.10% and was
payable in quarterly installments with a balloon payment at maturity.
On June 3, 2021, we agreed with DSF to add an additional facility agreement to the Initial DSF Facility (the “Second DSF
Additional Facility”) for borrowings up to $60.0 million. The Second DSF Additional Facility financed two LR2 vessels, which served
as collateral under the agreement together with the vessels provided as security under the Initial DSF Facility and the First DSF
Additional Facility. The facility had a tenor of six years and five months with a final maturity date of November 1, 2027, had an interest
rate of LIBOR plus a margin of 2.00% and is payable in quarterly installments with a balloon payment at maturity. The Initial DSF
Facility, the First DSF Additional Facility and the Second DSF Additional Facility are collectively referred to as the "DSF Facility."
71
On December 11, 2023, we agreed with DSF to amend and extend the above DSF Facilities and change interest reference rate
from LIBOR to SOFR in accordance with US reference interest rate reform. The consolidated facility consists of a $140.1 million term
facility. This facility finances nine vessels built from 2010 to 2019 and bears interest rate of SOFR compounded in arrears plus a margin
of 1.85% per annum and a balloon payment at final maturity, which was extended two year to November 1, 2029. The facility will have
a margin of 2.00% from November 1, 2027 ("DSF facility 1").
On December 11, 2023, we obtained commitment for $105 million for four vessels built in 2015 and 2016, which was drawn at
the end of February 2024 (the "DSF Facility 2"). DSF Facility 2 bears interest rate of SOFR compounded in arrears plus a margin of
1.80% per annum and have quarterly installments and a balloon payment at final maturity, which is November 1, 2029.
On October 8, 2024, we agreed with DSF ("DSF Facility 3") to finance one MR vessel built in 2015 and bears interest rate of
SOFR compounded in arrears plus a margin of 1.90% per annum and a balloon payment at final maturity, which is November 1, 2031.
The DSF Facilities contain the following financial covenants:
•Equity Ratio. A ratio of equity to total assets of no less than 25%; and
•Minimum cash requirement. Minimum cash and cash equivalents, excluding restricted cash greater than or equal to the
higher of (i) $45 million and (ii) 5% of our total debt.
ING Facility
On December 11, 2023, we entered into a secured term loan facility agreement $57.9 million and financed three vessels, built
in 2015, that served as collateral under the facility (the "ING Facility"). The ING Facility refinances vessels previously financed by
DSF. TORM plc is the borrower and TORM A/S and TORM Tanker Corporation vessel-owning-entities owned directly or indirectly by
TORM plc are guarantors under the facilities agreement. The agreement has a tenor of six years with a final maturity date of December
31, 2029. The facility bears an interest rate of SOFR compounded in arrears plus a margin of 1.90% and is payable in quarterly
installments with a balloon at maturity. The agreement is secured by first priority mortgages over the security vessels, as well as first
priority assignments in respect of each of the vessel’s insurances and earnings and irrevocable joint and several guarantees from the
guarantors. ING has a 100% pledge in the issued and outstanding shares of capital stock on the vessel owner TORM Tanker
Corporation.
The ING Facility Agreement contains the following financial covenants:
•Equity Ratio. A ratio of equity to total assets of no less than 25%; and
•Minimum cash requirement. Minimum cash and cash equivalents, excluding restricted cash greater than or equal to the
higher of (i) $45 million and (ii) 5% of our total debt.
The drawdown was made on December 28, 2023.
Leasing Agreements
As of December 31, 2024, we had the following financial lease facilities:
Springliner Agreement
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On September 10, 2019, we entered into a financial sale and lease-back agreement with Springliner for $39.3 million (the
“Springliner Agreement”). The Springliner Agreement included two vessels built in 2010. TORM A/S is the bareboat charter and
Springliner is the owner of vessel. The Springliner Agreement has a tenor of seven years with final maturity on August 31, 2026. The
agreement includes a fixed bareboat charter hire of $5,700/day and is payable in monthly installments. TORM A/S holds a purchase
option on the vessels. The Springliner Agreement has no financial covenants.
BoComm Agreements
On May 28, 2019, we entered into a financial sale and lease-back agreement with Bank of Communications Financial Leasing
Co., LTD ("BoComm") for $66.4 million. The BoComm agreement included four vessels built in 2011. The agreement has a tenor of
six years with final maturity on August 31, 2026, includes an interest rate of LIBOR plus a margin of 3.30% and a bareboat charter hire
payable in monthly installments. On August 6, 2020, the agreement was amended to include scrubber financing for $10.8 million, which
has a tenor of three years with final maturity on February 5, 2024, includes an interest rate of LIBOR plus a margin of 2.40% and
includes a bareboat charter. TORM A/S is the bareboat charter and BoComm is the owner of vessels. TORM A/S holds a purchase
obligation on the vessels. The BoComm agreement has no financial covenants. The four vessels were repaid and refinanced into the
Syndicate Facility as of June 21, 2023.
On December 19, 2019 and May 10, 2021, we entered into financial sale and lease-back agreements with BoComm for $179.8
million. The BoComm agreement included five vessels built in 2015 and in 2018, and newbuildings being delivered in 2021 and in early
2022. TORM A/S is the bareboat charter and BoComm is the owner of vessel. The agreement has a tenor of 8 years and 10 years with
final maturity in 2029 and 2031, respectively. The agreement included an interest rate of LIBOR plus a margin of 3.00% and 3.10%,
respectively, and a bareboat charter hire payable in monthly installments. TORM A/S holds a purchase option on the vessels. The
BoComm agreement has no financial covenants.
On July 21, 2023, we amended the financial sale and lease-back agreements with BoComm. The amendment changed the
interest rate to SOFR plus a margin of 3.00% and 3.10% plus a credit adjustment spread of 0.1% and a bareboat charter hire payable in
monthly installments.
CDBL Agreement
On October 12, 2021, we entered into a financial sale and lease-back agreement with China Development Bank Leasing
(“CDBL”) for $172 million. The CDBL agreement included nine vessels built between 2010 to 2012. TORM A/S is the bareboat
charter and CDBL is the owner of vessel. The agreement has a tenor that ranges from 7 to 10 years with final maturity on December 31,
2029 or March 31, 2032. The agreement includes a fixed rate bareboat charter hire ranging from $5,900/day to $6,590/day and is
payable in monthly installments. TORM A/S holds a purchase option on the vessels. The CDBL agreement has no financial covenants.
CMBFL Agreements
On April 28, 2022, February 2, 2023 and February 16, 2023, we entered into financial sale and lease-back agreements with
China Merchant Bank Financial Leasing (“CMBFL”) for $224.5 million. The CMBFL agreement included eight vessels built in 2011
to 2016. TORM A/S is the bareboat charter and CMBFL is the owner of vessel. The agreement has a tenor that ranges from seven to
10.5 years with final maturity between April 12, 2030 to January 8, 2033. For seven vessels the agreement includes an accelerated fixed
rate bareboat charter hire of $16,500/day for the first three years and thereafter bareboat charter will be $8,455/day for the remaining
period and is payable in monthly installments. The last vessel bareboat charter is $9,690/day and is payable in monthly installments.
TORM A/S holds a purchase option on the vessels. The CMBFL agreement has no financial covenants.
Debt capital market Agreements
As of December 31, 2024, we had the following debt capital market facilities:
Senior unsecure bond
On January 24, 2024, TORM issued a USD denominated senior unsecure bond on the Oslo stock exchange for $200 million.
TORM PLC is the issuer. The bond has a fixed interest rate of 8.25%, paid semi-annually and final maturity on January 25, 2029.
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TORM has a tap-issue option to issue an additional $50 million under the same documentation and interest rate. The senior unsecure
bond is a senior unsecured obligation and rank equally with all of our existing and future senior unsecured and unsubordinated debt, are
effectively subordinated to our existing and future secured debt. The bond contains early redemption call options, first exercise is July
2027 with strike price of $103.3 and then bi-annual options with falling strike price down to July 2028 with strike price of $100.5. The
senior unsecured bond require us to comply with certain covenants, including financial covenants, restrictions on consolidations and
mergers or sales of assets.
The senior unsecure bond contains the following financial covenants:
•Equity Ratio. A ratio of equity to total assets of no less than 25%; and
•Minimum cash requirement. Minimum cash and cash equivalents, excluding restricted cash greater than or equal to the
higher of (i) $45 million and (ii) 5% of our total debt.
Cash flow
Consolidated cash flow for the years ended December 31, 2024 and 2023
For the discussion of cash flows for the year ended December 31, 2024 compared to December 31, 2023, reference is made to
“Financial Review 2024 - Liquidity and Cash Flow” on page 30 and to our Consolidated Cash Flow Statement for the Year Ended
December 31, 2024 and 2023 on page 202 of our Annual Report 2024.
For the discussion of cash flows for the year ended December 31, 2023 compared to December 31, 2022, reference is made to
“Item 5. Operating and Financial Review and Prospects” included in our 2023 Annual Report on Form 20-F, filed with the SEC on
March 7, 2024.
There are no material restrictions on the ability of subsidiaries with material cash amounts to transfer funds to TORM plc.
Capital Expenditures of TORM plc
The table below presents our capital expenditures for the years ended December 31, 2024, 2023 and 2022.
Capital Expenditures | 2024 | 2023 | 2022 | ||
(USD million) | |||||
Acquisition of vessels and capitalized dry-docking | 792.7 | 476.0 | 77.2 | ||
Prepayments on vessels | 111.5 | 126.6 | 43.1 | ||
Total | 904.2 | 602.6 | 120.3 |
Capital expenditures for the years ended December 31, 2024, 2023 and 2022 consisted primarily of investments in vessels and
capitalized dry-docking. For the year ended December 31, 2024, TORM’s prepayments on purchased not delivered secondhand vessels
amounted to $112 million compared to $127 million and $43 million for the years ended December 31, 2023 and 2022, respectively.
For 2024, TORM plc’s investments related to the acquisition of vessels and capitalized dry-docking amounted to $793 million
compared to $476 and $77 million in 2023 and 2022, respectively. TORM invested a total of $ 904 million during 2024 compared to
$603 and $120 million invested during 2023 and 2022, respectively.
C. Research and Development, Patents and Licenses, etc.
Not applicable.
D. Trend Information
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Reference is made to “Market Review” on pages 23 - 24 of the Annual Report 2024 and to “Item 3. Key Information—D. Risk
Factors—Risks Related to Our Business and Our Industry”.
E. Critical Accounting Estimates
The preparation of financial statements in conformity with IFRS requires estimates and assumptions that influence the value of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the value of revenue
and expenses during the reporting period. These estimates and assumptions are affected by the accounting policies applied. An
accounting estimate is considered critical if the estimate requires the executive management’s position on matters that are subject to
significant uncertainty, if different estimates could reasonably have been applied, or if changes in the estimate that would have a
material impact on the financial position or results of operations are reasonably likely to occur from financial period to financial period.
Our management believes that the accounting estimates employed for the historical financial statements for TORM plc are appropriate
and the resulting balance sheet items are reasonable. However, future results of TORM plc could differ from original estimates requiring
adjustments to balance sheet items in future periods.
Reference is made to “Financial Review 2024-Assessment of Impairment of Assets” on page 29, Note 1- “Accounting Policies,
Critical Accounting Estimates and Judgements” on pages 204 - 208 and Note 12-”Impairment Testing” on pages 226 - 228, each in the
Annual Report 2024.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.Directors and Senior Management
Set forth below are the names, ages and positions of the directors, board observers and Senior Management Team of TORM
plc. Except for the Class B director, who is appointed by the holder of our Class B share and is not subject to annual re-election, and
who may be replaced at any time by the trustee acting on the instructions of the holders of our Class A common shares (other than Njord
Luxco and its affiliates), each director holds office for a one-year term or until his successor has been duly elected and qualified, except
in the event of his death, resignation, removal or the earlier termination of his term of office. At the end of the one-year term, a director
may seek re-election.
The business address of each of our directors and Senior Management Team is TORM plc, 4th Floor | 120 Cannon Street,
London, EC4N 6AS, United Kingdom.
Name | Age | Position | Date of expiry of current term (for Directors) | |||
Christopher Helmut Boehringer | 54 | Chairman | 2024 Annual General Meeting | |||
David Neil Weinstein | 65 | Deputy Chairman (appointed by the holder of the B Share) | Serves until removed by the B shareholder | |||
Annette Malm Justad | 66 | Board Member | 2024 Annual General Meeting | |||
Pär Göran Trapp | 63 | Board Member | 2024 Annual General Meeting | |||
Rasmus Johannes Skaun Hoffman | 47 | Board Observer (Employee Representative) (1) | ||||
Christian Gorrissen | 60 | Board Observer (Employee Representative) (1) | Resigned April 17, 2024 | |||
Liv Kjær | 40 | Board Observer (Employee Representative) (1) | Elected April 17, 2024 | |||
Jacob Balslev Meldgaard | 56 | Executive Director and Chief Executive Officer of TORM A/S | ||||
Kim Balle | 56 | Chief Financial Officer of TORM A/S | ||||
Lars Christensen | 58 | Senior Vice President and Head of Projects of TORM A/S | ||||
Jesper Søndergaard Jensen | 55 | Senior Vice President and Head of Technical Division of TORM A/S |
(1) Board Observers are appointed by the Company’s directors and may be removed by the directors at any time for any
reason. Board Observers can attend and speak at meetings of the Board of Directors but cannot vote.
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Board Diversity
The table below provides certain information regarding the diversity of our Board of Directors as of the date of this annual
report.
Board Diversity Matrix | |||||||||
Country of Principal Executive Offices: | United Kingdom | ||||||||
Foreign Private Issuer | Yes | ||||||||
Disclosure Prohibited under Home Country Law | No | ||||||||
Total Number of Directors | 5 | ||||||||
Female | Male | Non- Binary | Did Not Disclose Gender | ||||||
Part I: Gender Identity | |||||||||
Directors | 1 | 4 | 0 | 0 | |||||
Part II: Demographic Background | |||||||||
Underrepresented Individual in Home Country Jurisdiction | None | ||||||||
LGBTQ+ | - | ||||||||
Did Not Disclose Demographic Background | 5 | ||||||||
Biographical information concerning the directors and our Senior Management Team is set forth below.
Christopher Helmut Boehringer serves and has served as Chairman of our Board of Directors since August 2015. In addition, Mr.
Boehringer is Chairman of TORM’s Nomination Committee and Remuneration Committee. Mr. Boehringer is Managing Director and
Head of Europe, Oaktree Capital Management (International) Limited and has held various executive positions within Oaktree since
2006. Mr. Boehringer also serves as a member of the Board of Directors of Utmost Group Limited, Marco Capital Holdings Limited,
Draslovka a.s. and Oaktree Capital Management (International) Limited. Mr. Boehringer holds a Bachelor of Arts in Economics from
Harvard University and a Master of Business Administration from INSEAD.
David Neil Weinstein serves and has served as a member and Deputy Chairman of our Board of Directors since August 2015. Mr.
Weinstein is also a member of TORM’s Audit Committee, Nomination Committee, Remuneration Committee and Risk Committee. Mr.
Weinstein is a capital markets, governance, and reorganization specialist. Mr. Weinstein has had a number of Board leadership positions
in inter alia Seadrill, Ltd., Stone Energy Corporation, Tru Taj LLC, Deep Ocean Group, Axiall Corporation, The Oneida Group,
Horizon Lines, Inc., Interstate Bakeries Corporation, Pioneer Companies, Inc. and York Research Corporation and has served as
Managing Director of Calyon Securities Inc., BNP Paribas, Bank of Boston and Chase Securities Inc. Mr. Weinstein holds a Bachelor of
Arts in Economics from Brandeis University and a Juris Doctor from Columbia University School of Law.
Annette Malm Justad serves and has served as a member of our Board of Directors since April 2020. Ms. Justad is also a member of
TORM's Audit Committee, Nomination Committee, Remuneration Committee and Risk Committee. Ms. Justad is a partner at Recore
Norway AS and serves as Chair of the Board of Directors of Store Norske Spitsbergen Kulkompani AS, AMSC ASA, Småkraft AS and
Feddie Ocean Distillery AS. She is a member of the Board of Directors of Awilco LNG ASA, and PowerCell Sweden AB. Ms. Justad
has more than 25 years of executive experience from the shipping industry, including Chief Executive Officer of the Oslo listed Eitzen
Maritime Services ASA from 2006-2010. Ms. Justad holds a Master of technology management from the Norwegian University of
Science and Technology/Massachusetts Institute of Technology/Norwegian School of Economics and a Master of Chemical
Engineering from the Norwegian University of Science and Technology.
Pär Göran Trapp serves and has served as a member of our Board of Directors since August 2015. In addition, Mr. Trapp is Chairman
of TORM’s Audit Committee and Risk Committee. Mr. Trapp was with Morgan Stanley from 1992 to 2013 where he started as crude
oil trader, then became Head of Oil Products Trading Europe & Asia, Global Head of Oil Trading and Head of Commodities EMEA.
Prior to joining Morgan Stanley, Göran Trapp was a crude oil trader at Statoil. Göran Trapp is a cofounder of energy advisory boutique
Energex Partners and Chairman of Energex Partners Ltd. Mr. Trapp holds a Master of Science in Economics and Business
Administration from the Stockholm School of Economics.
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Rasmus Johannes Skaun Hoffmann is and has been a Board Observer since April 2016 and before that time served as a member of
our Board of Directors since April 2011. Mr. Hoffmann has been employed with us since 2003 and serves as a chief engineer. Mr.
Hoffmann also serves on the Board of Directors of TORM A/S has served as member of the board in the TORM Foundation since 2013.
Liv Kjær has been a Board Observer since April 17, 2024. Liv Kjær has been employed with TORM since 2014 and serves as
Head of Agency & Process Excellence having previously been employed as Regional Team Leader of Operations Denmark. Ms. Kjær
holds an Executive MBA in Shipping and Logistics.
Christian Gorrissen serves and has served as Head of Legal of TORM A/S since June 2011. Prior to joining the Company, he served
as Head of Legal of Maersk Contractors from 1999 to 2006, Deputy General Counsel of the A.P. Moller-Maersk Group from 2006 to
2008 and as Managing Director of Maersk Drilling Australia Pty. Ltd. From 2008 to 2011. Mr. Gorrissen holds a Master of Laws degree
from the University of Copenhagen, is an attorney admitted to the Supreme Court of Denmark and has attended the International
Executive Program at INSEAD.
Jacob Meldgaard serves and has served as the Chief Executive Officer of TORM A/S since April 2010. Prior to joining TORM, Mr.
Meldgaard served as executive vice president and as a member of the executive management of Dampskibsselskabet NORDEN A/S.
Mr. Meldgaard served as Chairman of the Board of Directors of Danish Shipping until May 2023, he is now board member of Danish
Shipping, Danish Ship Finance A/S, International Chamber of Shipping, and the TORM Foundation. Mr. Meldgaard holds a Bachelor
of Commerce in international trade from the Copenhagen Business School and attended the Advanced Management Program at
Wharton Business School and Harvard Business School.
Kim Balle serves and has served as the Chief Financial Officer of TORM A/S since December 2019. Prior to joining TORM, Mr. Balle
served as Group Chief Financial Officer of CASA A/S since 2017, executive positions in DLG a.m.b.a. from 2014 to 2017 including
Group Chief Financial Officer, executive positions in Danske Bank from 2012 to 2014 including Head of Corporate & Institutional
Banking and Head of Domestic Clients. Mr. Balle is Chairman of TORM A/S and the TORM Foundation and currently serves and has
served as a member of the Board of Directors since 2017 for Nordea Invest and Lind Capital. In 2021, Mr. Balle became a member of
the Board of Directors and the Chairman of the Audit Committee of Liewood A/S and in 2023 he became a member of the Board of
Directors and the Chairman of the Audit Committee in Rosendahl Design Group A/S. He holds a Bachelor of Science in Financing and
Credit and a Master of Business Administration from the Copenhagen Business School and executive educations from Harvard
Business School, INSEAD, University of Oxford and Copenhagen Business School.
Lars Christensen serves and has served as the Senior Vice President and Head of Projects of TORM A/S since May 2011. Prior to
joining TORM, Mr. Christensen served as Managing Director of Navitaship, Vice President of Maersk Broker, Manager at Maersk K.K
and Shipbroker at EA Gibson Shipbrokers. Mr. Christensen holds a Certificate in international trade from the Copenhagen Business
School, a Master of Business Administration from IMD and attended the Executive Management Program at Columbia Business
School. Mr. Christensen is a member of the Board of Directors of TORM Singapore, chairman of the Luise Andresen Foundation and
Lindcom A/S. He is also a member of the board of Andresen Invest A/S, member of the board of Ferrum A/S, Ferrum Holding A/S and
Speditør Andresens Mindefond.
Jesper Søndergaard Jensen serves and has served as the Senior Vice President and Head of Technical Division of TORM A/S since
September 2014. Prior to joining TORM, Mr. Jensen served as Senior Vice President and Technical Manager at Clipper Group and
Fleet Group Manager, Manager and Chief Engineer at Maersk Group. Mr. Jensen holds a Bachelor of Technology Management in
Marine Engineering from the Maritime and Polytechnic College in Denmark and an Executive Master of Business Administration from
Henley Business School and Advanced Management Program at Harvard Business School. Mr. Jensen is Chairman of the Board of ME
Production Denmark and China, and is a Director of the Clean Shipping Alliance and PJ Circular Engineering.
B. Compensation
At the general meeting held on April 11, 2024, our shareholders reapproved the remuneration policy, with effect from the date
of the meeting, which includes overall guidelines for incentive pay for the Board of Directors and our Senior Management Team
(defined below). During 2024, the Committee wished to undertake a further review of the Remuneration Policy that was approved by
the shareholders at the annual general meeting. The Committee reviewed the policy and, in particular, the section related to fees paid to
our Non-Executive Directors and the Chief Executive Officer and concluded that no changes to the Company’s Remuneration Policy
were necessary. The Company is required, under the United Kingdom Companies Act 2006, to prepare a Remuneration Report for each
financial year.
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For information about compensation to our non-executive directors, reference is made to page 191 of the “Remuneration
Committee Report” in the Annual Report 2024.
Executive Management Compensation
Our Senior Management Team, which is comprised of Jacob Meldgaard, our Executive Director and principal executive officer
of TORM plc, the Chief Executive Officer of TORM A/S, Kim Balle, our principal financial officer and the Chief Financial Officer of
TORM A/S, Jesper Jensen, the Head of the Technical Division of TORM A/S and Lars Christensen, the Head of Projects of TORM A/
S, receive compensation consisting of a fixed base salary, cash-based bonus incentives paid out in 2024 under our performance bonus
program, discussed below, and customary executive fringe benefits. We have not granted loans, issued guarantees or undertaken similar
obligations to or on behalf of members of our Senior Management Team.
In 2024, the aggregate compensation paid by the Group to Jacob Meldgaard for his role as Executive Director and principal
executive officer of TORM plc and as the Chief Executive Officer of TORM A/S amounted to $2,451,571, which includes the fee
payable to Mr. Meldgaard for his service on the Board of Directors. We have not allocated funds to provide pension, retirement or
similar benefits to Mr. Meldgaard.
In 2024, the aggregate compensation paid by the Group to the other members of our Senior Management Team (excluding Mr.
Meldgaard) was $2,145,162, which includes an aggregate of $140,483 allocated for pensions for these individuals.
Incentive Schemes
Compensation of our Senior Management Team includes the eligibility to participate in a variable incentive-based pay with a
combination of share options, restricted share units and other share-based awards. We have in place a Long-Term Incentive Plan, or the
LTIP, pursuant to which our Board of Directors may grant certain employees and executive officers share options, restricted share units,
or RSUs, in the form of restricted stock options, or other share-based awards. See “Item 10. Additional Information”.
For information on RSUs granted to Mr. Meldgaard pursuant to the LTIP, reference is made to the “Remuneration Committee
Report -Long-Term Incentive Program-Restricted Share Units Granted” on page 179 of the Annual Report 2024.
During 2024, the members of our Senior Management Team other than Mr. Meldgaard were granted an aggregate of 382,800
RSUs as part of each executive’s annual grant. Each RSU entitles the other members of our Senior Management Team to acquire one
Class A common share, subject to a three-year vesting period, with one third of the grant amount vesting at each anniversary date. The
RSUs were issued with an original exercise price of DKK 258.40 per Class A common share for a period of twelve months after the
vesting date. The exercise price on the RSUs may be adjusted by the Board of Directors to reflect dividend payments made to
shareholders. Assuming 100% vesting and based on the Black-Scholes model, the aggregate RSU grant in 2024 to the other members of
our Senior Management Team would be approximately $2,862,822. In addition, the members of our Senior Management Team were
granted a total of 8,721 RSUs following exercise of RSUs granted in 2021 and 2022 to reflect the payment of dividends since the grant
date. The exercise price for each RSU was USD 0.01.
Performance Bonus Program 2024
For information on the cash performance bonus received by Mr. Meldgaard for the financial year 2024, reference is made to
“Remuneration Committee Report -Performance Bonus 2024” on page 178 of the Annual Report 2024.
During the financial year 2024, the members of our Senior Management Team other than Mr. Meldgaard received cash
performance bonuses in an aggregate amount of $502,145 which is directly linked to the fulfillment of specific performance metrics,
which include developments in the price of our shares and our cost base (up to 50% of the base salary of each executive).
C. Board Practices
Our Board of Directors maintains overall responsibility for the Company and its strategy and is entrusted with various tasks
including appointment and supervision of our Executive Director, Mr. Jacob Meldgaard, and establishment of strategic, accounting,
organizational and financial policies.
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Our Board of Directors has delegated the day-to-day management of our business to our Executive Director. This includes our
operational development and responsibility for implementing the strategies and overall decisions approved by the Board of Directors.
The Executive Director also serves the position as Chief Executive Officer of TORM A/S, our largest subsidiary. Transactions of an
unusual nature or of major importance may only be effected by our Executive Director on the basis of a special authorization granted by
our Board of Directors. In the event that certain transactions cannot await approval by our Board of Directors, taking into consideration
the best interests of the Company, our Executive Director, to the extent possible, shall obtain the approval of the Chairman of our Board
of Directors and ensure that the Board of Directors is subsequently given notice of such transactions passed. Transactions of an unusual
nature or of major importance are defined in our board guidelines for our Board of Directors and include, among other things, the
acquisition and disposal of vessels.
For a description and terms of reference of the committees of our Board of Directors, reference is made to “TORM's
Governance Structure” on page 159 and the individual reports of our Audit Committee, Risk Committee, Nomination Committee and
Remuneration Committee on pages 164 - 184 of our Annual Report 2024.
Board Committees
Audit Committee
We have established an Audit Committee, comprised of three independent non-executive directors. The Audit Committee is
comprised of Mr. Trapp (Chairman), Ms. Justad and Mr. Weinstein. Our Audit Committee assists the Board of Directors in fulfilling
its responsibilities relating to the oversight of the quality and integrity of the accounting, auditing, and financial and ESG reporting of
TORM. Mr. Trapp is our “Audit Committee financial expert” and is “independent” in accordance with SEC rules.
Remuneration Committee
We have established a Remuneration Committee, comprised of three members, Mr. Boehringer (Chairman), Ms. Justad and
Mr. Weinstein. Our Remuneration Committee assists the Board of Directors in reviewing Management’s performance, development,
and remuneration as well as TORM’s general remuneration policies. The Remuneration Committee is responsible for setting the
compensation of executive officers of the Company, reviewing the Company’s incentive and equity-based compensation plans, and
reviewing and approving employment and severance agreements.
Nomination Committee
We have established a Nomination Committee comprised of three members, Mr. Boehringer (Chairman), Ms. Justad, and Mr.
Weinstein. Our Nomination Committee reviews the structure, size, and composition (including skills, knowledge, experience, and
diversity) of the Board of Directors and makes recommendations to the Board of Directors regarding any changes. The Nomination
Committee also considers succession planning for Directors, the Chief Executive Officer, and others.
Risk Committee
We have established a Risk Committee, comprised of three members: Mr. Trapp (Chairman), Ms. Justad and Mr. Weinstein.
Our Risk Committee assists the Board of Directors in fulfilling its responsibilities relating to the oversight of the quality and
effectiveness of the company-wide risk management program including strategic, operational, compliance, HSSE-related, financial,
credit, market, reputational and other risk.
For more information, please see “Item 6. Directors, Senior Management and Employees—A. Directors and Senior
Management”.
Employment Agreements
Mr. Jacob Meldgaard
We may dismiss Mr. Meldgaard with twelve months’ notice to the end of a month, and Mr. Meldgaard may terminate his
contract with six months’ notice to the end of a month. Mr. Meldgaard is not entitled to other kinds of remuneration resulting from a
retirement from the Company other than performance bonuses earned, if any.
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Mr. Meldgaard is subject to global non-competition and non-solicitation clauses for a period of twelve months. For the
effective period of these clauses, Mr. Meldgaard is entitled to a monthly compensation compared to 100% of his base salary. The non-
competition clause may be terminated with one month’s notice. However, whether one or both of the non-competition and non-
solicitation clauses are effective, the compensation only becomes payable once.
In case of a change of control, as further defined in Mr. Meldgaard’s service agreement, Mr. Meldgaard may, within three
months from the date of the change, terminate his employment with six months’ notice, in which case certain non-competition and non-
solicitation clauses will be shortened.
Under mandatory Danish law, non-competition clauses cannot be enforced after expiry of the notice period if the termination is
effected by the Company without Mr. Meldgaard having given reasonable cause for the dismissal.
Other Members of the Senior Management Team
We may dismiss the other members of the Senior Management Team (excluding Mr. Meldgaard) with nine to twelve months’
notice (varying length depending on position and seniority) to the end of a month. Each of these executives may all terminate his
contract with four to six months’ notice (varying length depending on position) to the end of a month.
Based on the current seniority, these current members of our Senior Management Team are not entitled to other kinds of
remuneration upon retirement from the Company, other than performance bonuses earned, if any.
These other members of the Senior Management Team are subject to global non-competition clauses for a period of up to
twelve months (depending on position). For the effective period of the clauses, these other members of the Senior Management Team
are entitled to a monthly compensation compared to 100% of their respective base salary.
The non-competition clauses may be terminated. Under mandatory Danish law, non-competition clauses cannot be enforced
after expiry of the notice period if the termination is effected by the Company without the members of the Senior Management Team
having given reasonable cause for their dismissal.
Clawback Policy
In December 2023, TORM adopted a policy regarding the recovery of erroneously awarded compensation (“Clawback
Policy”) in accordance with the applicable rules of The Nasdaq Stock Market and Section 10D and Rule 10D-1 of the Securities
Exchange Act of 1934, as amended. In the event TORM is required to prepare an accounting restatement due to material
noncompliance with any financial reporting requirements under U.S. securities laws or otherwise erroneous data or if TORM
determines there has been a significant misconduct that causes material financial, operational or reputational harm, TORM shall be
entitled to recover a portion or all of any incentive-based compensation provided to certain executives who, during a three-year period
preceding the date on which an accounting restatement is required, received incentive compensation based on the erroneous financial
data that exceeds the amount of incentive-based compensation the executive would have received based on the restatement.
The Remuneration Committee administers the Company’s Clawback Policy and has discretion, in accordance with the
applicable laws, rules and regulations, to determine how to seek recovery under the Clawback Policy and may forego recovery if it
determines that recovery would be impracticable.
Cybersecurity
Our Chief Financial Officer has the overall risk ownership and accountability to control such risk. Our Chief Financial
Officer formulates cybersecurity strategies and drives initiatives, and together with the Head of Group IT, set targets, assesses risks,
develop policies and procedures, and execute our cybersecurity efforts. Our Chief Financial Officer regularly reports to the Risk
Committee and the overall Board of Directors, which ultimately oversees cybersecurity risks and initiatives. The Risk Committee
monitors the progress of TORM’s cybersecurity efforts and together with the Chief Financial Officer ensures integrity of reporting.
The Risk Committee reports to the Board of Directors at each Risk Committee meeting. For more information on our cybersecurity
risk management and strategy and governance, please see “Item 16K. Cybersecurity.”
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D. Employees
As of December 31, 2024, we employed approximately 479 people in our offices in Denmark, India, the Philippines,
Singapore, United Kingdom and the United States, excluding seafarers, who work on our vessels.
E. Share Ownership
The table below shows, in relation to each of our directors and members of our Senior Management Team, the total number of
shares owned and the total number of Restricted Share Units, or RSUs, held as of 6 March, 2025. The RSUs granted to our Executive
Director, Jacob Meldgaard, were received for his role as Chief Executive Officer of TORM A/S. For any arrangements that involve
employees in the capital of the Company, please refer to “Item 10. Additional Information A.- Restricted Share Units” and for
Restricted Share Units granted to the Chief Executive Officer, please refer to Note 5 of this annual report on Form 20-F.
Directors and Executive officers | Class A common shares held | Unvested RSUs | Vested RSUs | ||
Christopher H. Boehringer | 21,204 | - | - | ||
David Weinstein | 5,000 | - | - | ||
Göran Trapp | 0 | - | - | ||
Annette Malm Justad | 2,700 | - | - | ||
Jacob Meldgaard | 0 | 810,401 | 260,763 | ||
All other executive officers in the aggregate | * | 1,148,400 | 391,521 |
*Our remaining executive officers individually each own less than 1% of our outstanding shares.
F. DISCLOSURE OF A REGISTRANT’S ACTION TO RECOVER ERRONEOUSLY AWARDED
COMPENSATION.
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.Major Shareholders
The following table sets forth the beneficial ownership of our Class A common shares, par value $0.01 per share, as of the date
of this annual report, by beneficial owners of 5% or more of the common shares. All of our shareholders, including the shareholders
listed in the table below, are entitled to one vote for each share held (excluding the B share and the C share).
Class A Common Shares | ||||
Beneficially Owned | ||||
Name | Number | Percentage(1) | ||
Njord Luxco(2)(3) | 40,581,120 | 41.49% | ||
(1)Calculated based on 97,814,051 Class A common shares outstanding as of December 31, 2024.
(2)According to Schedule 13D filed with the SEC on September 14, 2020 and information provided by Njord Luxco, the business
address of Njord Luxco is OCM Njord Holdings S.a r.l, 26A, Boulevard Royal L-2449, Luxembourg, Luxembourg. The
majority shareholder of Njord Holdings is OCM Luxembourg OPPS IX Sarl. The majority shareholder of OCM Luxembourg
OPPS IX Sarl is Oaktree Opportunities Fund IX, L.P. The general partner of Oaktree Opportunities Fund IX, L.P. is Oaktree
Opportunities Fund IX GP, L.P. The sole director of Oaktree Opportunities Fund IX GP, L.P. is Oaktree Opportunities Fund IX
GP, Ltd. The sole director of Oaktree Opportunities Fund IX GP, Ltd. is Oaktree Capital Management, L.P. The general
partner of Oaktree Capital Management, L.P. is Oaktree Capital Management GP, LLC. The general partner of Oaktree Capital
Management GP, LLC is Atlas OCM Holdings, LLC. The names of each of the directors and executive officers of Atlas OCM
Holdings, LLC are Howard S. Marks, Bruce A. Karsh, Jay S. Wintrob, John B. Frank and Sheldon M. Stone who, by virtue of
their membership interests in Oaktree Capital Group, LLC and Atlas OCM Holdings, LLC may be deemed to share voting and
dispositive power with respect to the shares of TORM plc held by Njord Holdings. The address for all of the entities and
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individuals identified above is c/o Oaktree Capital Management, L.P., 333 S. Grand Avenue, 28th Floor, Los Angeles,
California 90071.
(3)Njord Luxco is the holder of the sole outstanding Class C share. The Class C share has 350,000,000 votes at the general
meeting in respect of specified matters, including election of members to our Board of Directors (other than the Deputy
Chairman) and certain amendments to the Articles of Association. See “Item 10. Additional Information—A. Share Capital —
Our Shares—Class C Share”.
As of December 31, 2024, Njord Luxco beneficially owned 40,581,120 Class A common shares, or 41.49% (2023: 51,006,538
Class A common shares, 59.15%; 2022: 53,812,988 Class A common shares, 65.77%).
As of December 31, 2024, we had 4,456,575 RSUs outstanding. Subject to vesting, each RSU entitles the holder to acquire one
Class A common share.
As of 06 March 2025, we had 4,456,575 RSUs outstanding. Subject to vesting, each RSU entitles the holder to acquire one
Class A common share.
The sole outstanding B share is held by a trustee on behalf of non-Oaktree shareholders to provide certain minority protections.
The Class B Share has one vote at the general meeting and the right to elect the Deputy Chairman of our Board of Directors and one
Board Observer. As per the date of this report, there is no Class B Share Board observer. See “Item 10. Additional Information—A.
Share Capital —Our Shares—Class B Share”.
As of December 31, 2024, our sole shareholder of record located in the United States was Cede & Co., a nominee of The
Depository Trust Company, which held 30,944,636 Class A common shares, representing 31.64% of our issued and outstanding Class
A common shares on that date.
As of 06 March 2025, our sole shareholder of record located in the United States was Cede & Co., a nominee of The
Depository Trust Company, which held 62,923,215 Class A common shares, representing 64% of our issued and outstanding Class A
common shares on that date.
No corporation or foreign government owns more than 50% of our outstanding common shares. We are not aware of any
arrangements, known by the Company, the operation of which may at a subsequent date result in a change in control of the Company.
B. Related Party Transactions
Remuneration of our directors and Senior Management Team is disclosed in “Item 6. Directors, Senior Management and
Employees-B. Compensation”.
Mr. Boehringer is a partner and a managing director of Oaktree Capital Management (International) Limited. Oaktree affiliates
manage (indirectly) the Company’s controlling shareholder, Njord Luxco. Oaktree has interests in numerous businesses, including
businesses which may compete directly or indirectly with the Group. Mr. Boehringer may from time to time be involved in influencing
the business or strategy of such businesses.
On September 1, 2022, TORM purchased 75% of the shares in Marine Exhaust Technology A/S for a cash consideration of $
2.0 million and thereby obtaining a controlling interest in its joint venture entity Marine Exhaust Technology (Hong Kong) Ltd. Until
September 1, 2022, TORM’s transactions with its joint venture entity producing scrubbers for the TORM fleet covered capital
expenditures of $5.6 million in total.
To our knowledge, there have been no other transactions with related parties during the periods required to be presented.
C. Interest of Experts and Counsel
Not applicable.
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ITEM 8. FINANCIAL INFORMATION
A.Consolidated Statements and other Financial Information
Please see the section of this annual report on Form 20-F entitled “Item 18. Financial Statements”.
Legal Proceedings
We are from time to time and currently a party to various legal proceedings arising in the ordinary course of business. We seek
to maintain commercial liability insurance for such cases, and to the extent that we find that a specific claim is covered by insurance, our
policy is to make no reservations in our accounts except for other related costs such as deductibles payable by us under the insurance
policies.
In 2020, TORM was involved in cargo claims relating to a customer having granted indemnities for discharge of cargoes, and
not being able to honor those obligations. The cases involved irregular activities by the customer. Legal action was initiated by TORM
in the UK and in India against the customer and related individuals. During 2022, TORM settled one claim and reassessed its
provisions for the remaining part of the case complex, which led to the reversal of provisions amounting to USD 6.3m. As expected at
the end of 2023, the remaining part of the case complex was resolved in arbitration during the first quarter of 2024 with an award in
favor of TORM.
TORM is involved in some other legal proceedings and disputes. It is Senior Management Team’s opinion that the outcome of
these proceedings and disputes should not have any material impact on TORM’s financial position, results of operations and cash flows.
Distribution Policy
Reference is made to “Investor Information-Distribution Policy” on page 186 of our Annual Report 2024.
On April 11, 2024, the Board of Directors approved a dividend of $1.36 per share, with a total dividend payment of
approximately $126.8 million in line with our distribution policy. The dividend payment was made on April 24, 2024, to shareholders
of record as of April 16, 2024, with the ex-dividend date on April 15, 2024. The dividend payment has not been recognized as a
liability and there are no tax consequences.
On May 8, 2024, the Board of Directors approved a dividend of $1.50 per share, with a total dividend payment of
approximately $140.9 million in line with our distribution policy. The dividend payment was made on June 4, 2024, to shareholders of
record as of May 22, 2024, with the ex-dividend date on May 21, 2024. The dividend payment has not been recognized as a liability
and there are no tax consequences.
On August 15, 2024, the Board of Directors approved a dividend of $1.80 per share, with a total dividend payment of
approximately $169.9 million in line with our distribution policy. The dividend payment was made on September 11, 2024, to
shareholders of record as of August 29, 2024, with the ex-dividend date on August 28, 2024 for the shares listed on Nasdaq OMX
Copenhagen and August 29, 2024 for the shares listed on Nasdaq New York. The dividend payment has not been recognized as a
liability and there are no tax consequences.
On November 7, 2024, the Board of Directors approved a dividend of $1.20 per share, with a total dividend payment of
approximately $116.2 million in line with our distribution policy. The dividend payment was made on December 4, 2024, to
shareholders of record as of November 21, 2024, with the ex-dividend date on November 20, 2024 for shares listed on Nasdaq OMX
Copenhagen and November 21, 2024 for the shares listed on Nasdaq New York. The dividend payment has not been recognized as a
liability and there are no tax consequences.
On March 7, 2024, TORM amended the distribution policy with effect from the first quarter of 2024. With this TORM
intends to distribute on a quarterly basis excess liquidity above a threshold liquidity level. The threshold liquidity level will be
determined as the sum of i) the product of liquidity requirement per vessel and the number of owned and leased vessels in TORM’s
fleet as at the balance sheet day and ii) a discretionary element determined by the Board taking into consideration TORM’s capital
structure, strategic opportunities, future obligations and market trends.
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Our Board of Directors may, in its sole discretion, from time to time, declare and distribute dividends in accordance with our
Articles of Association and applicable law. Any decision to distribute dividends will be at the sole discretion of the Board of Directors.
Dividends which are declared as interim dividends do not need to be approved by the shareholders at our annual general meeting.
We can give no assurance that dividends will be declared and paid in the future or the amount of such dividends if declared and
paid. For a discussion of certain risk factors that may affect our ability to pay dividends, see “Item 3. Key Information—A. Risk
Factors”. For a description of the restrictions on the payment of dividends contained in our financing agreements, see “Item 5. Operating
and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Financing Agreements”. For a discussion of the
material tax consequences regarding the receipt of dividends we may declare, see “Item 10. Additional Information— E. Taxation”.
B. Significant Changes
For significant events that occurred after the date of the annual financial statements, reference is made to ‘Note 2 – Liquidity,
Capital Resources and Subsequent Events’, pages 209 - 210 in our Annual Report 2024. For description of important events and
achievements during 2024, reference is made to "2024 Highlights", pages 3 - 7 in our Annual Report 2024.
ITEM 9. THE OFFER AND LISTING
Our Class A common shares currently trade on Nasdaq Copenhagen A/S under the symbol “TRMD A” and on Nasdaq New
York under the symbol “TRMD”. The B share and C share are not listed for trading on any exchange. See “Item 10. Additional
Information”.
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ITEM 10. ADDITIONAL INFORMATION
A.Share Capital
Issued and Authorized Capitalization
As of December 31, 2024, and the date of this annual report, our share capital consisted of 97,814,051 Class A common
shares, par value $0.01 per share, one Class B share, par value $0.01 per share, and one Class C share, par value $0.01 per share. As of
December 31, 2024 and the date of this annual report, we have 493,371 treasury shares.
We plan to solicit the approval of our shareholders and apply for a court order from the Companies Court in England and
Wales to effect the cancellation of 493,371 treasury shares that we purchased in share buybacks on Nasdaq Copenhagen A/S in 2016
and 2020. The cancellation of these treasury shares is intended to rectify the fact that these repurchases were not made in accordance
with the UK Companies Act, which distinguishes between buybacks effected through “market purchases” and “off-market purchases.”
We effected these buybacks under “market purchase” resolutions; however, for purposes of the UK Companies Act, Nasdaq
Copenhagen A/S is an overseas exchange, making it ineligible for buybacks conducted under the “market purchase” provisions. The
cancellation of the affected treasury shares will not affect the rights attached to, or result in any other change to, any of our other
shares (or their nominal value).
At the Company’s 2016 Annual General Meeting of Shareholders, the Board of Directors was granted certain authorizations
to increase our issued share capital, both with and without pre-emption rights to the existing shareholders. These share authorities
expired on March 14, 2021. The Board of Directors sought renewal of this existing authority at the 2020 Annual General Meeting of
Shareholders and this resolution was approved and will apply until the close of business on April 14, 2025. The Board of Directors
sought renewal of this existing authority at the 2024 Annual General Meeting of Shareholders and this resolution was approved and
will apply until the close of business on April 10, 2029. For a description of the share authorities granted to our Board of Directors,
reference is made to “Director’s Report—Share Capital” on page 192 of our Annual Report 2024.
Our Shares
Class A common shares. Each outstanding Class A common share, par value $0.01 per share, has (i) on a poll, one (1) vote on
all matters at the general meeting (other than the election or removal of the Deputy Chairman), (ii) pre-emption rights upon any new
issue of equity securities (including Class A common shares) for cash (unless otherwise provided by the United Kingdom Companies
Act or our Articles of Association or as disapplied by the relevant shareholders’ resolution) and (iii) the right to receive dividends, as
well as liquidation proceeds and other distributions, that we may declare from time to time. The Class A common shares are not
redeemable, either in full or in part.
Class B share. The one outstanding Class B share, par value $0.01, is held by a trustee on behalf of our minority shareholders
(the Class A common shareholders other than Njord Luxco or its affiliates) pursuant to the terms of a minority trust deed, which is filed
as Exhibit 2.2 to this annual report. The Class B share has (i) one vote at our general meetings, (ii) no pre-emptive subscription rights in
relation to any issue of new shares of other classes and (iii) effectively carries no right to receive dividends, liquidation proceeds or
other distributions from us. The holder of the Class B share has the right to elect one member to our Board of Directors (the Deputy
Chairman) as well as appoint one Board Observer. Currently, David Weinstein serves as the Class B share elected director. The Class B
share may not be transferred or pledged, except for a transfer to a replacement trustee or a redemption by us. The Class B share is
required to be redeemed when the Class C share is redeemed. The trustee is required to exercise its rights as holder of the Class B share
at the direction of such minority shareholders. Such minority shareholders are able to direct the trustee as the holder of the Class B share
by responding to a directions request distributed to such minority shareholders in accordance with the terms of the minority trust deed.
Class C share. The one outstanding Class C share, par value $0.01, is held by Njord Luxco. The holder of the Class C share
has 350,000,000 votes at our general meetings on specified matters, described below. Based on Njord Luxco’s share ownership as of
the date of this annual report of 40,581,120 Class A common shares and the C share, Njord Luxco has 390,581,120 votes.
The Class C share votes may only be cast on resolutions in respect of the appointment or removal of directors (excluding the
Deputy Chairman) and certain amendments to the Articles of Association, proposed by the Board of Directors. The Class C share votes
may not be cast on resolutions in respect of any amendments to certain reserved matters, as specified in our Articles of Association,
(unless those reserved matters also constitute changes to our Articles of Association on which the Class C share is entitled to vote), pre-
emptive rights of shareholders, rights attached to the Class B share and other minority protection rights provisions contained in our
Articles of Association.
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The Class C share has no pre-emption rights in relation to any issue of new shares of other classes and effectively carries no
right to receive dividends, liquidation proceeds or other distributions from us. The Class C share may not be transferred or pledged,
except to an affiliate of Njord Luxco or pursuant to redemption by us. The Class C will be automatically redeemed when Njord Luxco
and its affiliates cease to beneficially own at least one third of our issued Class A common shares. The voting rights attached to the
Class C share have the practical effect of allowing Njord Luxco to control the Board of Directors of TORM plc and to make
amendments to the Articles of Association proposed by the Board of Directors, other than amendments to the minority protections. Even
when Njord Luxco holds only a third of the issued Class A common shares, the votes cast by Njord Luxco would represent
approximately 85% of the votes that may be cast on resolutions on which the Class C share may vote.
The reserved matters set forth in our Articles of Association require either the approval of a majority of our Board including
our Chairman and Deputy Chairman or the approval of a resolution approved by at least 70% or 86% of the votes capable of being cast.
Please see “Item. 10. Additional Information— B. Memorandum and Articles of Association”.
Our Share History
As of December 31, 2022, TORM’s total share capital was $823,113.01 consisting of 82,311,299 Class A common shares,
one Class B share and one Class C share, each with a par value of $0.01 per share.
As of December 31, 2023, TORM’s total share capital was $862,256.86 consisting of 86,225,684 Class A common shares,
one Class B share and one Class C share, each with a par value of $0.01 per share.
As of December 31, 2024, TORM’s total share capital was $978,140.53 consisting of 97,814,051 Class A common shares,
one Class B share and one Class C share, each with a par value of $0.01 per share.
Reconciliation of the Number of Class A Common Shares Outstanding as of the Date of this Annual Report
Shares outstanding at December 31, 2022 | 82,311,299 |
Number of Class A common shares issued in connection with exercise of RSUs | 1,137,569 |
Number of Class A common shares issued in connection with acquisition of vessels | 2,776,816 |
Shares outstanding at December 31, 2023 | 86,225,684 |
Number of Class A common shares issued in connection with exercise of RSUs | 1,345,438 |
Number of Class A common shares issued in connection with acquisition of vessels | 10,242,929 |
Shares outstanding at December 31, 2024 | 97,814,051 |
Number of Class A common shares issued in connection with exercise of RSUs | 0 |
Number of Class A common shares issued in connection with acquisition of vessels | 0 |
Shares outstanding as of March 6, 2025 | 97,814,051 |
Share Capital Increases
On January 5, 2024, we increased our share capital by 1,313,482 Class A common shares (corresponding to a nominal value
of $13,134.82) as a result of the increase in 660,714 Class A common shares (corresponding to a nominal value of $6,607.14) as a
result of the delivery of the third of four eco MR product tanker vessels (TORM Denise) acquired in the fourth quarter of 2023 and the
increase in 652,768 Class A common shares (corresponding to a nominal value of $6,527.68) as a result of the first of eight eco LR2
product tanker vessels (TORM Gwendolyn) acquired in the fourth quarter of 2023. After the capital increase, our share capital
amounted to $875,391.68 divided into 87,539,166 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C
share of $0.01.
On January 11, 2024, we increased our share capital by 1,284,791 Class A common shares (corresponding to a nominal value
of $12,847.91) as a result of the increase in 660,714 Class A common shares (corresponding to a nominal value of $6,607.14) as a
result of the delivery of the final of four eco MR product tanker vessels (TORM Danica) acquired in the fourth quarter of 2023 and the
increase in 624,077 Class A common shares (corresponding to a nominal value of $6,240.77) as a result of the second of eight eco
LR2 product tanker vessels (TORM Gabriella) acquired in the fourth quarter of 2023. After the capital increase, our share capital
amounted to $888,239.59 divided into 88,823,957 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C
share of $0.01.
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On January 16, 2024, we increased our share capital by 638,013 Class A common shares (corresponding to a nominal value
of $6,380.13) as a result of the increase in 616,746 Class A common shares (corresponding to a nominal value of $6,167.46) as a
result of the delivery of the third of eight eco LR2 product tanker vessels (TORM Gwyneth) acquired in the fourth quarter of 2023 and
as a result of the increase in 21,267 Class A common shares (corresponding to a nominal value of $212.67) as a result of the exercise
of a corresponding number of RSUs. After the capital increase, our share capital amounted to $894,619.72 divided into 89,461,970
Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of $0.01.
On January 24, 2024, we increased our share capital by 1,237,266 Class A common shares (corresponding to a nominal value
of $12,372.66) as a result of the increase in 1,223,088 Class A common shares (corresponding to a nominal value of $12,230.88) as a
result of the delivery of the fourth and fifth of eight eco LR2 product tanker vessels (TORM Ganga and TORM Gitte) acquired in the
fourth quarter of 2023 and as a result of the increase in 14,178 Class A common shares (corresponding to a nominal value of $141.78)
as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to $906,992.38
divided into 90,699,236 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of $0.01.
On January 30, 2024, we increased our share capital by 23,198 Class A common shares (corresponding to a nominal value of
$231.98) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$907,224.36 divided into 90,722,434 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On February 8, 2024, we increased our share capital by 6,905 Class A common shares (corresponding to a nominal value of
$69.05) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$907,293.41 divided into 90,729,339 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On March 12, 2024, we increased our share capital by 620,473 Class A common shares (corresponding to a nominal value of
$6,204.73) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$913,498.14 divided into 91,349,812 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On March 19, 2024, we increased our share capital by 744,668 Class A common shares (corresponding to a nominal value of
$7,446.68) as a result of the increase in 698,590 Class A common shares (corresponding to a nominal value of $6,985.90) as a result
of the delivery of sixth of the eight LR 2 vessel (TORM Gemma) acquired in the fourth quarter of 2023 and as a result of the increase
in 46,078 Class A common shares (corresponding to a nominal value of $460.78) as a result of the exercise of a corresponding number
of RSUs. After the capital increase, our share capital amounted to $920,944.82 divided into 92,094,480 Class A common shares of
$0.01 each, one Class B share of $0.01 and one Class C share of $0.01.
On March 22, 2024, we increased our share capital by 570,006 Class A common shares (corresponding to a nominal value of
$5,700.06) as a result of the delivery of the seventh of the eight LR2 vessels (TORM Gloria). After the capital increase, our share
capital amounted to $926,644.88 divided into 92,664,486 Class A common shares of $0.01 each, one Class B share of $0.01 and one
Class C share of $0.01.
On March 26, 2024, we increased our share capital by 71,152 Class A common shares (corresponding to a nominal value of
$711.52) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$927,356.40 divided into 92,735,638 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On April 4, 2024, we increased our share capital by 725,483 Class A common shares (corresponding to a nominal value of
$7,254.83) as a result of increase in 679,102 shares (corresponding to a nominal value of $6,791.02) from the delivery of the eighth
LR2 vessel (TORM Grace) and the increase in 46,381 Class A common shares (corresponding to a nominal value of $463.81) as a
result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to $934,611.23
divided into 93,461,121 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of $0.01.
On April 9, 2024, we increased our share capital by 255,200 Class A common shares (corresponding to a nominal value of
$2,552.00) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$937,163.23 divided into 93,716,321 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
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On April 26, 2024, we increased our share capital by 683,009 Class A common shares (corresponding to a nominal value of
$6,830.09) as a result of the delivery of the LR2 vessel acquired in March 2024 (TORM Genesis). After the capital increase, our share
capital amounted to $943,993.32 divided into 94,399,330 Class A common shares of $0.01 each, one Class B share of $0.01 and one
Class C share of $0.01.
On May 15, 2024, we increased our share capital by 48,985 Class A common shares (corresponding to a nominal value of
$489.85) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$944,483.17 divided into 94,448,315 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On May 23, 2024, we increased our share capital by 36,399 Class A common shares (corresponding to a nominal value of
$363.99) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$944,847.16 divided into 94,484,714 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On May 29, 2024, we increased our share capital by 3,589 Class A common shares (corresponding to a nominal value of
$35.89) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$944,883.05 divided into 94,488,303 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On June 13, 2024, we increased our share capital by 26,938 Class A common shares (corresponding to a nominal value of
$269.38) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$945,152.43 divided into 94,515,241 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On July 30, 2024, we increased our share capital by 335,285 Class A common shares (corresponding to a nominal value of
$3,352.85) as a result of the delivery of the first MR vessel acquired in July 2024 (TORM Diwata). After the capital increase, our
share capital amounted to $948,505.28 divided into 94,850,526 Class A common shares of $0.01 each, one Class B share of $0.01 and
one Class C share of $0.01.
On August 23, 2024, we increased our share capital by 59,300 Class A common shares (corresponding to a nominal value of
$593.00) as a result of the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$949,098.28 divided into 94,909,826 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On September 3, 2024, we increased our share capital by 364,874 Class A common shares (corresponding to a nominal value
of $3,648.74) as a result of the increase in 352,152 Class A common shares (corresponding to a nominal value of $3,521.52) as a
result of the delivery of the second MR vessel acquired in July 2024 (TORM Durga) and the increase in 12,722 Class A common
shares (corresponding to a nominal value of $127.22) as a result of the exercise of a corresponding number of RSUs. After the capital
increase, our share capital amounted to $952,747.02 divided into 95,274,700 Class A common shares of $0.01 each, one Class B share
of $0.01 and one Class C share of $0.01.
On September 12, 2024, we increased our share capital by 352,152 Class A common shares (corresponding to a nominal
value of $3,521.52) as a result of the delivery of the third MR vessel acquired in July 2024 (TORM Damini). After the capital
increase, our share capital amounted to $956,268.54 divided into 95,626,852 Class A common shares of $0.01 each, one Class B share
of $0.01 and one Class C share of $0.01.
On September 25, 2024, we increased our share capital by 27,483 Class A common shares (corresponding to a nominal value
of $274.83) as a result the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$956,543.37 divided into 95,654,335 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
On October 9, 2024, we increased our share capital by 352,152 Class A common shares (corresponding to a nominal value of
$3,521.52) as a result of the delivery of the fourth MR vessel acquired in July 2024 (TORM Dulce). After the capital increase, our
share capital amounted to $960,064.89 divided into 96,006,487 Class A common shares of $0.01 each, one Class B share of $0.01 and
one Class C share of $0.01.
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On October 28, 2024, we increased our share capital by 421,247 Class A common shares (corresponding to a nominal value
of $4,212.47) as a result of the increase in 414,158 Class A common shares (corresponding to a nominal value of $4,141.58) as a
result of the delivery of the fifth MR vessel acquired in July 2024 (TORM Doris) and the increase in 7,089 Class A common shares
(corresponding to a nominal value of $70.89) as a result of the exercise of a corresponding number of RSUs. After the capital increase,
our share capital amounted to $964,277.36 divided into 96,427,734 Class A common shares of $0.01 each, one Class B share of $0.01
and one Class C share of $0.01.
On November 4, 2024, we increased our share capital by 417,026 Class A common shares (corresponding to a nominal value
of $4,170.26) as a result of the delivery of the sixth MR vessel acquired in July 2024 (TORM Dagny). After the capital increase, our
share capital amounted to $968,447.62 divided into 96,844,760 Class A common shares of $0.01 each, one Class B share of $0.01 and
one Class C share of $0.01.
On November 27, 2024, we increased our share capital by 961,823 Class A common shares (corresponding to a nominal
value of $9,618.23) as a result of the increase in 951,190 Class A common shares (corresponding to a nominal value of $9,511.90) as a
result of the deliveries of the seventh and eighth MR vessels acquired in July 2024 (TORM Daphne and TORM Deborah) and the
increase in 10,633 Class A common shares (corresponding to a nominal value of $106.33) as a result of the exercise of a
corresponding number of RSUs. After the capital increase, our share capital amounted to $978,065.85 divided into 97,806,583 Class A
common shares of $0.01 each, one Class B share of $0.01 and one Class C share of $0.01.
On December 18, 2024, we increased our share capital by 7,468 Class A common shares (corresponding to a nominal value
of $74.68) as a result the exercise of a corresponding number of RSUs. After the capital increase, our share capital amounted to
$978,140.53 divided into 97,814,051 Class A common shares of $0.01 each, one Class B share of $0.01 and one Class C share of
$0.01.
Cancellation of Treasury Shares
We plan to solicit the approval of our shareholders and apply for a court order from the Companies Court in England and
Wales to effect the cancellation of 493,371 treasury shares that we purchased in share buybacks on Nasdaq Copenhagen A/S in 2016
and 2020. The cancellation of these treasury shares is intended to rectify the fact that these repurchases were not made in accordance
with the UK Companies Act, which distinguishes between buybacks effected through “market purchases” and “off-market purchases.”
We effected these buybacks under “market purchase” resolutions; however, for purposes of the UK Companies Act, Nasdaq
Copenhagen A/S is an overseas exchange, making it ineligible for buybacks conducted under the “market purchase” provisions. The
cancellation of the affected treasury shares will not affect the rights attached to, or result in any other change to, any of our other
shares (or their nominal value).
Restricted Share Units
In accordance with TORM’s Remuneration Policy, the Board of Directors has, as part of the Long-Term Incentive Program
(LTIP), granted certain employees Restricted Share Units (RSUs) in the form of restricted stock options. The RSUs aim at retaining
and incentivizing the employees to seek to improve the performance of TORM and thereby the TORM share price for the mutual
benefit of themselves and the shareholders of TORM. Each RSU granted under the LTIP entitles its holder to acquire one Class A
common share, subject to vesting.
In 2022, the Board agreed to grant a total of 1,137,770 to other members of the Senior Management Team (the “2022
RSUs”). The 2022 RSUs were issued. The 2022 RSUs were issued on the same vesting terms as the 2018, 2019, 2020 and 2021 RSUs
and had an exercise price of DKK 58.0 at time of allocation, corresponding to the daily average closing price on Nasdaq Copenhagen
across the 90-calendar day period before March 2, 2022, the date of publication of the Annual Report 2021, plus a premium of 15%.
The exercise period for vested RSUs will be 360 days.
In 2023, the Board agreed to grant a total of 1,248,153 to other members of the Senior Management Team (the “2023
RSUs”). The 2023 RSUs were issued on the same vesting terms as the 2018, 2019, 2020, 2021 and 2022 RSUs and had an exercise
price of DKK 220.6 at time of allocation, corresponding to the daily average closing price on Nasdaq Copenhagen across the 90-
calendar day period before March 16, 2023, the date of publication of the Annual Report 2022, plus a premium of 15%. The exercise
period for vested RSUs will be 360 days.
Also in 2023, the Board agreed to grant a total of 1,333,222 to other members of the Senior Management Team (the “2023
Retention RSUs”). The 2023 Retention RSUs will vest on March 1, 2026 and had an exercise price of $0.01 at the time of allocation.
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In 2024, the Board agreed to grant a total of 1,214,986 to other members of the Senior Management Team (the “2024
RSUs”). The 2024 RSUs were issued on the same vesting terms as the 2018, 2019, 2020, 2021,2022 and 2023 RSUs and had an
exercise price of DKK 258.4 at time of allocation, corresponding to the average of 90 calendar days preceding the publication of
TORM plc’s 2023 Annual Report plus a 15% premium. Vested RSUs may be exercised for a period of 360 days from each vesting
date.
Also in 2024, the Board agreed to grant a total of 16,430, 11,146 and 3,120 RSUs to other members of the Senior
Management Team (the “2021 Additional RSUs”, "2022 Additional RSUs" and "2023 Additional RSUs", respectively). The 2021
Additional RSUs will vest on issue and had an exercise price of $0.01 at the time of allocation.
As of December 31, 2024, 4,456,575 RSUs outstanding.
Additionally, 660,122 of the 2018 RSUs, 695,478 of the 2019 RSUs, 638,039 of the 2020 RSUs, 1,231,064 of the 2021
RSUs, 871,919 of the 2022 RSUs, 467,577 of the 2023 RSUs, 7,089 of the 2023 Retention RSUs, 20,021 of the 2021 Additional
RSUs, 13,118 of the 2022 Additional RSUs, and 3,120 of the 2023 Additional RSUs, have been exercised.
Based on the Black-Scholes model, the theoretical market value of the RSU allocations in 2018, 2019, 2020, 2021, 2022,
2023, and 2024, around the time of issuance, was calculated at $2.3 million, $1.5 million, $1.3 million, $3.0 million, $2.7 million,
$64.4 million, and $10.0, respectively. See “Item 6. Directors, Senior Management and Employees-B. Compensation” and “-E. Share
Ownership”.
B. Memorandum and Articles of Association
The description of TORM plc’s Memorandum and Articles of Association is incorporated by reference to our Registration
Statement on Form 20-F (Registration No. 001-38294), as amended, which was filed with the SEC on November 24, 2017. The
Company’s Articles of Association are filed as Exhibit 1.1 hereto and are incorporated by reference into this annual report.
C. Material Contracts
We refer you to “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Our Financing
Agreements” with respect to our credit facilities, and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party
Transactions” with respect to our related party transactions for a discussion of the agreements that we consider to be both material and
outside the ordinary course of business during the two-year period immediately preceding the date of this annual report. Other than
these contracts, we have no other material contracts, other than contracts entered into in the ordinary course of business, to which we are
a party.
D. Exchange Controls
Under United Kingdom law, there are currently no restrictions on the export or import of capital, including foreign exchange
controls or restrictions, that affect the remittance of dividends, interest or other payments to non-resident holders of our common shares.
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E. Taxation
U.S. Federal Income Tax Considerations
The following are the material U.S. federal income tax consequences to us and our U.S. Holders and Non-U.S. Holders, each
as defined below, of our activities and the ownership and disposition of our common shares. This discussion does not purport to deal
with the tax consequences of owning common shares relevant to all categories of investors, some of which, such as banks, insurance
companies, real estate investment trusts, regulated investment companies, grantor trusts, tax-exempt organizations, dealers in securities
or currencies, traders in securities that elect the mark-to-market method of accounting for their securities, investors whose functional
currency is not the U.S. dollar, investors that are or own our common shares through partnerships or other pass-through entities,
investors that own, actually or under applicable constructive ownership rules, 10% or more of our common shares, persons that will
hold the common shares as part of a hedging transaction, “straddle” or “conversion transaction,” persons who are deemed to sell the
common shares under constructive sale rules, persons required to recognize income for U.S. federal income tax purposes no later than
the taxable year in which such income is included on an “applicable financial statement,” persons subject to the “base erosion and anti-
avoidance” tax and persons who are liable for an alternative minimum tax, may be subject to special rules. The following discussion of
United States federal income tax matters is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, judicial
decisions, administrative pronouncements, and existing and proposed regulations issued by the United States Department of the
Treasury, or the Treasury Regulations, all as in effect or in existence on the date of this annual report, and all of which are subject to
change, possibly with retroactive effect. This discussion does not address any aspect of state, local or any U.S. federal tax considerations
other than income taxation, such as estate or gift taxation or unearned income Medicare contribution taxation. This discussion deals only
with holders who hold the common shares as a capital asset. The discussion below is based, in part, on the description of our business as
described in this annual report and assumes that we conduct our business as described in this annual report. Unless otherwise noted,
references in the following discussion to the “Company,” “we,” “our,” and “us” are to TORM plc and its subsidiaries on a consolidated
basis.
United States Federal Income Taxation of the Company
Taxation of Operating Income: In General
We anticipate that substantially all of our gross income will be derived from the use and operation of vessels in international
commerce, and that this income will principally consist of freights from the transportation of cargos, hire or lease income from voyage
or time charters and the performance of services directly related thereto, which we refer to as “shipping income”. Unless exempt from
U.S. federal income taxation under Section 883 of the Code, under Article 8 of the U.S.-United Kingdom Income Tax Treaty or under
Article 8 of the U.S.-Denmark Income Tax Treaty, we will be subject to U.S. federal income taxation, in the manner discussed below, to
the extent our shipping income is considered for U.S. federal income tax purposes to be derived from sources within the United States.
Shipping income that is attributable to transportation that begins or ends, but that does not both begin and end in the United
States, will be considered for U.S. federal income tax purposes to be 50% derived from sources within the United States. Shipping
income attributable to transportation that both begins and ends in the United States will be considered to be 100% derived from sources
within the United States. We are not permitted by law to engage in transportation that gives rise to 100% U.S. source shipping income.
Shipping income attributable to transportation exclusively between non-U.S. ports will be considered to be 100% derived from
sources outside the United States. Shipping income derived from sources outside the United States will not be subject to any U.S.
federal income tax.
We do not expect that we or our subsidiaries to qualify for exemption from tax under Section 883 of the Code, although we and
our subsidiaries may qualify in the future if there is a change in our capital structure. See below for a discussion of the requirements for
qualification under Section 883.
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We and/or one or more of our subsidiaries (collectively referred to as “we” for purposes of this paragraph) may qualify for
exemption from tax under the terms of the U.S.-United Kingdom Income Tax Treaty or U.S.-Denmark Income Tax Treaty. Whether we
so qualify depends, among other things, on whether we satisfy the Limitation on Benefits article of the applicable U.S. income tax
treaty. In particular, we would generally satisfy the Limitation on Benefits article if we can establish that we are engaged in the active
conduct of a trade or business in the United Kingdom or Denmark, whichever is applicable, our U.S. source shipping income is derived
in connection with, or is incidental to, such trade or business, and such trade or business activity in the applicable treaty jurisdiction is
substantial in relation to our trade or business activity in the United States. Additionally, we may also be able to satisfy the Limitation
on Benefits article of the U.S.-Denmark Income Tax Treaty if we can establish that our principal class of shares is regularly traded on a
recognized stock exchange, such as Nasdaq Copenhagen, and either (i) primarily traded on a recognized stock exchange located in
Denmark, or (ii) our primary place of management and control is in Denmark, our country of residence. For this purpose, our Class A
common shares would generally be considered our primary class of shares if the Class A common shares represent more than 50% of
the voting power and value of the Company. Additionally for this purpose, our Class A common shares would be treated as regularly
traded if the Class A common shares are traded in more than de minimis quantities each quarter, and if the aggregate number of Class A
common shares traded during the prior taxable year is at least 6% of the average number of Class A common shares during such prior
taxable year. Given the legal and factual uncertainties in making the foregoing determination, there can be no assurance that we will
qualify for exemption from tax under a U.S. federal income tax treaty, or that the IRS or a court of law will agree with our determination
in this regard.
Exemption Under Section 883 of the Code
Under Section 883 of the Code and the Treasury Regulations promulgated thereunder, or “Section 883,” we and each of our
subsidiaries that derives U.S. source shipping income will qualify for exemption from U.S. federal income tax under Section 883 in
respect of such shipping income if, in relevant part:
•we and each such subsidiary is organized in a “qualified foreign country” which, as defined, is a foreign country that
grants an equivalent exemption from tax to corporations organized in the United States in respect of the shipping income
for which exemption is being claimed under Section 883, which we refer to as the “country of organization requirement”;
and either
•more than 50% of the value of our stock is owned actually or constructively under specified attribution rules by “qualified
shareholders” (which as defined includes, among other things, individuals who are “residents” of qualified foreign
countries and corporations that are organized in qualified foreign countries and meet the Publicly-Traded Test discussed
immediately below), which we refer to as the “50% Ownership Test,” or
•our stock is “primarily” and “regularly” traded on an “established securities market” in our country of organization, in
another country that grants an “equivalent exemption” to U.S. corporations or in the United States, which we refer to as
the “Publicly-Traded Test”.
As the IRS has recognized the United Kingdom, our country of incorporation, and each of the countries of incorporation of our
subsidiaries, including Denmark, as a qualified foreign country in respect of the shipping income for which exemption is being claimed
under Section 883, we and each of our subsidiaries satisfy the country of organization requirement. Therefore, each of our subsidiaries
will be exempt from U.S. federal income tax with respect to our U.S. source shipping income if we satisfy either the “50% Ownership
Test” or the “Publicly-Traded Test” and certain substantiation and reporting requirements are met, thereby allowing each of our
subsidiaries to satisfy the 50% Ownership Test. We do not anticipate to satisfy the 50% Ownership Test. Our ability to satisfy the
Publicly-Traded Test is discussed below, and if we satisfy the Publicly-Traded Test, each of our subsidiaries can satisfy the 50%
Ownership Test since each would be owned by a qualified shareholder for such purposes.
The Treasury Regulations provide, in pertinent part, that a class of stock of a foreign corporation will be considered to be
“primarily traded” on an established securities market in a country (such as Nasdaq Copenhagen) if the exchange is designated under a
Limitations on Benefits article in a United States income tax treaty, and if the number of shares of such class of stock that are traded
during any taxable year on all established securities markets in that country exceeds the number of shares of such class that are traded
during that taxable year on established securities markets in any other single country. Currently, our shares are primarily traded on
Nasdaq Copenhagen for purposes of the “primarily traded” test, although this may change in future years.
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The Treasury Regulations provide further that stock of a foreign corporation will be considered to be “regularly traded” on an
established securities market only if: (i) one or more classes of stock of the corporation that, in the aggregate, represents more than 50%
of the stock of the corporation, by voting power and value, is listed on such established securities market, (ii) each such class of stock is
traded on such established securities market, other than in de minimis quantities, on at least 60 days during the taxable year, and (iii) the
aggregate number of shares of such stock traded on such established securities market is at least 10% of the average number of shares of
such stock outstanding during such taxable year. Even if this were not the case, the Treasury Regulations provide that the trading
frequency and trading volume tests will be deemed satisfied with respect to a class of stock that is traded on an established securities
market in the United States if such stock is regularly quoted by dealers making a market in such stock. Although we have a class of
stock that is listed on the Nasdaq New York, an established securities market in the United States, we do not anticipate satisfying the
requirement that our stock be “regularly traded” on an established securities market under the quantitative testing rules.
Even if our common stock was considered to be “regularly traded” on an established securities market, the Treasury
Regulations provide, in pertinent part, that a class of stock of a foreign corporation will not be considered to be “regularly traded” on an
established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class of
stock are owned, within the meaning of the Treasury Regulations, on more than half the days during such taxable year by persons who
each own 5% or more of the vote and value of the outstanding shares of such class of stock, which persons we refer to as “5%
shareholders” and the rule as the “5% override rule”.
For purposes of identifying our 5% shareholders, we are permitted to rely on Schedule 13G and Schedule 13D filings with the
SEC. Even if our stock was considered “regularly traded” on an established securities market, we believe the 5% override rule would
have been triggered and that we would not be able to rely on Section 883 for exemption from United States federal income taxation on
our U.S. source shipping income.
Therefore, if we cannot qualify for benefits under an applicable U.S. income tax treaty, we would be subject to United States
taxation on our U.S. source shipping income. We intend to take the position that we qualify for benefits of the U.S.-U.K. income tax
treaty for purposes of Section 883. Therefore, we expect to be exempt from U.S. federal income taxation on U.S. source shipping
income.
U.S. Federal Income Taxation in the Absence of Section 883 or Treaty Exemption
4% Gross Basis Tax Regime. To the extent the benefits of Section 883 or an applicable U.S. income tax treaty are unavailable,
our U.S. source shipping income which is not considered to be “effectively connected” with the conduct of a U.S. trade or business, as
discussed below, would be subject to a 4% U.S. federal income tax imposed by Section 887 of the Code on a gross basis, without the
benefit of deductions, which we refer to as the “4% gross basis tax regime”. As under the sourcing rules described above, no more than
50% of our shipping income would be treated as derived from U.S. sources, the maximum effective rate of U.S. federal income tax on
our shipping income should never exceed 2% under the 4% gross basis tax regime.
Net Basis and Branch Tax Regimes. To the extent the benefits of Section 883 or an applicable U.S. income tax treaty are
unavailable and the U.S. source shipping income of a subsidiary is considered to be “effectively connected” with the conduct of a U.S.
trade or business, as discussed below, any such “effectively connected” U.S. source shipping income, net of applicable deductions,
would be subject to the U.S. federal income tax currently imposed at the corporate rate of 21%. In addition, such subsidiary may be
subject to the U.S. branch profits tax, at a rate of 30% or such lower rate as may be provided by an applicable U.S. income tax treaty, on
earnings “effectively connected” with the conduct of such U.S. trade or business, as determined after allowance for certain adjustments,
and on certain interest paid or deemed paid attributable to the conduct of a relevant subsidiary’s U.S. trade or business
U.S. source shipping income will be considered “effectively connected” with the conduct of a U.S. trade or business only if:
•we have, or are considered to have, a fixed place of business in the United States involved in the earning of shipping
income; and
•substantially all of our U.S. source shipping income is attributable to regularly scheduled transportation, such as the
operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points
for voyages that begin or end in the United States.
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We do not intend to have, or permit circumstances that would result in having, substantially all of our U.S. source shipping
income be attributable to regularly scheduled transportation. Based on the foregoing and on the expected mode of our shipping
operations, we expect that none of our U.S. source shipping income will be “effectively connected” with the conduct of a U.S. trade or
business.
U.S. Taxation of Gain on Sale of Vessels.
Regardless of whether we qualify for exemption under Section 883 of the Code or the applicable U.S. income tax treaty, we do
not expect to be subject to U.S. federal income taxation with respect to gain realized on a sale of a vessel, provided the sale is
considered to occur outside of the United States under U.S. federal income tax principles. In general, a sale of a vessel will be
considered to occur outside of the United States for this purpose if title to the vessel, and risk of loss with respect to the vessel, pass to
the buyer outside of the United States. It is expected that any sale of a vessel by us will be considered to occur outside of the United
States.
U.S. Tonnage Tax Regime
TORM Tanker Corporation has elected to be treated under the tonnage tax regime in the U.S. with respect to its income
derived from qualifying shipping activities based on the net tonnage of the corporation’s qualifying U.S. flagged vessels.
Pursuant to this regime, TORM’s vessel-owning corporation in the U.S. will be subject to U.S. tax based predominantly upon
the net tonnage of the vessels rather than income generated from operating the vessels (i.e., operating income). Based upon the net
tonnage of our current U.S. vessels and the applicable rate of taxation, our U.S. subsidiary is expected to be liable for approximately
$13,000 of U.S. tonnage tax for the year ended December 31, 2024.
In the event that tonnage tax schemes or other tax laws are changed in the future, our overall tax burden could increase, which
could have a material adverse effect on our future performance, results of operations, cash flows and financial position.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term “U.S. Holder” means a beneficial owner of our common shares that is a U.S. citizen or resident for
U.S. federal income tax purposes, a U.S. corporation or other U.S. entity taxable as a corporation, an estate, the income of which is
subject to U.S. federal income taxation regardless of its source, or a trust if (i) a court within the United States is able to exercise
primary jurisdiction over the administration of the trust and one or more U.S. persons have the authority to control all substantial
decisions of the trust or (ii) the trust has a valid election in effect to be treated as a U.S. person.
If a partnership holds our common shares, the U.S. federal income tax treatment of a partner will generally depend upon the
status of the partner and upon the activities of the partnership. If you are a partner in a partnership holding our common shares, you are
encouraged to consult your own tax advisor.
Distributions
Subject to the discussion of passive foreign investment companies below, any distributions made by us with respect to our
common shares to a U.S. Holder will generally constitute dividends to the extent of our current or accumulated earnings and profits, as
determined under U.S. federal income tax principles.
Dividends paid with respect to our common shares to a U.S. Holder that is an individual, trust or estate, which we refer to as a
“U.S. Individual Holder”, may be eligible for preferential U.S. federal income tax rates provided that (1) we are a “qualified foreign
corporation”, (2) the U.S. Individual Holder has owned our common shares for more than 60 days during the 121-day period beginning
60 days before the date on which our common shares become ex-dividend, (3) we are not a passive foreign investment company for the
taxable year of the dividend or the immediately preceding taxable year (which we do not believe we are, have been or will be) and (4)
the U.S. Individual Holder is not under an obligation to make related payments with respect to positions in substantially similar or
related property.
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We will be treated as a “qualified foreign corporation” if we qualify for benefits of a comprehensive income tax treaty to which
the United States is a party, such as the U.S.-U.K. Income Tax Treaty or the U.S.-Denmark Income Tax Treaty, or if our common shares
are readily tradable on an established securities market in the United States. We believe we qualify for the benefits of the U.S.-U.K.
Income Tax Treaty or the U.S.-Denmark Income Tax Treaty, both of which are comprehensive income tax treaties, and our common
shares are readily tradable on an established securities market in the United States because they are listed on Nasdaq New York.
Therefore, we believe that any dividends paid by us to a U.S. Individual Holder on our common shares are eligible for these preferential
rates. Any dividends paid by us which are not eligible for these preferential rates will be taxed as ordinary income to a U.S. Holder.
Distributions in excess of our current and accumulated earnings and profits will be treated first as a non-taxable return of
capital to the extent of the U.S. Holder’s tax basis in its common shares on a dollar-for-dollar basis and thereafter as capital gain. U.S.
Holders that are corporations will generally not be entitled to claim a dividend received deduction with respect to any distributions they
receive from us. Dividends paid on our common shares will generally be treated as “passive category income” or, in the case of certain
types of U.S. Holders, “general category income”, for purposes of computing allowable foreign tax credits for U.S. foreign tax credit
purposes.
Special rules may apply to any “extraordinary dividend” — generally, a dividend in an amount which is equal to or in excess of
10% of a shareholder’s adjusted basis (or fair market value in certain circumstances) or dividends received within a one-year period that,
in the aggregate, equal or exceed 20% of a shareholder’s adjusted tax basis (or fair market value upon the shareholder’s election) in a
share of our common stock — paid by us. If we pay an “extraordinary dividend” on our common shares that is treated as “qualified
dividend income”, then any loss derived by a non-corporate U.S. holder from the sale or exchange of such common shares will be
treated as long-term capital loss to the extent of such dividend.
Dividends will be generally included in the income of U.S. Holders at the U.S. dollar amount of the dividend (including any
non-U.S. taxes withheld therefrom), based upon the exchange rate in effect on the date of the distribution. In the case of foreign
currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a
tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss recognized upon a subsequent sale
or other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss. However, an
individual whose realized foreign exchange gain does not exceed U.S. $200 will not recognize that gain, to the extent that there are not
expenses associated with the transaction that meet the requirement for deductibility as a trade or business expense (other than travel
expenses in connection with a business trip or as an expense for the production of income).
Sale, Exchange or other Disposition of Our Common Shares
Subject to the discussion of passive foreign investment company status below, a U.S. Holder will generally recognize taxable
gain or loss upon a sale, exchange or other disposition of our common shares in an amount equal to the difference between the amount
realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder’s adjusted tax basis in the common
shares. A U.S. Holder’s adjusted tax basis in its common shares generally will be the U.S. Holder’s purchase price for the common
shares, reduced (but not below zero) by the amount of any distribution on such common shares that was treated as a nontaxable return of
capital to such U.S. Holder. Such gain or loss will be capital gain or loss and will be treated as long-term capital gain or loss if the U.S.
Holder’s holding period in the common shares is greater than one year at the time of the sale, exchange or other disposition. Such capital
gain or loss will generally be treated as U.S.-source income or loss, as applicable, for U.S. foreign tax credit purposes. A U.S. Holder’s
ability to deduct capital losses is subject to certain limitations.
If the sale of our common shares is subject to withholding or other foreign taxes, such as a non-resident capital withholding
tax, it is possible that the foreign taxes may not be creditable, but instead be deductible if the taxpayer itemizes his or her deductions.
Investors should consult their tax advisors in this regard.
Passive Foreign Investment Company Status and Significant U.S. Federal Income Tax Consequences
Special U.S. federal income tax rules apply to a U.S. Holder that holds stock in a foreign corporation classified as a passive
foreign investment company, or “PFIC”, for U.S. federal income tax purposes. In general, a foreign corporation will be treated as a
PFIC with respect to a U.S. shareholder in such foreign corporation if, for any taxable year in which such shareholder holds stock in
such foreign corporation, either:
•at least 75% of the corporation’s gross income for such taxable year consists of passive income (for example dividends,
interest, capital gains and rents derived from other than in the active conduct of a rental business), or
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•at least 50% of the average value of the assets held by the corporation during such taxable year produces, or is held for the
production of, passive income, which we refer to as “passive assets”.
For purposes of determining whether we are a PFIC, cash will generally be treated as an asset held for the production of
passive income. Income earned or deemed earned by us in connection with the performance of services would not constitute passive
income. By contrast, rental income would generally constitute passive income unless we are treated under specific rules as deriving the
rental income in the active conduct of a rental business. Also, for purposes of determining whether we are a PFIC, we will be treated as
owning our proportionate share of the assets and as receiving directly our proportionate share of the income of any corporation in which
we own at least 25% by value of the stock of such corporation.
Based on our current operations and future projections, we do not believe that we are, nor do we expect to become, a PFIC
with respect to any taxable year. Although there is no legal authority directly on point, our belief is based principally on the position
that, for purposes of determining whether we are a PFIC, the gross income we derive or are deemed to derive from the time chartering
and voyage chartering activities of us and our subsidiaries should constitute active income from the performance of services rather than
passive, rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our subsidiaries
own and operate in connection with the production of such income, in particular the vessels, should not constitute passive assets for
purposes of determining whether we are a PFIC. We anticipate that substantially all of our gross income will be derived from time and
voyage charters and the performance of services directly related thereto, and that substantially all of the vessels in our fleet will be
engaged in such activities.
We believe there is substantial legal authority supporting our position consisting of the Code, legislative history, case law and
IRS pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for
other tax purposes. However, there is no direct legal authority under the PFIC rules addressing our specific method of operation, and
there is authority which characterizes time charter income as rental income rather than services income for other tax purposes. In the
absence of any legal authority specifically relating to the statutory provisions governing PFICs, the IRS or a court could disagree with
our position. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any
taxable year, we cannot assure that the nature or extent of our operations, or the composition of our income or assets, will not change
and that we will not become a PFIC in the future.
As discussed more fully below, if we were to be treated as a PFIC for any taxable year, a U.S. Holder would be subject to
different U.S. federal income taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing
Fund”, which election we refer to as a “QEF election”. As an alternative to making a QEF election, a U.S. Holder should be able to
make a “mark-to-market” election with respect to our common shares, as discussed below.
If we were to be treated as a PFIC for any taxable year, a U.S. Holder would also be subject to special U.S. federal income tax
rules in respect of such U.S. Holder’s indirect interest in any of our subsidiaries that are also treated as PFICs. Such a U.S. Holder would
be permitted to make a QEF election in respect of any such subsidiary, as long as we timely provide the information necessary for such
election, which we currently intend to do in such circumstances, but such a U.S. Holder would not be permitted to make a mark-to-
market election in respect of such U.S. Holder’s indirect interest in any such subsidiary. In addition, if we were to be treated as a PFIC
for any taxable year, and a U.S. Holder actually or constructively own common shares that exceed certain thresholds, a U.S. Holder
would be required to file a Form 8621 with its U.S. federal income tax return for that year with respect to such Holder’s common shares.
Substantial penalties apply to any failure to timely file a Form 8621, unless the failure is shown to be due to reasonable cause and not
due to willful neglect. Also, in the event that a U.S. Holder is required to file a Form 8621 and does not do so, the statute of limitations
on the assessment and collection of U.S. federal income taxes for such person for the related tax year may not close until three years
after the date that the Form 8621 is filed. The application of the PFIC rules is complicated, and U.S. Holders are encouraged to consult
with their tax advisors regarding the application of such rules in their circumstances.
U.S. Federal Income Taxation of U.S. Holders Making a Timely QEF Election
If a U.S. Holder makes a timely QEF election, which U.S. Holder we refer to as an “Electing Holder”, the Electing Holder
must report each year for U.S. federal income tax purposes his pro rata share of our ordinary earnings and net capital gain, if any, for our
taxable year that ends with or within the taxable year of the Electing Holder, regardless of whether or not distributions were received by
the Electing Holder with respect to its commons shares. No portion of such inclusions of ordinary earnings will be entitled to the
preferential U.S. federal income tax rates applicable to certain dividends discussed above. Net capital gain inclusions of certain non-
corporate U.S. holders may be eligible for preferential capital gains rates. The Electing Holder’s adjusted tax basis in the common
shares will be increased to reflect taxed but undistributed earnings and profits. Distributions of earnings and profits that had been
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previously taxed will result in a corresponding reduction in the adjusted tax basis in the common shares and will not be taxed again once
distributed. An Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with
respect to any taxable year. An Electing Holder can generally recognize capital gain or loss on the sale, exchange or other disposition of
our common shares. A U.S. Holder would make a QEF election with respect to any taxable year that our company is a PFIC by filing an
IRS Form 8621 with his U.S. federal income tax return. If we became aware that we were to be treated as a PFIC for any taxable year,
we would provide each U.S. Holder with all necessary information in order to make the QEF election described above. A U.S. Holder
who is treated as constructively owning shares in any of our subsidiaries which are treated as PFICs would be required to make a
separate QEF election with respect to each such subsidiary when we are a PFIC.
U.S. Federal Income Taxation of U.S. Holders Making a “Mark-to-Market” Election
Alternatively, if we were to be treated as a PFIC for any taxable year and our common shares are treated as “marketable stock”,
as we believe will be the case, a U.S. Holder would be allowed to make a “mark-to-market” election with respect to our common shares,
provided the U.S. Holder completes and files an IRS Form 8621 in accordance with the relevant instructions and related Treasury
Regulations. If that election is made, the U.S. Holder would generally include as ordinary income in each taxable year the excess, if any,
of the fair market value of the common shares at the end of the taxable year over such Holder’s adjusted tax basis in the common shares.
The U.S. Holder would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’s adjusted tax basis in the
common shares over its fair value at the end of the taxable year, but only to the extent of the net amount previously included in income
as a result of the mark-to-market election. A U.S. Holder’s tax basis in its common shares would be adjusted to reflect any such income
or loss amount. Gain realized on the sale, exchange or other disposition of our common shares would be treated as ordinary income, and
any loss realized on the sale, exchange or other disposition of the common shares would be treated as ordinary loss to the extent that
such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Holder. A mark-to-market election
would likely not be available for any of our subsidiaries that are treated as PFICs.
U.S. Federal Income Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election
Finally, if we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a QEF election or a
“mark-to-market” election for that year, whom we refer to as a “Non-Electing Holder,” would be subject to special rules with respect to
(1) any excess distribution (i.e. the portion of any distributions received by the Non-Electing Holder on our common shares in a taxable
year in excess of 125% of the average annual distributions received by the Non-Electing Holder in the three preceding taxable years, or,
if shorter, the Non-Electing Holder’s holding period for the common shares) and (2) any gain realized on the sale, exchange or other
disposition of our common shares. Under these special rules:
•the excess distribution or gain would be allocated ratably over the Non-Electing Holder’s aggregate holding period for the
common shares;
•the amount allocated to the current taxable year and any taxable year before we became a PFIC would be taxed as ordinary
income and would not be entitled to the preferential U.S. federal income tax rates applicable to certain dividends discussed
above; and
•the amount allocated to each of the other taxable years would be subject to tax at the highest rate in effect for the
applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed with
respect to the resulting tax attributable to each such other taxable year.
These adverse U.S. federal income tax consequences would not apply to a pension or profit sharing trust or other tax-exempt
organization that did not borrow funds or otherwise utilize leverage in connection with its acquisition of our common shares. If a Non-
Electing Holder who is an individual dies while owning our common shares, such Holder’s successor would generally not receive a
step-up in tax basis with respect to such common shares.
U.S. Federal Income Taxation of “Non-U.S. Holders”
A beneficial owner of our common shares that is not a U.S. Holder (and not an entity treated as a partnership) is referred to
herein as a “Non-U.S. Holder”.
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Distributions
Non-U.S. Holders will generally not be subject to U.S. federal income tax or withholding tax on dividends received with
respect to our common shares, unless the dividends are “effectively connected” with the Non-U.S. Holder’s conduct of a trade or
business in the United States or, if the Non-U.S. Holder is entitled to the benefits of an applicable U.S. income tax treaty with respect to
those dividends, those dividends are attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States.
Sale, Exchange or Other Disposition of Common Shares
Non-U.S. Holders will generally not be subject to U.S. federal income tax or withholding tax on any gain realized upon the
sale, exchange or other disposition of our common shares unless: (i) the gain is “effectively connected” with the Non-U.S. Holder’s
conduct of a trade or business in the United States or, if the Non-U.S. Holder is entitled to the benefits of an applicable U.S. income tax
treaty with respect to that gain, that gain is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United
States or (ii) the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of
disposition and other conditions are met.
If the Non-U.S. Holder is engaged in a U.S. trade or business for U.S. federal income tax purposes, the income from the
common shares, including dividends on the underlying common shares and the gain from the sale, exchange or other disposition of the
common shares that is “effectively connected” with the conduct of that U.S. trade or business, will generally be subject to U.S. federal
income tax in the same manner as discussed in the previous section relating to the U.S. federal income taxation of U.S. Holders. In
addition, in the case of a corporate Non-U.S. Holder, such Non-U.S. Holder’s earnings and profits that are attributable to the
“effectively connected” income, subject to certain adjustments, may be subject to an additional U.S. federal branch profits tax at a rate
of 30% or at a lower rate as may be specified by an applicable U.S. income tax treaty.
Backup Withholding and Information Reporting
In general, dividend payments, or other taxable distributions, and payment of the gross proceeds on a sale or other disposition
of our common shares, made within the United States to you will be subject to information reporting requirements. In addition, such
payments will be subject to “backup withholding” if you are a non-corporate U.S. Holder and you:
•fail to provide an accurate taxpayer identification number;
•are notified by the IRS that you have failed to report all interest or dividends required to be shown on your U.S. federal
income tax returns; or
•in certain circumstances, fail to comply with applicable certification requirements.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by
certifying their status on an appropriate IRS Form W-8.
If you sell your common shares to or through a U.S. office of a broker, the payment of the proceeds is subject to both U.S.
backup withholding and information reporting unless you certify that you are a non-U.S. person, under penalties of perjury, or you
otherwise establish an exemption. If you sell your common shares through a non-U.S. office of a non-U.S. broker and the sales proceeds
are paid to you outside the United States, then information reporting and backup withholding will generally not apply to that payment.
However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of sales proceeds, including a
payment made to you outside the United States, if you sell your common shares through a non-U.S. office of a broker that is a U.S.
person or has some other contacts with the United States.
Backup withholding is not an additional tax. Rather, you may generally obtain a refund of any amounts withheld under backup
withholding rules that exceed your U.S. federal income tax liability by filing a refund claim with the IRS.
Individuals who are U.S. Holders (and to the extent specified in the applicable Treasury Regulations, certain individuals who
are Non-U.S. Holders and certain U.S. entities) who hold “specified foreign financial assets” (as defined in Section 6038D of the Code
and the applicable Treasury Regulations) are required to file an IRS Form 8938 (Statement of Specified Foreign Financial Assets) with
information relating to each such asset for each taxable year in which the aggregate value of all such assets exceeds $75,000 at any time
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during the taxable year or $50,000 on the last day of the taxable year. Substantial penalties apply to any failure to timely file an IRS
Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, the statute of
limitations on the assessment and collection of U.S. federal income tax with respect to a taxable year for which the filing of an IRS
Form 8938 is required may not close until three years after the date on which the IRS Form 8938 is filed. Specified foreign financial
assets would generally include our common shares, unless the common shares are held in an account maintained by a U.S. “financial
institution” (as defined in Section 6038D of the Code). U.S. Holders (including U.S. entities) and Non-U.S. Holders are encouraged to
consult their own tax advisors regarding their reporting obligations under Section 6038D of the Code.
Danish Tax Considerations
The following is a summary of certain Danish tax considerations relating to an investment in TORM plc. The summary
describes the Danish tax implications pertaining to dividends paid from TORM A/S to TORM plc, and a sale of Class A common shares
by TORM plc.
The summary does not purport to constitute exhaustive tax or legal advice. It is specifically to be noted that the summary does
not address all possible tax consequences relating to an investment in the shares of TORM plc. The summary is based solely upon the
tax laws of Denmark in effect on the date of this annual report. Danish tax laws may be subject to changes, which could change the
future taxation.
Changes in Global Tax Laws
Long-standing international tax initiatives that determine each country’s jurisdiction to tax cross-border international trade
and profits are evolving as a result of, among other things, initiatives such as the Anti-Tax Avoidance Directives, as well as the Base
Erosion and Profit Shifting reporting requirements, mandated and/or recommended by the EU, G8, G20 and Organization for
Economic Cooperation and Development, including the imposition of a minimum global effective tax rate for multinational businesses
regardless of the jurisdiction of operation and where profits are generated (Pillar Two). As these and other tax laws and related
regulations change (including changes in the interpretation, approach and guidance of tax authorities), our financial results could be
materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is difficult to assess
whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but
such changes could adversely affect our financial results.
On December 12, 2022, the European Union member states agreed to implement the OECD’s Pillar Two global corporate
minimum tax rate of 15% on companies with revenues of at least €750 million effective from 2024. Various countries, including the
United Kingdom, have either adopted implementing legislation or are in the process of drafting such legislation. Any new tax law in a
jurisdiction where we conduct business or pay tax could have a negative effect on our company.
Sale of Class A common shares by TORM plc
Shareholders not resident in Denmark will normally not be subject to Danish tax on gains realized on the sale of shares,
irrespective of the ownership period and equity interest. However, Danish anti-avoidance rules should be observed as these rules may, if
certain conditions are met, result in a requalification of tax-exempt capital gains into dividends, which could trigger Danish withholding
taxes. These rules could apply in a number of situations, such as in connection with a related party sale of shares against cash and in
unrelated third-party transactions in connection with the transfer of shares to a new holding company (controlled by a third party)
against shares and cash. For example, this could be the case, if dividends from TORM A/S cannot be received tax exempt by TORM
plc. The rules should only apply to intra-group transactions as well as situations where TORM plc or a group-related company receives
an ownership share in the group acquiring the shares in TORM A/S.
Dividends distributed to the holders of Class A common shares of TORM A/S to TORM plc
Under Danish tax law, dividends paid on shares in a Danish company to a foreign company are normally subject to dividend
withholding tax of 27%. However, the foreign company receiving the dividends will as a main rule be subject to a final Danish
withholding tax of 22% provided the recipient files certain documentation and reclaims the excess tax from the Danish tax authorities.
Dividends paid on shares in a Danish company are as a starting point exempt from Danish withholding tax when the foreign
receiving company owns at least 10% of the Danish distributing company, the foreign receiving company is tax resident in a state which
has a tax treaty with Denmark, or is covered by the Parent-Subsidiary Directive and the Danish taxation should be reduced or eliminated
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in accordance with a tax treaty or the Parent-Subsidiary Directive between Denmark and the state in which the receiving company is
domiciled.
When considering whether a tax treaty or the Parent-Subsidiary Directive can be applied (thereby enabling exemption from
Danish withholding taxes on dividend distributions), the Danish tax authorities do consider a number of other criteria, including whether
the foreign receiving company is the beneficial owner, and whether the structure can be challenged based on general anti-avoidance
rules introduced in 2015, as subsequently amended.
In recent years, the Danish tax authorities have focused on the issue of beneficial ownership, with a number cases being
decided by the Danish Supreme Court on how the term “beneficial ownership” should be determined. The courts and the Danish tax
authorities are, in their approach, not specifically focused on substance but are generally focusing on actual flows of funds.
Consequently, the Danish tax authorities might, depending on the specific flow of funds, treat even intermediary non-Danish holding
companies that have significant substance as conduit companies for Danish tax purposes. During a potential audit, the Danish tax
authorities are, therefore, likely to assess the beneficial ownership based on whether dividends received by an intermediary holding
company from a Danish entity have been re-routed up the ownership chain as e.g., dividends, interest or other contributions or
considerations (i.e., the character of the funds flow is not necessarily a primary concern).If these conditions for exemption are not
fulfilled, Danish withholding tax of 27% (potentially reduced to 22%) will be triggered on such dividend distributions from TORM A/S.
Share transfer tax and stamp duties
No Danish share transfer tax or stamp duties are payable on direct or indirect transfer of the shares of TORM A/S.
United Kingdom Tax Considerations
The following statements do not constitute tax advice and are intended only as a general guide to current United Kingdom law
and HM Revenue and Customs (“HMRC”) published practice, which may not be binding on HMRC, as of the date of this document
(which are both subject to change at any time, possibly with retrospective effect). They relate only to certain limited aspects of the
United Kingdom tax treatment of the beneficial owners of the Class A common shares. They are intended to apply only to shareholders
who are resident only in the United Kingdom for United Kingdom tax purposes (unless the context requires otherwise) and, if
individuals, who are domiciled in the United Kingdom and to whom split-year treatment does not apply. The statements below only
relate to persons who are and will be the absolute beneficial owners of the Class A common shares and who hold, and will hold, the
Class A common shares through the Depository Trust Company as investments (and not as securities to be realized in the course of a
trade). The statements below are not exhaustive and may not apply to certain shareholders, such as dealers in securities, broker dealers,
insurance companies and collective investment schemes, shareholders who are exempt from taxation, shareholders who hold their shares
through an Individual Savings Account or a Self-Invested Personal Pension and shareholders who have (or are deemed to have)
acquired the Class A common shares by virtue of an office or employment. Such persons may be subject to special rules. This summary
does not address any inheritance tax considerations.
Prospective purchasers of the Class A common shares who are in any doubt as to their tax position should consult an
appropriate professional adviser.
Taxation of Dividends
General
TORM plc is not required to make any withholding or deduction for or on account of United Kingdom tax in respect of
dividends on the Class A common shares, irrespective of whether the shareholder receiving the dividend is resident in or outside the
United Kingdom.
Individual Shareholders
United Kingdom resident individual Shareholders may be subject to income tax on dividends they receive from the Company.
The first £500 of dividend income that the United Kingdom resident individuals receive in each tax year is taxed at a rate of 0% (the
“Nil Rate Amount”).
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Dividend income that is within the Nil Rate Amount counts towards an individual’s basic or higher rate limits – and will
therefore affect the taxation of other income received and any capital gains realized by the individual in the tax year. It may also affect
the level of savings allowance to which they are entitled. In calculating into which tax band any dividend income over the Nil Rate
Amount falls, dividend income is treated as the “top slice” of an individual’s income.
Any dividend income received by a United Kingdom resident individual Shareholder in excess of the Nil Rate Amount will be
subject to income tax at a rate of 8.75%, to the extent that it is within the basic rate band, 39.35%, to the extent that it is within the
higher rate band and 38.1%, to the extent that it is within the additional rate band.
Corporate Shareholders
Shareholders within the charge to United Kingdom corporation tax which are “small companies” (for the purposes of United
Kingdom taxation of dividends) will generally not expect to be subject to tax on dividends from the Company. A “small company” for
the purposes of United Kingdom taxation of dividends means broadly a company that is a micro or small enterprise as defined in the
Annex to Commission Recommendation 2003/361/EC of May 6, 2003 subject to certain exceptions.
Other shareholders within the charge to United Kingdom corporation tax will not be subject to tax on dividends from the
Company as long as the dividends fall within an exempt class and certain conditions are met. For example: dividends paid to companies
holding less than 10% of the issued share capital of the payer (or any class of that share capital, which here refers to the Class A
common shares) are generally dividends that fall within an exemption in respect of “portfolio holdings” (subject to other conditions
being met and the application of relevant anti-avoidance rules). Other exemptions may also apply (subject to the applications of relevant
anti-avoidance rules).
Shareholders Resident outside the United Kingdom
Where a shareholder resident for tax purposes outside the United Kingdom carries on a trade, profession or vocation in the
United Kingdom and the dividends are a receipt of that trade or, in the case of corporation tax, the Class A common shares are held by
or for a United Kingdom permanent establishment through which a trade is carried on, the shareholder may be liable to United Kingdom
tax on dividends paid by the Company.
Taxation of Chargeable Gains
Individual Shareholders
A disposal of the Class A common shares may give rise to a chargeable gain (or allowable loss) for the purposes of United
Kingdom capital gains tax, depending on the circumstances and subject to any available exemption or relief. The rate of capital gains tax
in respect of shareholdings is 18% for individuals who are subject to income tax at the basic rate and 24% to the extent that an
individual’s chargeable gains, when aggregated with his or her income chargeable to income tax, exceed the basic rate band for income
tax purposes. An individual shareholder is entitled to realize an exempt amount of gains (£3,000 in the 2024/25 tax year) in each tax
year without being liable to tax.
A shareholder who is an individual and who has ceased to be resident in the United Kingdom for taxation purposes (or has
become treated as resident outside the United Kingdom for the purposes of a double tax treaty (‘‘Treaty non-resident’’)) for a period of
five tax years or shorter, and who disposes of the Class A common shares during that period may in some circumstances also be liable,
on his or her return to the United Kingdom, to United Kingdom capital gains tax on that gain, subject to any available exemptions or
reliefs.
Corporate Shareholders
Where a shareholder is within the charge to United Kingdom corporation tax, including cases where it is not resident (for tax
purposes) in the United Kingdom, a disposal of the Class A common shares may give rise to a chargeable gain (or allowable loss) for
the purposes of United Kingdom corporation tax at (typically) a rate of 25% (though some companies pay different rates), depending on
the circumstances and subject to any available exemption or relief. Indexation allowance may reduce the amount of chargeable gain on
shares obtained prior to 2018, but may not create or increase any allowable loss. Special rules may apply to match disposals with
multiple acquisitions of the Class A common shares.
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Shareholders Resident outside the United Kingdom
A shareholder that is not resident in the United Kingdom (and, in the case of an individual, is not temporarily non-resident) for
United Kingdom tax purposes, and whose Class A common shares are not held in connection with carrying on a trade, profession or
vocation in the United Kingdom will generally not be subject to United Kingdom tax on chargeable gains on the disposal of the Class A
common shares.
Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)
The comments in this section relating to stamp duty and SDRT apply whether or not a shareholder is resident or domiciled in
the United Kingdom. Special rules may apply to shareholders such as market makers, brokers, dealers and intermediaries.
Following the European Court of Justice decision in HSBC Holdings Plc and Vidacos Nominees Ltd v The Commissioners for
Her Majesty’s Revenue & Customs (C-569/07) and the First-tier Tax Tribunal decision in HSBC Holdings Plc and The Bank of New
York Mellon Corporation v The Commissioners for Her Majesty’s Revenue & Customs (TC/2009/16584), HMRC has confirmed that
1.5% SDRT is no longer payable on new shares issued into a clearance service or depositary receipt system, nor on transfers to a
clearance service or depositary receipt system where such transfers are integral to the raising of new capital. Following the United
Kingdom’s exit from the European Union, the United Kingdom government amended the relevant sections of the Finance Act 1986, as
part of the Finance Act 2024, in order to prevent the 1.5% charge from taking effect when depositary receipts are issued or transferred
as part of qualifying arrangements to raise new capital. We recommend that advice is sought before any payment of the 1.5% charge is
made.
No stamp duty should be payable on the acquisition or transfer of the beneficial ownership of the Class A common shares held
by a nominee for a person whose business is or includes the provision of clearance services where that acquisition or transfer is settled
within the clearance service and there is no physical instrument of transfer. An agreement for the transfer of such Class A common
shares should also not give rise to a SDRT liability, provided that no election has been made under section 97A of the United Kingdom
Finance Act 1986 which is applicable to such Class A common shares. We understand that no such election has been made by the
Depository Trust Company as with respect to the Class A common shares.
Any instrument of transfer of the Class A common shares that are not held by a nominee for a person whose business is or
includes the provision of clearance services will generally attract stamp duty at a rate of 0.5% of the amount or value of the
consideration for the transfer (rounded up, if necessary, to the next multiple of £5). No stamp duty is chargeable on an instrument
transferring shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument that the
transaction effected by the instrument does not form part of a larger transaction or series of transactions for which the aggregate
consideration exceeds £1,000. An unconditional agreement for such transfer, or a conditional agreement which subsequently becomes
unconditional, will also generally be liable to SDRT at the rate of 0.5% of the amount or value of the consideration for the transfer, but
such liability will be cancelled if the agreement is completed by a duly stamped instrument of transfer within six years of the date of the
agreement, or if the agreement was conditional, the date the agreement became unconditional. Where stamp duty is paid, any SDRT
previously paid should be repaid on the making of an appropriate claim generally with interest.
Therefore, a transfer of title in the Class A common shares or an agreement to transfer such shares from within the Depository
Trust Company system out of the Depository Trust Company system, and any subsequent transfers or agreements to transfer outside the
Depository Trust Company system, will generally attract a charge to United Kingdom stamp duty and/or United Kingdom SDRT at a
rate of 0.5% of any consideration. Shareholders should note in particular that a redeposit of the Class A common shares into the
Depository Trust Company system, including by means of a transfer into a depositary receipt system, will generally attract United
Kingdom stamp duty and/or United Kingdom SDRT at the higher rate of 1.5%.
United Kingdom Tonnage Tax Regime
Each of TORM plc and TORM VesselCo UK Ltd. have elected to be subject to the tonnage tax regime in the United
Kingdom with respect to its income derived from qualifying shipping activities based on the net tonnage of the Group’s qualifying
Danish-flagged vessels owned and operated by the United Kingdom companies.
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Pursuant to this regime, the Group’s vessel-owning companies in the United Kingdom will be subject to United Kingdom
corporation tax based predominantly upon the net tonnage of the vessels rather than income generated from operating the vessels (i.e.,
operating income).
In the event that tonnage tax schemes or other tax laws are changed in the future, the Company’s overall tax burden could
increase, which could have a material adverse effect on the Group’s future performance, results of operations, cash flows and financial
position.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We file reports and other information with the SEC. These materials, including this annual report and the accompanying
exhibits are available from http://www.sec.gov. In addition, shareholders may visit the Investors section of our website at
www.torm.com or request a copy of our filings at no cost by writing or telephoning us at the following address:
TORM plc
Tuborg Havnevej 18
DK-DK-2900 Hellerup, Denmark
Tel: +45 39 17 92 00
None of the information contained on our website is incorporated into or forms a part of this annual report.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
We intend to submit any annual report provided to shareholders in electronic format as an exhibit to a current report on Form
6-K. Please see “Item 19. Exhibits- Annual Report” for the sections of our Annual Report 2024 that are incorporated by reference into
this annual report.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Note 25—”Risks Associated with TORM’s Activities” on pages 239 - 242 of our Annual Report 2024.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
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PART II.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
reports under the Exchange Act is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to the Senior Management Team, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our disclosure controls and
procedures are designed to provide reasonable assurance of achieving their objectives.
We carried out an evaluation under the supervision, and with the participation of the Senior Management Team, including our
Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e) under the Securities Act of 1934) as of December 31, 2024.
Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of December 31, 2024 to provide reasonable assurance that (1) information required to be disclosed by us
in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms, and (2) that such information is accumulated and communicated to the Senior Management Team, including
our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control objectives.
B. Management’s Annual Report on Internal Control Over Financial Reporting
In accordance with Rule 13a-15(f) of the Exchange Act, the Senior Management Team of the Company is responsible for the
establishment and maintenance of adequate internal controls over financial reporting for the Company. Internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with IFRS as issued by the IASB. The Company’s system of internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS as issued by the IASB, and
that receipts and expenditures of the Company are being made only in accordance with authorizations of the Senior Management Team
and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposal of the Company’s assets that could have a material effect on the financial statements. The Senior
Management Team has performed an assessment of the effectiveness of the Company’s internal controls over financial reporting as of
December 31, 2024 based on the provisions of Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO, in 2013. Based on our assessment, the Senior Management Team determined
that the Company’s internal controls over financial reporting were effective as of December 31, 2024.
C. Attestation Report of the Registered Public Accounting Firm
The independent registered public accounting firm that audited the consolidated financial statements, EY Godkendt
Revisionspartnerselskab, has issued an attestation report on the effectiveness of the Company's internal control over financial reporting
as of December 31, 2024, appearing on page F-83 of the financial statements filed as part of this annual report.
105
D. Changes in Internal Control Over Financial Reporting
There were no significant changes in our internal control over financial reporting during the year that ended December 31,
2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Mr. Göran Trapp, who serves as the Chairman of our Audit Committee, qualifies
as an “audit committee financial expert” and that he is “independent” in accordance with Nasdaq and SEC rules.
ITEM 16B. CODE OF ETHICS
We have adopted a code of ethics, which we refer to as our Business Principles, which applies to all entities in the TORM
Group and its employees (both shore-based and at sea), directors and officers. A copy of the Business Principles is filed herewith as
Exhibit 11.1. We have also posted a copy of our Business Principles on our website at www.torm.com/responsibility/reports-and-
policies. None of the information contained on this website is incorporated into or forms a part of this annual report. We will provide
any person, free of charge with a copy of our Business Principles upon written request to our offices at: Tuborg Havnevej 18, DK-2900
Hellerup, Denmark.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company’s principal accountant for 2024 was EY Godkendt Revisionspartnerselskab (PCAOB ID: 1757 ).
Reference is made to Note 6—“Remuneration to Auditors Appointed at the Parent Company’s Annual General Meeting” on
page 218 of our Annual Report 2024.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
During the year ended December 31, 2024, no issuer or affiliate purchases of our equity securities were made.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
Pursuant to an exception under Nasdaq New York listing standards available to foreign private issuers, we are not required to
comply with many of the corporate governance practices followed by U.S. companies under the Nasdaq New York listing standards.
Accordingly, we are exempt from many of Nasdaq New York’s corporate governance practices other than the requirements regarding
the disclosure of a going concern audit opinion, submission of a listing agreement, notification of material non-compliance with Nasdaq
New York corporate governance practices and the establishment and composition of an audit committee and a formal written audit
committee charter. In connection with the listing of our Class A common shares on Nasdaq New York, we have certified to Nasdaq
New York that our corporate governance practices are in compliance with, and are not prohibited by, English Law. Set forth below is a
list of the significant differences between our current or potential corporate governance practices and Nasdaq New York standards
applicable to listed U.S. companies.
106
Independence of Directors. Nasdaq New York requires that a U.S.-listed company maintain a majority of independent
directors. Our Board of Directors consists of five directors, three of which are considered “independent” under Rule 10A-3 promulgated
under the Exchange Act and under the rules of Nasdaq New York. Under English law and our Articles of Association, our Board of
Directors is not required to consist of a majority of independent directors. Under the United Kingdom Corporate Governance Code, to
which we are subject, a majority of our Board is required to be independent. However, the determination of independence is different
from Nasdaq New York standards, and we may choose to deviate from this requirement in the future as long as we explain why we have
done so in our annual report.
Remuneration Committee. Nasdaq New York requires that a listed U.S. company have a remuneration committee consisting
only of independent directors. Under English law and our Articles of Association, our Remuneration Committee is not required to
consist entirely of independent directors. The United Kingdom Corporate Governance Code requires this committee to be comprised of
independent directors and that the chairman of the Board of Directors not chair the Remuneration Committee, but we currently deviate
from these requirements in that our Chairman of the Board, Christopher H. Boehringer, is also chair of our Remuneration Committee.
For more information, see “Corporate Governance – Statement of Compliance with the United Kingdom Corporate Governance Code”
on page 174 of our Annual Report 2024.
Audit Committee. Nasdaq New York requires, among other things, that a listed U.S. company have an audit committee
comprised of three entirely independent directors under Rule 10A-3 promulgated under the Exchange Act. The United Kingdom
Corporate Governance Code requires an audit committee to be comprised of three, or in the case of smaller companies, two,
independent directors, but we may choose to deviate from this requirement in the future as long as we explain why in our annual report.
Currently, our Audit Committee is comprised of our three independent directors.
Executive Sessions. Nasdaq New York requires that the independent directors of a U.S.-listed company have regularly
scheduled meetings at which only independent directors are present, or executive sessions. The United Kingdom Corporate Governance
Code requires that our Chairman hold meetings with non-executive directors without the executives present and that, led by the senior
independent director, the non-executive directors meet without the Chairman present at least annually to appraise the Chairman’s
performance and on such other occasions as necessary.
Shareholder Approval of Securities Issuances. Nasdaq New York requires that a listed U.S. company obtain the approval of its
shareholders prior to issuances of securities under certain circumstances. In lieu of this requirement, we have elected to follow
applicable practices of England and Wales for authorizing issuances of securities, which generally require (i) shareholder approval (a)
by ordinary resolution to grant the directors authority to allot shares and (b) by special resolution to grant the directors authority to allot
shares free of pre-emption rights (which approvals have already been granted by shareholders pursuant to the Company’s shareholders
resolutions dated March 15, 2016, as renewed pursuant to the Company’s shareholders resolutions dated April 15, 2020 and further
renewed pursuant to the Company’s shareholders resolutions dated April 11, 2024), that will apply until the close of business on April
10, 2029 (the Board of Directors will seek new authorities related to the market purchase of its own shares at the 2025 Annual General
Meeting of Shareholders); (ii) board approval and, in addition, (iii) particular board approval in certain circumstances specific to the
Company including pursuant to articles 8 and 137 of the Company’s articles of association, but these practices do not follow additional
corporate governance guidelines that would apply to companies listed on the Main Board of the London Stock Exchange.
Shareholder Approval of Equity Compensation Plans. Nasdaq New York requires that shareholders be given the opportunity to
vote on all equity-compensation plans and material amendments thereto, with limited exceptions for inducement awards, certain grants,
plans and amendments in the context of mergers and acquisitions, and specific types of plans. In lieu of this requirement, we have
elected to follow the applicable practices of England and Wales for authorizing such plans, which do not generally require shareholder
approval (except (i) in certain circumstances not applicable to the Company or (ii) where the issue of shares, or right to subscribe for or
agreement to issue shares, requires further shareholder approval pursuant to applicable law beyond the shareholder approvals currently
existing pursuant to the Company’s shareholder resolutions dated March 15, 2016, subsequently renewed on April 15, 2020 and further
renewed pursuant to the Company’s shareholders resolutions dated April 11, 2024), that will apply until the close of business on April
10, 2029). Certain plans also require certain special director approval requirements to be met pursuant to articles 137.3 and 137.4.4 of
the Company’s articles of association.
Corporate Governance Guidelines. Nasdaq New York requires U.S. companies to adopt and disclose corporate governance
guidelines. The guidelines must address, among other things: director qualification standards, director responsibilities, director access to
management and independent advisers, director compensation, director orientation and continuing education, management succession
and an annual performance evaluation. The UK Corporate Governance Code requires the Company to report on its compliance with the
107
UK Corporate Governance Code in accordance with the “comply or explain” principle. The Company’s position with respect to
compliance (or non-compliance) with the individual recommendations of the UK Corporate Governance Code is required to be
disclosed in the Company’s Annual Report and Accounts. In addition, the Company includes on its website a detailed analysis of its
compliance (or non-compliance) with the UK Corporate Governance Code in its corporate governance statement.
Directors’ Remuneration Reports. Under Section 420(1) of the UK Companies Act, we are required to produce a directors’
remuneration report for each fiscal year. The Directors’ remuneration reports must include (i) a directors’ remuneration policy, which is
subject to a binding shareholder vote at least once every three years and (ii) an annual report on remuneration in the financial year being
reported on, and on how the current policy will be implemented in the next financial year, which is subject to an annual advisory
shareholder vote. The UK Companies Act requires that remuneration payments to directors of the Company and payments to them for
loss of office must be consistent with the approved directors’ remuneration policy or, if not, must be specifically approved by the
shareholders at a general meeting.
Disclosure of Third-Party Director and Nominee Compensation. Nasdaq New York requires U.S. companies to disclose the
material terms of all agreements and arrangements between any director or nominee for director, and any person or entity other than the
Company (a “Third Party”), relating to compensation or other payment in connection with such person’s candidacy or service as a
director of the Company, except for such agreements and arrangements that (i) relate only to reimbursement of expenses in connection
with candidacy as a director; (ii) existed prior to the nominee’s candidacy and the nominee’s relationship with the Third Party has been
publicly disclosed in certain filings under the Exchange Act; or (iii) have been disclosed in certain other filings applicable to domestic
issuers. Under the UK Companies Act, directors have a statutory duty not to accept benefits from third parties conferred by reason of (a)
his or her being a director or (b) his or her doing (or not doing) anything as a director. However, as this is a general statutory duty of the
directors, the Company may give authority for the receipt of benefits from third parties which would otherwise be a breach of duty.
Such benefits would have to be consistent with the approved directors’ remuneration policy or, if not, would need to be specifically
approved by the shareholders at a general meeting. Directors additionally have a statutory duty to avoid conflicts of interest under the
UK Companies Act and should declare any interests in agreements or arrangements which could give rise to such conflict so that non-
conflicted directors can make judgment as to whether a conflict has arisen and/or authorize such conflict.
Director Nominations. Nasdaq New York requires that director nominees to U.S. companies’ boards of directors be selected or
recommended either by the vote of the board’s independent directors or by a nomination committee comprised solely of independent
directors. In accordance with UK law and our Articles of Association, our Nomination Committee, which is required to be composed of
a majority of independent non-executive directors, identifies individuals qualified to become members of the Board of Directors and
recommends nominees for election as members of the Board of Directors at the Company’s Annual General Meeting of Shareholders or
to fill vacancies, as needed.
Proxy Solicitation. Nasdaq New York requires U.S. companies to solicit proxies from and provide proxy statements to
shareholders for all shareholder meetings and to provide copies of proxy solicitation materials to Nasdaq New York. As a foreign
private issuer, we are not required to follow Nasdaq New York’s proxy solicitation rules, and consistent with UK law and our Articles
of Association, we will notify our shareholders of meetings between 14 and 28 days prior to the meeting date. The notification will
contain, among other things, information regarding business to be transacted at the meeting.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
Our Board of Directors has adopted an insider trading policy governing the purchase, sale and other dispositions of our
securities by our directors, Senior Management Team and employees. A copy of our insider trading policy is included as an exhibit to
this annual report.
108
ITEM 16K. CYBERSECURITY
Risk management and strategy
whereby the Company conducts severity and materiality assessments to the disclosure phase. The purpose of these procedures is to
ensure that TORM complies with statutory and regulatory requirements such as the: (i) Commission’s cybersecurity policy requiring
registrants to disclose material cybersecurity incidents on Form 6-K and to disclose on an annual basis material information regarding
its cybersecurity risk management, strategy and governance on Form 20-F; and (ii) Network and Information Security Directive 2
(NIS2 Directive) from the EU which aims to achieve a high common level of cybersecurity across Member States.
These policies are intended to apply to all cybersecurity incidents with material or critical risk impact to the Company’s
employees, assets and third parties , including customers, external consultants, vendors, and suppliers. An incident (or collection of
related incidents) is considered material if there is a substantial likelihood that a reasonable shareholder would consider it important in
making an investment decision, or if it would have significantly altered the ‘total mix’ of information made available.
The company is continuously reassessing its IT risks. In 2024, the estimated likelihood that a cybersecurity incident would
occur changed to "possible" due to the increased threats from Russia and the observed cases of hybrid warfare aimed at critical
infrastructure. Impact assessments establish that there will only be minor operational and financial impacts of a cyber incident due
confidentiality, integrity, and availability of systems and data used by TORM, to reduce the risk of information security incidents, and
to ensure compliance with relevant legislation.
The Company has also implemented a cybersecurity incident response policy based on the SANS (Sysadmin Audit, Network
and Security) incident response framework. The purpose of the incident response policy is to ensure that TORM detects, responds to
and reports security incidents to minimize impact, prevent foreseen future incidents and to comply with regulatory requirements.
To proactively manage cybersecurity risks, the Company has defined an IT risk management policy based on ISO27005 and
integrated the following procedures: (i) Crisis Management Procedure; (ii) Business Continuity Procedure; (iii) Disaster Recovery
Procedure; (iv) Disclosure Procedure, and (v) Data Breach Response.
To ensure that the Company can comprehensively respond to cybersecurity incidents, the Company has developed and
maintained certain procedures including, but not limited to, identifying, and maintaining inventory of critical IT assets, securing
defined lines of communication, providing employees with cybersecurity awareness training and testing incident response procedures
annually. The Company has also established an identification, containment, eradication and recovery, and post-incident evaluation
procedures.
The Company has established a detection procedure whereby it deploys a monitoring system that analyzes correlated events
from multiple systems and notifies IT of incidents that should be investigated and assessed. The Company has also implemented
procedures to continuously monitor vulnerabilities in its systems to proactively mitigate these vulnerabilities before a potential exploit.
Additionally, the Company shall attempt to contain the incident’s impact and intend to remediate or remove any malware or other
artifacts introduced by the attacks. In case a significant cybersecurity incident occurs, the Company shall compile a detailed
management policy which is based on COBIT 2019 (Control Objectives for Information and Related Technologies) control objectives.
The policy applies to any third-party person, independent consultant, organization, or legal entity, including supplier, vendors, or
business partners with whom TORM contracts for IT products and services. The Company performs due diligence on its third-party
management to ensure that the performance of the supplier, IT security measures and third-party risks are regularly reviewed and
Governance
Management Policy updated and communicated to relevant stakeholders in the TORM Group. Furthermore, it is the head of Group
109
IT’s responsibility to ensure that these policies are reviewed at least once a year and re-approved by the Risk Committee of the Board
of Directors.
scenarios, critical assets, vulnerabilities, threats and existing controls. Based on the risk assessment, risks are prioritized for risk
treatment to comply with the defined risk appetite and exceptions are escalated to the risk owner (the Chief Financial Officer) for
approval. Cybersecurity risks are being continuously monitored and the risk registers for vessels and office are being reviewed on an
annual basis. Head of Group IT and the Company's CISO annually report on risks and approved exceptions to the Senior Management
Officer formulates cybersecurity strategies and drives initiatives, and together with the Head of Group IT, set targets, assesses risks,
develop policies and procedures, and execute our cybersecurity efforts. The Chief Financial Officer regularly reports to the Risk
Committee and the overall Board of Directors, which ultimately oversees cybersecurity risks and initiatives. The Risk Committee
monitors the progress of TORM’s cybersecurity efforts and together with the Chief Financial Officer ensures integrity of reporting.
The Risk Committee reports to the Board of Directors at each Risk Committee meeting.
Management’s cybersecurity experience
information officer and Head of IT with enterprise responsibility for information security. Apart from this, the Head of Group IT is
Certified in Cybersecurity (CC) from ISC2 and is attending the NIS2 Executive Program by Bech-Bruun.
In 2024, the Company hired a CISO with more than 10 years dedicated experience in the cybersecurity field to head the IT
risk and security team and to lead the continuous work on increasing the cybersecurity maturity in the Company.
The Chief Financial Officer has extensive experience from senior positions in banking and from heading up the Company’s
IT and Risk Management Division for more than five years. The Chief Financial Officer is responsible for IT, as well as Risk
Management, and has focused intensively on information security, including cybersecurity, and is following a designated NIS2
Executive Program.
The Chief Executive Officer has extensive experience from senior management positions in the shipping industry for over 25
years. As Chief Executive Officer and a member of the Board of Directors, he has had the overall managerial responsibility for the
Company’s information security, and he has been closely involved in designing the Company’ Risk Management set-up and
procedures. The Chief Executive Officer has been closely involved in designing cybersecurity training for the Company’s Board of
Directors.
Cybersecurity Threats
incidents can affect the confidentiality, availability and integrity of our IT systems, and could negatively impact our business,
including our ability to service customers, and may have a material adverse effect on our compliance, reputation, future performance,
results of operations, cash flows and financial position.”
110
PART III.
ITEM 17. FINANCIAL STATEMENTS
See “Item 18. Financial Statements.”
ITEM 18. FINANCIAL STATEMENTS
The financial statements required by this item accompany this annual report in the form of our Annual Report 2024 (see Item
19).
ITEM 19.EXHIBITS
Annual Report
The following pages from our Annual Report 2024, furnished to the SEC on Form 6-K, dated March 6, 2025, are incorporated
by reference into this annual report on Form 20-F. The content of quotations, websites and other sources referenced on these pages of
the Annual Report 2024 are not incorporated by reference into this Form 20-F.
Section | Page(s) in the Annual Report 2024 | ||
Key Figures | 3 | ||
2024 Highlights | 3-7 | ||
Business Model and Strategic Choices | 8-15 | ||
Review and Outlook | 17-39 | ||
Market Review | 23-24 | ||
Financial Review 2024 - Liquidity and Cash Flow; Assessment of Impairment of Assets; Primary Factors Affecting Results of Operations | 25-33 | ||
Market Drivers and Outlook | 34-35 | ||
TORM Fleet Development | 38 | ||
Sustainability Statement | 40-153 | ||
TORM's Governance Structure | 159 | ||
Board of Director Committee Reports | 164-184 | ||
Investor Information - Distribution Policy | 186 | ||
Directors’ Report—Share Capital | 192 | ||
Glossary | 276 |
111
List of Exhibits
1.1 | Memorandum and Articles of Association(1) | ||
2.1 | Form of Class A Common Share Certificate(1) | ||
2.2 | B Share Minority Trust Deed, dated May 30, 2016(1) | ||
2.3 | Equity Warrant Instrument, dated March 15, 2016(1) | ||
2.4 | Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934(4) | ||
4.1 | TORM plc 2018 Management Long-Term Incentive Plan(3) | ||
4.2 | TORM plc 2019 Management Long-Term Incentive Plan(4) | ||
4.3 | TORM plc 2020 Management Long-Term Incentive Plan(5) | ||
4.4 | TORM plc 2021 Management Long-Term Incentive Plan(6) | ||
4.5 | TORM plc 2022 Management Long-Term Incentive Plan(7) | ||
4.6 | TORM plc 2023 Management Long-Term Incentive Plan(8) | ||
4.7 | TORM plc 2024 Management Long-Term Incentive Plan | ||
8.1 | List of Subsidiaries | ||
11.1 | TORM’s Business Principles(2) | ||
11.2 | TORM's Insider Trading Policy(8) | ||
12.1 | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer | ||
12.2 | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer | ||
13.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
13.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
15.1 | Consent of EY Godkendt Revisionspartnerselskab | ||
97.1 | Policy Relating to Recovery of Erroneously Awarded Compensation(8) | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||
XML | Extracted XBRL Instance Document |
(1) Filed as an exhibit to the Company’s Registration Statement on Form 20-F (Registration No. 001-38294) on November 24, 2017, as
amended, and incorporated by reference herein.
(2) Filed as an exhibit to the Company’s Annual Report filed on Form 20-F on March 8, 2018, and incorporated by reference herein.
(3) Filed as an exhibit to the Company’s Annual Report filed on Form 20-F on March 12, 2019, and incorporated by reference herein.
(4) Filed as an exhibit to the Company’s Annual Report filed on Form 20-F on March 11, 2020, and incorporated by reference herein.
(5) Filed as an exhibit to the Company’s Annual Report filed on Form 20-F on March 1, 2021, and incorporated by reference herein
(6) Filed as an exhibit to the Company’s Annual Report filed on Form 20-F on March 23, 2022, and incorporated by reference herein
(7) Filed as an exhibit to the Company’s Annual Report filed on Form 20-F on March 16, 2023, and incorporated by reference herein
(8) Filed as an exhibit to the Company’s Annual Report filed on Form 20-F on March 7, 2024, and incorporated by reference herein
F-1
Financial Statements
Consolidated Financial Statements | ||
Consolidated Income statement for the years ended December 31, 2024, 2023 and 2022 | F-2 | |
Consolidated Statement of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 | F-3 | |
Consolidated Balance Sheet for the years ended December 31, 2024, 2023 and 2022 | F-4 | |
Consolidated Statement of Changes in Equity for the years ended December 31, 2024, 2023 and 2022 | F-6 | |
Consolidated Cash Flow Statement for the years ended December 31, 2024, 2023 and 2022 | F-8 | |
Notes to the Consolidated Financial Statements for the years ended December 31, 2024, 2023 and 2022 | F-10 |
F-2
Consolidated Income Statement
January 01 - December 31
USDm | Note | 2024 | 2023 | 2022 | ||||
Revenue | 3,4 | |||||||
Port expenses, bunkers, commissions, and other cost of goods and services sold | ( | ( | ( | |||||
Operating expenses | 5 | ( | ( | ( | ||||
Profit from sale of vessels | 28 | |||||||
Administrative expenses | 5,6 | ( | ( | ( | ||||
Other operating income and expenses | ( | |||||||
Share of profit/(loss) from joint ventures | ||||||||
Impairment losses on tangible assets | 10,12,28 | ( | ||||||
Depreciation and amortization | 9,10,11 | ( | ( | ( | ||||
Operating profit (EBIT) | ||||||||
Financial income | 7 | |||||||
Financial expenses | 7 | ( | ( | ( | ||||
Profit/(loss) before tax | ||||||||
Tax | 8 | ( | ||||||
Net profit/(loss) for the year | ||||||||
Net profit/(loss) for the year attributable to: | ||||||||
TORM plc shareholders | ||||||||
Non-controlling interest | ( | ( | ( | |||||
Net profit/(loss) for the year | ||||||||
Earnings per share for TORM plc shareholders | ||||||||
Basic earnings/(loss) per share (USD) | 32 | |||||||
Diluted earnings/(loss) per share (USD) | 32 |
F-3
Consolidated Statement of Comprehensive Income
January 01 - December 31
USDm | 2024 | 2023 | 2022 | |||
Net profit/(loss) for the year | ||||||
Other comprehensive income/(loss): | ||||||
Items that may be reclassified to profit or loss: | ||||||
Exchange rate adjustment arising from translation of entities using a functional currency different from USD | ( | ( | ||||
Reclassification of exchange rate adjustments on disposal of joint venture | ||||||
Fair value adjustment on hedging instruments | ||||||
Fair value adjustment on hedging instruments transferred to income statement | ( | ( | ||||
Tax on other comprehensive income | ( | |||||
Items that may not be reclassified to profit or loss: | ||||||
Remeasurements of net pension and other post-retirement benefit liability or asset | ( | |||||
Other comprehensive income/(loss) after tax | ( | ( | ||||
Total comprehensive income/(loss) for the year | ||||||
Total comprehensive income/(loss) for the year attributable to: | ||||||
TORM plc shareholders | ||||||
Non-controlling interest | ( | ( | ( | |||
Total comprehensive income/(loss) for the year |
F-4
Consolidated Balance Sheet
As of December 31
USDm | Note | 2024 | 2023 | 2022 | |||
ASSETS | |||||||
Intangible assets | |||||||
Goodwill | 9,12,34 | ||||||
Other intangible assets | 9 | ||||||
Total intangible assets | |||||||
Tangible fixed assets | |||||||
Land and buildings | 10,11 | ||||||
Vessels and capitalized dry-docking | 10,11,12,21 | ||||||
Prepayments on vessels | 10 | ||||||
Other non-current assets under construction | |||||||
Other plant and operating equipment | 10 | ||||||
Total tangible fixed assets | |||||||
Financial assets | |||||||
Investments in joint ventures | |||||||
Loan receivables | 13 | ||||||
Deferred tax asset | 8 | ||||||
Other investments | |||||||
Total financial assets | |||||||
Total non-current assets | 3 | ||||||
Current assets | |||||||
Inventories | |||||||
Trade receivables | 15 | ||||||
Other receivables | 16 | ||||||
Prepayments | 17 | ||||||
Cash and cash equivalents incl. restricted cash | 33 | ||||||
Current assets excluding assets held for sale | |||||||
Assets held for sale | 28 | ||||||
Total current assets | |||||||
TOTAL ASSETS |
F-5
USDm | Note | 2024 | 2023 | 2022 | |||
EQUITY AND LIABILITIES | |||||||
Equity | |||||||
Common shares | 18 | ||||||
Share premium | |||||||
Treasury shares | 18 | ( | ( | ( | |||
Hedging reserves | |||||||
Other reserves | |||||||
Translation reserves | ( | ( | ( | ||||
Retained profit | |||||||
Equity attributable to TORM plc shareholders | |||||||
Non-controlling interest | 34 | ||||||
Total equity | |||||||
Liabilities | |||||||
Non-current liabilities | |||||||
Non-current tax liability related to held-over gains | 8 | ||||||
Deferred tax liability | 8 | ||||||
Borrowings | 11,20,21,23 | ||||||
Other non-current liabilities | 19 | ||||||
Total non-current liabilities | |||||||
Current liabilities | |||||||
Borrowings | 11,20,21,23 | ||||||
Trade payables | 23 | ||||||
Current tax liabilities | |||||||
Other liabilities | 19,23 | ||||||
Provisions | 31 | ||||||
Prepayments from customers | |||||||
Total current liabilities | |||||||
Total liabilities | |||||||
TOTAL EQUITY AND LIABILITIES |
F-6
Consolidated Statement of Changes in Equity
January 01 - December 31
USDm | Common shares | Share premium | Treasury shares ¹⁾ | Hedging reserves | Translation reserves | Other reserves | Retained profit | Equity attributable to shareholders of TORM plc | Non- controlling interest | Total |
Equity as of January 01, 2022 | - | - | ||||||||
Comprehensive income/loss for the year: | ||||||||||
Net profit/(loss) for the year | — | — | — | — | — | — | - | |||
Other comprehensive income/(loss) for the year²⁾ | — | — | — | - | — | — | ||||
Tax on other comprehensive income | — | — | — | - | — | — | — | - | — | - |
Total comprehensive income/(loss) for the year | - | - | ||||||||
Capital increases ³⁾ | — | — | — | — | — | — | — | |||
Share-based compensation | — | — | — | — | — | — | — | |||
Dividends paid | — | — | — | — | — | — | - | - | — | - |
Total changes in equity 2022 | - | - | ||||||||
Non-controlling interest arising on acquisition | — | — | — | — | — | — | — | — | ||
Equity as of December 31, 2022 | - | - | ||||||||
Comprehensive income/loss for the year: | ||||||||||
Net profit/(loss) for the year | — | — | — | — | — | — | - | |||
Other comprehensive income/(loss) for the year ²⁾ | — | — | — | - | — | — | - | - | - | |
Tax on other comprehensive income | — | — | — | — | — | — | — | |||
Total comprehensive income/(loss) for the year | - | - | ||||||||
Capital increase ³⁾ | — | — | — | — | — | — | ||||
Transaction costs of capital increase | — | - | — | — | — | — | — | - | — | - |
Share-based compensation | — | — | — | — | — | — | — | |||
Dividends paid | — | — | — | — | — | — | - | - | — | - |
Total changes in equity 2023 | - | - | ||||||||
Non-controlling interest arising on acquisition | — | — | — | — | — | — | — | — | — | |
Equity as of December 31, 2023 | - | - |
F-7
Consolidated Statement of Changes in Equity
January 01 - December 31
USDm | Common shares | Share premium | Treasury shares ¹⁾ | Hedging reserves | Translation reserves | Other reserves | Retained profit | Equity attributable to shareholders of TORM plc | Non- controlling interest | Total |
Equity as of January 01, 2024 | - | - | ||||||||
Comprehensive income/(loss) for the year: | ||||||||||
Net profit/(loss) for the year | — | — | — | — | — | — | - | |||
Other comprehensive income/ (loss) for the year ²⁾ | — | — | — | - | - | — | - | - | - | - |
Tax on other comprehensive income | — | — | — | — | — | — | — | |||
Total comprehensive income/(loss) for the year | - | - | - | |||||||
Capital increases ³⁾ | — | — | — | — | — | — | ||||
Capital reduction ⁴⁾ | — | - | — | — | — | — | — | — | ||
Transaction costs of capital increase | — | - | — | — | — | — | — | - | — | - |
Share-based compensation | — | — | — | — | — | — | — | |||
Dividends paid | — | — | — | — | — | — | - | - | — | - |
Total changes in equity 2024 | - | - | - | |||||||
— | ||||||||||
Non-controlling interest arising on acquisition | — | — | — | — | — | — | — | — | — | |
Equity as of December 31, 2024 | - | - |
subsequently approved by the court, in order to create further distributable reserves to support: (i) the future payment by the Company
of dividends to its shareholders; and (ii) share buy-backs should circumstances dictate it desirable.
F-8
Consolidated Cash Flow Statement
January 01 - December 31
USDm | Note | 2024 | 2023 | 2022 | |||
Cash flow from operating activities | |||||||
Net profit/(loss) for the year | |||||||
Adjustments: | |||||||
Profit from sale of vessels | ( | ( | ( | ||||
Depreciation and amortization | 9,10 | ||||||
Impairment losses on tangible assets | 9,10,28 | ||||||
Share of profit/(loss) from joint ventures | ( | ||||||
Financial income | 7 | ( | ( | ( | |||
Financial expenses | 7 | ||||||
Tax expenses/(income) | 8 | ( | ( | ||||
Other non-cash movements | 29 | ( | |||||
Dividends received from joint ventures | |||||||
Interest received and realized exchange gains | |||||||
Interest paid and realized exchange losses | ( | ( | ( | ||||
Income taxes paid | ( | ( | ( | ||||
Change in inventories, receivables and payables, etc. | 29 | ( | |||||
Net cash flow from operating activities |
F-9
USDm | Note | 2024 | 2023 | 2022 | |||
Cash flow from investing activities | |||||||
Investment in tangible fixed assets ¹⁾ | ( | ( | ( | ||||
Investment in intangible fixed assets | ( | ( | ( | ||||
Acquisition of subsidiaries, net of cash acquired | 34 | ||||||
Sale of tangible fixed assets | 28 | ||||||
Change in restricted cash | ( | ||||||
Net cash flow from investing activities | ( | ( | |||||
Cash flow from financing activities | |||||||
Proceeds, borrowings | 13,20 | ||||||
Repayment, borrowings | 20 | ( | ( | ( | |||
Dividends paid | ( | ( | ( | ||||
Capital increase ¹⁾ | 18 | ||||||
Transaction costs share issue | ( | ( | |||||
Net cash flow from financing activities | ( | ( | ( | ||||
Net cash flow from operating, investing, and financing activities | ( | ||||||
Cash and cash equivalents as of January 01 | |||||||
Cash and cash equivalents as of December 31 | |||||||
Restricted cash as of December 31 | 33 | ||||||
Cash and cash equivalents, including restricted cash as of December 31 |
USD 86.5 m, 2022:USD 0.0 m) non-cash share issues in relation to the acquisition of 19 (2023: five , 2022:zero ) vessels. Please refer to
Note 18 for further reference.
F-10
Notes to the consolidated financial statements
Note 1 | Accounting Policies, Critical Accounting Estimates and Judgements | F-11 | ||
Note 2 | Liquidity, Capital Resources and Subsequent Events | F-18 | ||
Note 3 | Segment | F-20 | ||
Note 4 | Revenue from Contracts with Customers | F-27 | ||
Note 5 | Staff Costs | F-29 | ||
Note 6 | Remuneration to Auditors Appointed at the Parent Company’s Annual General Meeting | F-33 | ||
Note 7 | Financial Items | F-34 | ||
Note 8 | Tax | F-35 | ||
Note 9 | Intangible Assets | F-38 | ||
Note 10 | Tangible Fixed Assets | F-40 | ||
Note 11 | Leasing | F-44 | ||
Note 12 | Impairment Testing | F-47 | ||
Note 13 | Loan Receivables | F-51 | ||
Note 14 | Inventories | F-52 | ||
Note 15 | Trade Receivables | F-53 | ||
Note 16 | Other Receivables | F-54 | ||
Note 17 | Prepayments | F-54 | ||
Note 18 | Common Shares and Treasury Shares | F-55 | ||
Note 19 | Other Liabilities | F-56 | ||
Note 20 | Effective Interest Rate, Outstanding Borrowings | F-58 | ||
Note 21 | Collateral Security for Borrowings | F-60 | ||
Note 22 | Guarantee Commitments and Contingent Liabilities | F-60 | ||
Note 23 | Contractual Rights and Obligations | F-61 | ||
Note 24 | Derivative Financial Instruments | F-63 | ||
Note 25 | Risks Associated with TORM’s Activities | F-67 | ||
Note 26 | Financial Instruments | F-72 | ||
Note 27 | Related Party Transactions | F-73 | ||
Note 28 | Assets Held for Sale and Non-Current Assets Sold During the Year | F-74 | ||
Note 29 | Cash Flows | F-74 | ||
Note 30 | Entities in the Group | F-75 | ||
Note 31 | Provisions | F-77 | ||
Note 32 | Earnings per Share and Dividend per Share | F-78 | ||
Note 33 | Cash and Cash Equivalents, Including Restricted Cash | F-79 | ||
Note 34 | Business combinations | F-79 |
F-11
Overview of Business
TORM plc is a shipping company that primarily owns and operates a fleet of product tankers and is engaged in the marine engineering
industry. TORM plc is a public company limited by shares and is incorporated in England and Wales. Its registered number is
09818726, and its registered address is 4th Floor , 120 Cannon Street , London , EC4N 6AS, United Kingdom . Unless otherwise
indicated, the terms “TORM plc” and “Parent Company” refers solely to TORM plc and the terms “we”, “us”, “our”, the ”Company”,
and the “Group” refer to TORM plc and its consolidated subsidiaries, which include TORM A/S.
TORM plc is listed on Nasdaq in Copenhagen, Denmark, on Nasdaq in New York, the United States as well as having bonds listed on
Oslo Stock Exchange, Norway.
Basis of Preparation
The consolidated financial statements of the Group have been prepared in accordance with UK-adopted International Accounting
Standards (“UK-adopted IAS”). The consolidated financial statements are also prepared in accordance with IFRS Accounting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and IFRS as adopted by the European Union
(“EU”), as applied to financial periods beginning on or after January 01, 2024 and additional disclosure requirements for listed
companies in accordance with the Danish Financial Statements Act.
The consolidated financial statements have been prepared on a going concern basis and under the historical cost convention, except
where fair value accounting is specifically required by IFRS.
The functional currency of the Company is USD, and the Company applies USD as the presentation currency in the preparation of the
consolidated financial statements.
Going Concern
As of December 31, 2024, TORM’s available liquidity including undrawn and committed facilities was USD 615 m, including a total
cash position of USD 291 m (including cash held for dividend payment). TORM’s net interest-bearing debt was USD 948 m, and the
net debt loan-to-value ratio was 26.8 % (Tanker segment only and before dividend payment related to Q4 2024). Further information
on TORM’s objectives and policies for managing our capital, our financial risk management objectives, and our exposure to credit and
liquidity risk can be found in note 25 to the financial statements. The principal risks and uncertainties facing TORM are set out on
pages 17-21.
TORM monitors our funding position throughout the year to ensure that we have access to sufficient funds to meet the forecasted cash
requirements and loan commitments, and to monitor compliance with the financial covenants in our loan facilities, details of which are
available in Note 2 to the financial statements.
A key element for TORM’s financial performance in the going concern period relates to the increased geopolitical risk following
Russia’s invasion of Ukraine in February 2022, while the conflicts in the Middle East are expected to have a lessor impact on the
product tanker market. While the changed geopolitical landscape initially supported market dynamics, crude cannibalization
significantly reduced the net positive effect in the second half of 2024. TORM’s base case assumes that these dynamics will persist,
albeit with a lower estimated impact on the product tanker market and resultingly with freight rates and vessel values materializing
below 2024 levels. TORM monitors the general development in the geopolitical situation and potential effects on the product tanker
market. In the base case, TORM has sufficient liquidity and headroom for all the covenant limits.
In addition to the base case, TORM has developed a reverse stress case. The reverse stress case covers the lowest TCE rate that only
just meet the minimum liquidity covenant and the lowest vessel values that do not breach any of the facilities’ minimum security
values in the period. In the reverse stress case, with TCE rates slightly below the lowest rolling four-quarter average since 2000 on a
per vessel class basis and a related decline in vessel values, TORM maintains sufficient headroom on liquidity and covenants
throughout the going concern period.
F-12
NOTE 1 – continued
The Board of Directors has considered TORM’s cash flow forecasts and the expected compliance with TORM’s financial covenants
for the period until March 31, 2026. Based on this review, the Board of Directors has a reasonable expectation that taking reasonably
possible changes in trading performance and vessel valuations into account, TORM will be able to continue in operation and comply
with our financial covenants for the period until March 31, 2026. Accordingly, TORM continues to adopt the going concern basis in
preparing our financial statements.
Adoption of New or Amended IFRS Standards
IASB has issued a number of new or amended accounting standards (IFRS) and interpretations (IFRIC). TORM has implemented the
following standards and amendments issued by the IASB and adopted by the UK in the consolidated financial statements for 2024:
•Amendments to IAS 1 Presentation of Financial Statements
•Amendments to IFRS 16 Lease Liability in a Sale and Leaseback
•Amendments to IAS 7 and IFRS 7 Supplier Finance Agreements
For the new standards and amendments, it is assessed that application of these effective on January 01, 2024 has not had any material
accounting impact, but only limited impact on disclosures on the consolidated financial statements in 2024.
The below have been issued by the IASB and adopted by the UK but have not yet come into effect for consolidated financial
statements of 2024:
•Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (January 2025)
•Annual Improvements to IFRS Accounting Standards—Volume 11 (January 2026)
The below have been issued by the IASB and not yet adopted by the UK and not yet come into effect:
•Amendments to IFRS 9 and IFRS 7: Amendments to the Classification and Measurement of Financial Instruments (January 2026)
•Amendments to IFRS 9 and IFRS 7: Contracts Referencing Nature dependent Electricity (January 2026)
•IFRS 18 Presentation and Disclosure in Financial Statements (January 2027)
•IFRS 19 Subsidiaries without Public Accountability: Disclosures (January 2027)
•IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture issued in
September 2014 (deferred indefinitely).
TORM has assessed the accounting standards and interpretations above except IFRS 18, and TORM does not expect the new
standards to have any material impact on neither TORM’s figures nor the disclosures. The impact of IFRS 18 on the consolidated
financial statements has not yet been determined on a sufficiently reliable basis.
F-13
NOTE 1 – continued
Accounting Policies
The Group’s material accounting policy information is provided below in combination with the accounting policies described in each
of the individual notes to the consolidated financial statements as outlined in the following notes:
•Segment reporting
•Revenue from contracts with customers
•Staff costs
•Intangible assets
•Tangible fixed assets
•Leasing
•Impairment
•Loan receivables
•Inventories
•Financial items
•Trade receivables
•Tax
•Other liabilities
•Borrowings
•Derivative financial instruments
•Provisions
•Earnings per share
•Business combinations
The consolidated financial statements comprise the financial statements of the parent company, TORM plc and entities controlled by the
Company and its subsidiaries. Control is achieved when the Company has all the following:
•Power over the investee
•Exposure, or rights, to variable returns from its involvement with the investee
•The ability to use its power over the investee to affect the amounts of the investor’s returns
TORM reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are
sufficient to give it the practical ability to direct the relevant activities unilaterally. The Company considers all facts and circumstances
in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:
•The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders
•Potential voting rights held by the Company, other vote holders, or other parties
•Rights arising from other contractual arrangements
•Any additional facts and circumstances which indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time when decisions need to be made, including voting pattern at previous shareholders’ meetings
Entities in which the Group exercises significant but not controlling influence are regarded as associated companies and are accounted
for using the equity method.
Companies which are managed jointly by agreement with one or more companies and therefore are subject to joint control (joint
ventures) are accounted for using the equity method.
F-14
NOTE 1 – continued
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ends when the Company loses control
over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated income statement and other comprehensive income from the date on which the Company obtains control until the date
when the Company loses control over the subsidiary.
The consolidated financial statements are prepared using consistent accounting policies and eliminating intercompany transactions,
The functional currency of all significant entities, including subsidiaries and associated companies, is United States Dollars (USD)
because the Company’s vessels operate in international shipping markets, in which income and expenses are settled in USD, and
because the Company’s most significant assets and liabilities in the form of vessels and related liabilities are denominated in USD.
Transactions in currencies other than the functional currency are translated into the functional currency at the transaction date. Cash,
receivables and payables and other monetary items denominated in currencies other than the functional currency are translated into the
functional currency at the exchange rate at the balance sheet date. Gains or losses due to differences between the exchange rate at the
transaction date and the exchange rate at the settlement date or the balance sheet date are recognized in the income statement under
“Financial income” and “Financial expenses”.
The reporting currency of the Company is USD. Upon recognition of entities with functional currencies other than USD, the financial
statements are translated into USD. Income statement items are translated into USD at the exchange rate for each transaction, whereas
balance sheet items are translated at the exchange rate as of the balance sheet date. Exchange differences arising from the translation of
financial statements into USD are recognized as a separate component in “Other comprehensive income”. On the disposal of an entity,
the cumulative amount of the exchange differences recognized in the separate component of equity relating to that entity is transferred
to the income statement as part of the gain or loss on disposal.
Port expenses, bunkers, and commissions and other costs of goods and services sold
Port expenses, bunker fuel consumption, commissions, and other costs of goods sold are recognized as incurred. To the extent that the
costs are recoverable, costs directly attributable to relocate the vessel to the load port are capitalized and amortized over the course of
the transportation period.
Gains and losses on forward bunker contracts, forward freight agreements (FFA) as well as write-down for losses on trade receivables
are included in this line.
Operating expenses, which comprise crew expenses, repair and maintenance expenses, and tonnage duty, are expensed as incurred.
Profit from sale of vessels
Profit from sale of vessels is recognized at the time of delivery to the buyer, representing the difference between the sales price less
costs to sell and the carrying value of the vessel.
Administrative expenses
Administrative expenses, which comprise administrative staff costs, management costs, office expenses, and other expenses relating to
administration, are expensed as incurred.
Other operating expenses and income
Other operating expenses primarily comprise management fees paid to commercial and technical managers for managing the fleet,
profits and losses deriving from the disposal of fixed assets other than vessels as well as claims and disputes provisions.
F-15
NOTE 1 – continued
Depreciation and impairment losses comprise depreciation of tangible fixed assets for the year as well as the write-down of the value of
assets by the amount by which the carrying amount of the asset exceeds its recoverable amount. In the event of indication of
impairment, the carrying amount is assessed, and the value of the asset is written down to its recoverable amount equal to the higher of
value in use based on net present value of future earnings from the assets and its fair value less costs to sell.
Subsequent reversal of impairment losses is recognized if the recoverable amount exceeds the carrying amount to the extent that the
carrying amount does not exceed the carrying amount without any historical impairment losses.
Balance Sheet
Financial assets are initially recognized on the settlement date at fair value plus transaction costs, except for financial assets at fair value
through profit or loss, which are recognized at fair value. Financial assets are derecognized when the rights to receive cash flows from
the assets have expired or have been transferred.
Investments in joint ventures comprise investments in companies which by agreement are managed jointly with one or more companies
and therefore are subject to joint control and in which the parties have rights to the net assets of the joint venture. Joint ventures are
accounted for using the equity method. Under the equity method, the investment in joint ventures is initially recognized at cost and
thereafter adjusted to recognize TORM’s share of the profit or loss in the joint venture. When TORM’s share of losses in a joint venture
exceeds the investment in the joint venture, TORM discontinues recognizing its share of further losses. Additional losses are recognized
only to the extent that TORM has incurred legal or constructive obligations or made payments on behalf of the joint venture.
Treasury shares are recognized as a separate component of equity at cost. Upon subsequent disposal of treasury shares, any
consideration is also recognized directly in equity.
Interim dividends are recognized when paid. Any year-end dividend is recognized as a liability at the date of approval at the AGM.
Other non-current liabilities consist of long-term employee-related liabilities related to the frozen Danish holiday funds in connection
with the transition to the new Danish Holiday Act. TORM has elected to keep the holiday funds until the employees, covered at the
transition date, reach the age of retirement. The liability is remeasured annually based on an index rate published by the Holiday
Trade payables are recognized at the fair value of the item purchased and are subsequently measured at amortized cost.
Deferred income relates to amounts received from customers in advance of the related performance obligations being satisfied.
F-16
NOTE 1 – continued
The cash flow statement shows how income and changes in the balance sheet items affect cash and cash equivalent, i.e. how cash is
generated or used in the period. The cash flow statement is presented in accordance with the indirect method commencing with “Net
profit/(loss) for the year”.
Cash flow from operating activities converts income statement items from the accrual basis of accounting to cash basis. Starting with
“Net profit/(loss) for the year”, non-cash items are reversed, and actual payments are included. Further, the change in working capital is
taken into account.
Cash flow from investing activities comprises the cash used or received in the purchase and sale of tangible fixed assets and financial
assets as well as cash from business combinations.
Cash flow from financing activities comprises changes in the cash used or received in borrowings (amount of new borrowings and
repayments), purchases or sales of treasury shares, dividends paid to shareholders.
Cash and cash equivalents including restricted cash comprise cash and short-term bank deposits with an original maturity of three
months or less. The carrying amount of these assets is approximately equal to their fair value. Cash and cash equivalents including
restricted cash at the end of the reporting period are shown in the consolidated cash flow statement and can be reconciled to the related
items in the consolidated balance sheet.
The restricted cash balance relates to cash provided as security for initial margin calls and negative market values on derivatives as well
as a sale and leaseback transaction prepayment to be released upon delivery of the vessel.
The preparation of financial statements in accordance with IFRS requires the Management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are
affected by the way TORM applies its accounting policies. An accounting estimate is considered critical if the estimate requires the
Management to make assumptions about matters subject to significant uncertainty, if different estimates could reasonably have been
used, or if changes in the estimate that would have a material impact on the Company’s financial position or results of operations are
reasonably likely to occur from period to period. The Management believes that the accounting estimates applied are appropriate and the
resulting balances are reasonable. However, actual results could differ from the original estimates requiring adjustments to these
balances in future periods.
The Management also makes various accounting judgements in the preparation of the consolidated financial statements which can affect
the amounts recognized.
Judgements
The Management has assessed that TORM has two cash-generating units (CGUs), being the Main Fleet and the Marine Engineering
(previously referred to as Marine Exhaust) cash-generating units. The Main Fleet is comprised of TORM’s LR1, LR2 and MR vessels,
which are largely interchangeable, and the cash flows generated by them are interdependent. These vessels are operated via the One
TORM platform collectively as a combined internal pool, employed principally in the spot market, and actively managed to meet the
needs of our customers in that market, particularly regarding the location of vessels meeting required specifications and the price of
transport rather than vessel class. Given the technical specifications and capacity of vessels, the Main Fleet is relatively homogenous
with a very high degree of interoperability. All vessels in the Main Fleet can handle multiple sizes of cargo and sail all seas and oceans,
over both shorter and long distances. The Main Fleet is monitored and managed on an aggregated level as one pool, i.e. each vessel or
vessel class does not generate cash inflows which are largely independent of those from other vessels or vessel classes. The MR vessels
acquired in prior years with chemical trading capability are operated as all other product tanker vessels and thus included in the Main
Fleet CGU.
F-17
NOTE 1 – continued
In addition, the activities within the Marine Engineering segment represent a single CGU because cash inflows are generated
independent of the cash inflows from the Main Fleet from serving the existing external customer base of the Marine Engineering
segment.
Estimates
Carrying amounts of vessels
The Company evaluates the carrying amounts of the vessels (including newbuildings) to determine if events have occurred which
would require a modification of their carrying amounts. The recoverable amount of vessels is reviewed based on events or changes in
circumstances which would indicate that the carrying amount of its vessels might not be recoverable.
In assessing the recoverability of the vessels, the Company reviews certain indicators of potential impairment or indication of any past
impairment losses that should be reversed. If an indication of impairment or reversal of past impairment is identified, the need for
recognizing an impairment loss or a recognition of a reversal of a past impairment loss is assessed by comparing the carrying amount
of the vessels to the higher of the fair value less costs of disposal and the value in use.
The Management assesses indicators of impairment that include, but are not limited to, broker vessel values, time charter rates,
weighted average cost of capital, and any other adverse impacts from current economic, environmental, and geopolitical uncertainty,
as well as the carrying amount of the net assets against the market capitalization.
The fair value less cost of disposal of the vessels is based on the market approach which considers the valuations from two
internationally acknowledged shipbrokers with appropriate qualifications and recent experience in the valuation of vessels. The
shipbrokers’ primary input is deadweight tonnage, yard, and age of the vessel. The fair value assumes that the vessels are in good and
seaworthy condition and with prompt, charter-free delivery.
The assessment of the value in use is based on projection of future discounted cash flows related to the vessels which is complex and
requires the Company to make various estimates including future freight rates, utilization, earnings from the vessels, future operating
expenses and capital expenditure including dry-docking costs and discount rates
All these factors have been historically volatile, especially the freight rates. The carrying amounts of TORM’s vessels may not represent
their fair market value at any point in time, as market prices of second-hand vessels to a certain degree tend to fluctuate with changes in
freight rates and the cost of newbuildings. However, if the estimated future cash flow or related assumptions in the future change, an
impairment write-down or reversal of impairment may be required.
For more information refer to Note 12.
F-18
Liquidity and Capital Resources
As of 31 December 2024, TORM’s cash and cash equivalents including restricted cash totaled USD 291 m (2023: USD 296 m, 2022:
USD 324 m), and undrawn and committed credit facilities as listed below amounted to USD 324 m (2023: USD 343 m, 2022: USD
Debt Facility | Maturity | Outstanding amount 2024 (USDm) | Outstanding amount 2023 (USDm) | Outstanding amount 2022 (USDm) | |
Senior Unsecured Bonds | 2029 | ||||
Syndicated Facilities 2023 | 2029 | ||||
Syndicated Facilities 2020 | Repaid | ||||
Danish Ship Finance Facility 2020 | 2031 | ||||
ING Facility 2023 | 2029 | ||||
HCOB Facility 2023 | Repaid | ||||
HCOB Facilities 2020-2021 | Repaid | ||||
HCOB Facility 2024 | 2031 | ||||
KfW Facility 2019 | 2032 | ||||
CEXIM 2016 | Repaid | ||||
Other credit facilities | 2026 | ||||
Total |
In 2024, TORM refinanced a number of debt facilities involving repayment of debt in relation to sale of vessels, as well as financing
additional second-hand vessel purchases. TORM repaid debt on seven vessels previously funded by HCOB. In total, the company had
TORM completed consolidation of the HCOB facilities by amending the facility with maturity prolonged to 2031. TORM also
refinanced the Danish Shipping Facility to partly fund the acquisition of three MR vessels. As of 31 December 2024, the scheduled
minimum payments on mortgage debt and bank loans in 2025 amount to USD 113.7 m.
Undrawn Facility | Maturity | Undrawn amount 2024 (USDm) | Undrawn amount 2023 (USDm) | Undrawn amount 2022 (USDm) | |
Syndicated Facilities 2023 - RCF | 2029 | ||||
Syndicated Facilities 2020 - RCF | Cancelled | ||||
Syndicated Facilities 2024 - RCF | 2031 | ||||
HCOB Facility 2023 - RCF | Cancelled | ||||
DSF Additional Facility | Cancelled | ||||
Syndicated Bridge to Bond Facility | Cancelled | ||||
HCOB Facility 2024 - RCF | 2031 | ||||
Total |
TORM announced a USD 150 m revolving syndicate credit facility with eight banks to partly finance the purchase of six second-hand
vessels. Furthermore, the HCOB revolving credit facility increased to USD 74 m and the maturity prolonged to 2031. Also, the
maturity of TORM’s USD 100 m Syndicated Facilities was extended by one year to 2029. As of December 31, 2024, all three credit
facilities remain undrawn.
F-19
TORM has the following lease facilities as of December 31, 2024.
Lease Facility | Maturity | Outstanding amount 2024 (USDm) | Outstanding amount 2023 (USDm) | Outstanding amount 2022 (USDm) | |
Bocomm Leasing Facilities 2019-2021 | 2032 | ||||
Bocomm Leasing Facilities 2019 | Repaid | ||||
Springliner Leases | 2026 | ||||
China Development Bank Financial Leasing | 2032 | ||||
China Merchant Bank Financial Leasing | 2033 | ||||
Showa Leasing | Repaid | ||||
Eifuku Leasing | Repaid | ||||
Total |
TORM did not engage in any new lease facilities in 2024. As of December 31, 2024, the scheduled minimum payments on lease
agreements in 2024 amounts to USD 51 m.
TORM manages its capital structure for the Group as a whole in order to support our spot-based vessel employment profile. This is done
through a conservative leverage, a strong liquidity position and limited off-balance sheet commitments. TORM ongoingly stress tests
the capital structure and liquidity position as well as prepares cash flow forecasts to make sure the capital structure remains robust to
potential risks. Besides the liquidity position, the main considerations are loan-to-value ratio, distribution policy, CAPEX commitments,
off-balance sheet liabilities, terms and sources of funding vessel investments, hedging of financial market risks and fleet employment
strategy, hereunder entering into FFA contracts.
On March 2024, TORM amended the distribution policy with effect from the first quarter of 2024. With this TORM intends to
distribute on a quarterly basis excess liquidity above a threshold liquidity level. The threshold liquidity level will be determined as the
sum of i) the product of liquidity requirement per vessel and the number of owned and leased vessels in TORM’s fleet as at the
balance sheet day and ii) a discretionary element determined by the Board taking into consideration TORM’s capital structure,
strategic opportunities, future obligations and market trends.
TORM’s debt facilities include financial covenants related to:
•Minimum liquidity (cash and cash equivalents minimum amount requirement at all times)
•Minimum security value (loan-to-value for individual borrowings)
•Equity ratio (minimum level)
Financial covenants should be complied with on a daily basis, and is reported to counterparties on a quarterly basis. During 2024, 2023
and 2022, TORM did not have any covenant breaches, and the Management has assessed that a covenant breach in the near future is
remote. Please refer to Note 20 for further information on facilities with financial covenants.
Subsequent Events
After the end of 2024, TORM sold the MR vessels TORM Ragnhild, TORM Resilience and TORM Thames to new owners with
expected delivery during the remaining part of Q1 2025.
TORM’s Board of Directors has on the date of this report approved an interim dividend for the fourth quarter of USD 0.60 per share to
be paid to the shareholders corresponding to an expected total dividend payment of USD 58.4 m. The distribution for the quarter is
equivalent to 75 % of net profit and reflects the Distribution Policy. The payment date is April 02, 2025 to all shareholders on record as
of March 20, 2025, and the ex-dividend date is 19 March 2025 for the shares listed on Nasdaq OMX Copenhagen and March 20, 2025
for the shares listed on Nasdaq New York. The dividend payment will not be recognized as a liability and there are no tax
consequences.
F-20
Segment Reporting - Consolidated Income Statement
USDm | 2024 | 2023 | 2022 | ||||||||||||
Tanker segment | Marine Engineerin g segment | Inter- segment elimination | Total | Tanker segment | Marine Engineeri ng segment | Inter- segment elimination | Total | Tanker segment | Marine Engineeri ng segment | Inter- segment eliminatio n | Total | ||||
Revenue | ( | ( | ( | ||||||||||||
Port expenses, bunkers, and commissions | ( | ( | ( | ( | ( | ( | |||||||||
Other cost of goods and services sold | ( | ( | ( | ( | ( | ( | |||||||||
Operating expenses | ( | ( | ( | ( | ( | ( | |||||||||
Profit from sale of vessels | |||||||||||||||
Administrative expenses | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||
Other operating income and expenses | ( | ( | |||||||||||||
Share of profit/(loss) from joint ventures | |||||||||||||||
Impairment losses and reversal of impairment on tangible assets | ( | ( | |||||||||||||
Depreciation and amortization | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||
Operating profit (EBIT) | ( | ( | ( | ||||||||||||
Financial income | |||||||||||||||
Financial expenses | ( | ( | ( | ( | ( | ( | ( | ( | ( | ||||||
Profit before tax | ( | ( | ( | ||||||||||||
Tax | ( | ( | ( | ||||||||||||
Net profit for the year | ( | ( | ( | ||||||||||||
The eliminations above represent revenue and other costs of goods and services sold from the installation of scrubbers performed by the Marine Engineering entities on tanker vessels
within the Tanker segment. All revenue from the Tanker segment is derived from external customers.
F-21
In all material aspects, TORM’s customers are domiciled outside the UK and are spread all over the world with only a few countries contributing significantly to TORM’s revenue.
Below is presented the countries contributing with more than 10% of TORM's revenue.
Countries contributing more than 10% of TORM's revenue | 2024 | 2023 | 2022 | |||
USDm | % of total | USDm | % of total | USDm | % of total | |
Switzerland | ||||||
United States | ||||||
United Arab Emirates | ||||||
Mexico | ||||||
A major part of TORM's revenues stems from a small group of customers. Below is presented the number of customers exceeding 10% of TORM's consolidated revenue and the
customers' share of TORM's consolidated revenue.
Customers contributing more than 10% of TORM's revenue | 2024 | 2023 | 2022 |
Number of customers | 0 | 0 | 1 |
Share of consolidated revenue |
F-22
NOTE 3 – continued
Segment Reporting - Consolidated Balance Sheet
F-23
USDm | 2024 | 2023 | 2022 | |||||||||||
Tanker segment | Marine Engineerin g segment | Inter- segment elimination | Total | Tanker segment | Marine Engineeri ng segment | Inter- segment elimination | Total | Tanker segment | Marine Engineeri ng segment | Inter- segment elimination | Total | |||
ASSETS | ||||||||||||||
Intangible assets | ||||||||||||||
Goodwill | ||||||||||||||
Other intangible assets | ||||||||||||||
Total intangible assets | ||||||||||||||
Tangible fixed assets | ||||||||||||||
Land and buildings | ||||||||||||||
Vessels and capitalized dry-docking | ( | ( | ( | |||||||||||
Prepayments on vessels | ||||||||||||||
Other non-current assets under construction | ( | ( | ||||||||||||
Other plant and operating equipment | ||||||||||||||
Total tangible fixed assets | ( | ( | ( | |||||||||||
Financial assets | ||||||||||||||
Investments in joint ventures | ||||||||||||||
Loan receivables | ||||||||||||||
Deferred tax asset | ||||||||||||||
Other investments | ||||||||||||||
Total financial assets | ||||||||||||||
Total non-current assets | ( | ( | ( | |||||||||||
Inventories | ( | |||||||||||||
Trade receivables | ( | ( | ||||||||||||
Other receivables | ||||||||||||||
Prepayments | ||||||||||||||
Cash and cash equivalents incl. restricted cash | ||||||||||||||
Current assets excluding assets held for sale | ( | ( | ||||||||||||
Assets held for sale | ||||||||||||||
Total current assets | ( | ( | ||||||||||||
TOTAL ASSETS | ( | ( | ( | |||||||||||
F-24
NOTE 3 – continued
Segment Reporting - Consolidated Balance Sheet
USDm | 2024 | 2023 | 2022 | |||||||||||
Tanker segment | Marine Engineering segment | Inter- segment elimination | Total | Tanker segment | Marine Engineering segment | Inter- segment elimination | Total | Tanker segment | Marine Engineering segment | Inter- segment elimination | Total | |||
EQUITY AND LIABILITIES | ||||||||||||||
Total equity | ( | ( | ( | |||||||||||
Liabilities | ||||||||||||||
NON-CURRENT LIABILITIES | ||||||||||||||
Non-current tax liability related to held-over gains | ||||||||||||||
Deferred tax liability | ||||||||||||||
Borrowings | ||||||||||||||
Other non-current liabilities | ||||||||||||||
Total non-current liabilities | ||||||||||||||
CURRENT LIABILITIES | ||||||||||||||
Borrowings | ||||||||||||||
Trade payables | ( | |||||||||||||
Current tax liabilities | ||||||||||||||
Other liabilities | ( | ( | ||||||||||||
Provisions | ||||||||||||||
Prepayments from customers | ( | ( | ( | |||||||||||
Total current liabilities | ( | ( | ( | |||||||||||
Total liabilities | ( | ( | ( | |||||||||||
TOTAL EQUITY AND LIABILITIES | ( | ( | ( | |||||||||||
Non-current asset additions during the year: | ||||||||||||||
Goodwill | ||||||||||||||
Other intangible assets | ||||||||||||||
Land and buildings | ||||||||||||||
Vessels and capitalized dry-docking | ( | ( | ( | |||||||||||
Prepayments on vessels | ||||||||||||||
Other non-current assets under construction | ( | ( | ||||||||||||
Other plant and operating equipment | ||||||||||||||
Total non-current asset additions | ( | ( | ( | |||||||||||
F-25
USDm | 2024 | 2023 | 2022 | |||
UK | ||||||
Denmark | ||||||
Singapore | ||||||
USA | ||||||
Other countries | ||||||
Non-current assets |
F-26
NOTE 3 – continued
Accounting Policies
primarily comprise transportation of refined oil products such as gasoline, jet fuel, and naphtha, and the Marine Engineering segment for which the services provided primarily
comprise developing and producing advanced and green marine equipment.
Transactions between the segments are based on market-related prices and are eliminated at Group level.
TORM considers the global product tanker market as a whole, and as the individual vessels are not limited to specific parts of the world, the Group has only one geographical
segment for the Tanker segment. Further, the internal management reporting does not provide geographical information for either the Tanker segment or the Marine Engineering
segment. Consequently, geographical segment information on revenue from external customers or non-current segment assets for the Tanker segment or the Marine Engineering
F-27
USDm | 2024 | 2023 | 2022 | |
Disaggregation of revenue | ||||
Transportation of oil products and chemicals | ||||
Scrubbers and related services | ||||
Welding and mounting | ||||
Others | ||||
Total revenue | ||||
Tanker segment | ||||
Marine Engineering segment | ||||
Intersegment elimination | ( | ( | ( | |
Total revenue |
USDm | 2024 | 2023 | 2022 | |
Customer contract balances | ||||
Trade receivables | ||||
Customer contract assets¹⁾ | ||||
Customer contract liabilities²⁾ | ( | ( | ( | |
Total |
¹⁾ Recognized in prepayments.
²⁾ Recognized in prepayments from customers.
Refer to Note 15 for further information on trade receivables. Customer contract assets primarily relate to prepaid voyage expenses until
the cargo load date. During the year, USD 2.5 m was recognized relating to customer contracts entered in 2023 (2023: USD 3.0 m
relating to 2022, 2022: USD 2.0 m relating to 2021). Customer contract liabilities primarily relate to prepaid charter hire and
prepayments received by customers in connection with scrubber installations. The change in customer contract liabilities during the
year is primarily caused by change in prepayments received by customers in connection with scrubber installations of USD 2.8 m.
Accounting policies
Income is recognized in the income statement when:
•The income generating activities have been carried out on the basis of a binding agreement
•The income can be measured reliably
•It is probable that the economic benefits associated with the transaction will flow to the Company
Revenue comprises freight, charter hire, and demurrage revenue from the vessels as well as Marine Engineering revenue. Revenue is
recognized when or as performance obligations are satisfied by transferring services to the customer, i.e. over time, provided that the
stage of completion can be measured reliably. Revenue is measured as the consideration that the Group expects to be entitled to.
Freight revenue including charter hire and demurrage (and related voyage costs) are recognized in the income statement according to
the entered charter parties from the date of load to the date of delivery of the cargo (discharge). The completion is determined using
the load-to-discharge method based on the percentage of the estimated duration of the voyage completed at the reporting date because
the customer receives the benefit during the voyage as it is provided.
Cross-over voyages
For cross-over voyages (voyages in progress at the end of a reporting period), the uncertainty and the dependence on estimates are
greater than for finalized voyages. The Company recognizes a percentage of the estimated revenue for the voyage equal to the
percentage of the estimated duration of the voyage completed at the balance sheet date. The estimate of revenue is based on the expected
duration and destination of the voyage.
F-28
NOTE 4 – continued
When recognizing revenue, there is a risk that the actual number of days it takes to complete the voyage will differ from the estimate.
The contract for a single voyage may state several alternative destination ports. The destination port may change during the voyage, and
the rate may vary depending on the destination port. Changes to the estimated duration of the voyage as well as changing destinations
and weather conditions will affect the voyage expenses.
Demurrage revenue
Freight contracts contain conditions regarding the amount of time available for loading and discharging of the vessel. If these conditions
are breached, TORM is compensated for the additional time incurred in the form of demurrage revenue. Demurrage revenue is
recognized in accordance with the terms and conditions of the charter parties. Upon completion of the voyage, the Company assesses
the time spent in port, and a demurrage claim based on the relevant contractual conditions is submitted to the charterers. The claim
will often be met by counterclaims due to differences in the interpretation of the agreement compared to the actual circumstances of
the additional time used. Based on previous experience, 97 % of the demurrage claim submitted is recognized as demurrage revenue
upon initial recognition. For cross-over voyages, an estimate of incurred demurrage is recognized at the balance sheet date.
The Company receives the demurrage payment upon reaching final agreement on the amount, which could be up to approximately 100
days after the original demurrage claim was submitted. Any adjustments to the final agreement are recognized as demurrage revenue.
Marine Engineering revenue
Some of the Group’s contracts with customers relate to the sale of marine engineering equipment with installation services. Customers
obtain control of the marine engineering equipment with installation services when the goods are delivered to the customer, they have
completed commissioning and delivery has been accepted by the customers. When without installation services, customers obtain
control of the marine engineering equipment when the goods are delivered to and have been accepted by the customers.
Revenue is thus recognized upon the customers obtaining control. There is generally only one performance obligation related hereto.
A warranty provision is recognized for expected repair costs related to warranty claims for sold marine engineering equipment within
the standard warranty period of one year . These provisions are recognized when the equipment is sold and are based on historical
experience. The warranty provision estimates are updated annually.
F-29
Employee Information
Staff costs included in operating expenses relate to the 109 seafarers employed under Danish contracts (2023: 105 , 2022:100 ).
The average number of employees is calculated as a full-time equivalent (FTE).
The Executive Director is, in the event of termination by the Company, entitled to a severance payment of up to 12 months' salary.
USDm | 2024 | 2023 | 2022 | |||
Total staff costs | ||||||
Staff costs included in operating expenses | ||||||
Staff costs included in administrative expenses | ||||||
Total | ||||||
Staff costs comprise the following | ||||||
Wages and salaries | ||||||
Share-based compensation | ||||||
Pension costs | ||||||
Other social security costs | ||||||
Other staff costs | ||||||
Total | ||||||
Average number of permanent employees | ||||||
Seafarers | ||||||
Land-based | ||||||
Total |
At the end of 2024 TORM has a pool of 3,677 (2023: 3,271 , 2022: 3,218 ) seafarers.
The majority of seafarers on vessels are on short-term contracts. The average number of seafarers on board vessels on short-term
contracts in 2024 was 1,721 (2023: 1,625 , 2022: 1,565 ).
Total seafarers’ costs in 2024 were USD 141.4 m (2023: USD 127.1 m, 2022: USD 124.9 m), which is included in “Operating
expenses” of which USD 131.8 m (2023: USD 118.5 m, 2022: USD 117.2 m) pertains to cost for seafarers on board vessels on short
term contracts and USD 9.6 m (2023: USD 8.6 m, 2022: USD 7.7 m) pertains to cost for seafarers employed under the Danish contract
as indicated in the staff costs table above.
USD '000 | 2024 | 2023 | 2022 | |||
Non-Executive Board and Committee remuneration, short term | ||||||
Christopher H. Boehringer | ||||||
David N. Weinstein | ||||||
Göran Trapp | ||||||
Annette Malm Justad | ||||||
Total |
F-30
NOTE 5 – continued
Executive Management
USD '000 | Salary | Taxable benefits | Annual performance bonus | Share-based payment | Total | |||||
Executive Management remuneration | ||||||||||
Jacob Meldgaard | ||||||||||
2022, TORM A/S¹⁾ | ||||||||||
2022, TORM plc¹⁾ | ||||||||||
2023, TORM A/S¹⁾ | ||||||||||
2023, TORM plc¹⁾ | ||||||||||
2024, TORM A/S¹⁾ | ||||||||||
2024, TORM plc¹⁾ |
¹⁾ Paid by legal entity as noted.
Senior Management Team
The aggregated compensation expensed by the Group to the three (2023: three , 2022: three ) other members of the Senior Management
Team in 2024 (excluding CEO Jacob Meldgaard) was USD 9.5 m (2023: USD 7.5 m, 2022: USD 2.8 m), which includes an aggregate of
USD 0.1 m (2023: USD 0.1 m, 2022: USD 0.1 m) allocated for pensions (defined contribution plans) and share-based payment of USD
Ordinary | Ordinary | Retention | Ordinary | |||||
Grant Date | 23-Mar-22 | 29-Mar-23 | 29-Mar-23 | 07-Mar-24 | ||||
RSU LTIP grant¹⁾ | ||||||||
Exercise price per share | DKK | DKK | USD | USD | ||||
RSU grant value assuming 100% vesting | USD | USD | USD | USD |
¹⁾ LTIP award is fixed by the Board of Directors and was communicated via company announcement no. 9 dated March 23, 2022,
announcement no.9 dated March 29, 2023 and announcement no.9 dated March 7, 2024, therefore there is no minimum or maximum
for 2022, 2023 and 2024.
TORM operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for
the grant of shares is recognized as an expense and allocated over the vesting period. Employment in TORM throughout the period is
in most cases a prerequisite for upholding the full vesting rights in the RSU program. For voluntary leavers subject to the Danish
Stock Options Act, the RSUs will vest in accordance with the vesting schedule, but for all other leavers, all unvested RSUs shall be
immediately forfeited for no consideration. Options are granted under the plan for no consideration and carry no dividend or voting
rights.
In accordance with its Remuneration Policy, TORM has granted the CEO a number of Restricted Share Units (RSUs). There are no
performance conditions associated with this grant of RSUs.
Refer to Long-Term Incentive Program – restricted share units granted to the executive director on page 178 in the Annual Report
2024 for further information. The original RSUs granted to the CEO in 2016 vested in equal installments over a five years period.
Subsequent awards vest in equal installments over three years .
F-31
NOTE 5 – continued
Vested RSUs may be exercised for a period of 360 days from each vesting date. Details of the CEO’s awards and interests in
Restricted Share Units are set out on page 116.
The single figure remuneration table for the CEO does not include any amounts in relation to the RSU awards as there are no
performance conditions associated with this grant of RSUs.
As detailed in announcement no. 9 issued on March 23, 2022, the CEO was granted a total of 255,200 RSUs which will vest in equal
amounts over the next three years . The first amount could be exercised from January 01, 2023. The exercise price for each RSU is
DKK 58.0 , corresponding to the average price of TORM shares in the 90 calendar days preceding the publication of TORM plc’s 2021
Annual Report plus a 15 % premium. Vested RSUs may be exercised for a period of 360 days from each vesting date.
As detailed in announcement no. 9 issued on March 29, 2023, the CEO was granted a total of 255,200 RSUs which will vest in equal
amounts over the next three years . The first amount could be exercised from January 01, 2024. The exercise price for each RSU is
DKK 220.6 , corresponding to the average price of TORM shares in the 90 calendar days preceding the publication of TORM plc’s
2022 Annual Report plus a 15 % premium adjusted for the dividend payment related to TORM’s fourth quarter 2022 results. Vested
RSUs may be exercised for a period of 360 days from each vesting date. In addition to the RSUs granted above, the CEO is granted a
total of 300,000 RSUs in the Additional Retention Program on similar terms as outlined above, with the exception that the strike price
for these RSUs is set to one US cent and that all RSUs will vest on March 01, 2026.
As detailed in announcement no. 9 issued on March 07, 2024, the CEO was granted a total of 255,200 RSUs which will vest in equal
amounts over the next three years . The first amount could be exercised from January 01, 2025. The exercise price for each RSU is
DKK 258.4 corresponding to the average price of TORM shares in the 90 calendar days preceding the publication of TORM plc’s
2023 Annual Report plus a 15 % premium. Vested RSUs may be exercised for a period of 360 days from each vesting date.
Long-term employee benefit obligations
The obligation comprises an obligation under the incentive programs to deliver Restricted Share Units in TORM plc at a determinable
price to the entity's key personnel, including the CEO. The RSUs granted entitle the holder to acquire one TORM A-share.
Number of shares (1,000) | 2024 | 2023 | 2022 | |||
Outstanding as of January 01 | ||||||
Granted during the period¹⁾ | ||||||
Exercised during the period | ( | ( | ( | |||
Expired/forfeited during the period | ( | ( | ( | |||
Outstanding as of December 31 | ||||||
Exercisable as of December 31 |
¹⁾ Includes additional 36,259 RSUs granted in 2024 to adjust for the impact of dividends on the share price in accordance with the
original terms of the grant. No modifications to the terms of the grant in the RSU program have occurred.
In 2022, the Board of Directors agreed to grant a total of 1,137,770 RSUs to other management. The vesting period of the program is
value of the options granted in 2022 was determined using the Black-Scholes model and is not material. The average remaining
contractual life for the restricted shares as of December 31, 2022 was 1.5 years, and as of December 31, 2024 was 0.0 years.
In 2023, the Board of Directors agreed to grant a total of 1,248,153 RSUs to other management. The vesting period of the program is
fair value of the options granted in 2023 was determined using the Black-Scholes model and amounts to USD 10.8 m. The average
remaining contractual life for the restricted shares as of December 31, 2023 was 1.5 years, and as of December 31, 2024 was one
F-32
Program on similar terms as outlined above, with the exception that the strike price for these RSUs is set to one US cent and that all
RSUs will vest on March 01, 2026. The fair value of the options in the Additional Retention Program granted in 2023 was determined
using the Black-Scholes model and amounts to USD 40.4 m.
In 2024, the Board of Directors agreed to grant a total of 1,214,986 RSUs to other management. The vesting period of the program is
fair value of the options granted in 2024 was determined using the Black-Scholes model and amounts to USD 8.1 m. The average
remaining contractual life for the restricted shares as of December 31, 2024 is 1.5 years.
Accounting Policies
Wages, salaries, social security contributions, holiday and sick leave, bonuses, and other monetary and non-monetary benefits are
recognized in the year in which the employees render the associated services. Please also refer to the accounting policy for share-based
payment.
The Group has entered into defined contribution plans only. Pension costs related to defined contribution plans are recorded in the
income statement in the year to which they relate.
The Group makes equity-settled share-based payments to certain employees, which are measured at fair value at the date of grant and
expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares which will eventually vest. The fair
value of the share schemes is calculated using the Black-Scholes model at the grant date.
F-33
USDm | 2024 | 2023 | 2022 | |||
Audit fees | ||||||
Fees payable to the Company's auditor for the audit of the Company's annual accounts | ||||||
Audit of the Company's subsidiaries pursuant to legislation | ||||||
Total audit fees | ||||||
Non-audit fees | ||||||
Audit-related services | ||||||
Others | ||||||
Total non-audit fees | ||||||
Total |
Under SEC regulations, the remuneration of the auditor of USD 2.3 m (2023: USD 1.5 m, 2022: USD 1.4 m) is required to be presented
as follows: Audit fees USD 1.8 m (2023: USD 1.4 m, 2022: USD 1.2 m), audit-related fees USD 0.5 m (2023: USD 0.1 m, 2022: USD
TORM's Audit Committee pre-approves all audit, audit-related and non-audit services not prohibited by law to be performed by our
independent auditors and associated fees prior to the engagement of the independent auditor with respect to such services.
F-34
USDm | 2024 | 2023 | 2022 | |||
Financial income | ||||||
Interest income from cash and cash equivalents, including restricted cash ¹⁾ | ||||||
Other financial income | ||||||
Total | ||||||
Financial expenses | ||||||
Interest expenses on borrowings ¹⁾ | ||||||
Financial expenses arising from lease liabilities regarding right-of-use assets | ||||||
Exchange rate adjustments, including loss from forward exchange rate contracts | ||||||
Commitment fee | ||||||
Amortization of interest rate swaps | ||||||
Ineffectiveness on interest rate swaps | ( | ( | ( | |||
Other financial expenses | ||||||
Total | ||||||
Total financial items | ( | ( | ( |
¹⁾ Interest for financial assets and liabilities not at fair value through profit and loss.
Accounting Policies
Financial income comprises interest income, realized and unrealized exchange rate gains relating to transactions in currencies other
than the functional currency, realized gains from other equity investments and securities, unrealized gains from securities, dividends
received, and other financial income. Interest is recognized in accordance with the accrual basis of accounting considering the
effective interest rate. Dividends from other investments are recognized when the right to receive payment has been decided, which is
typically when the dividend has been declared and can be received without conditions.
Financial expenses
Financial expenses comprise interest expenses, financing costs of leases liabilities, realized and unrealized exchange rate losses
relating to transactions in currencies other than the functional currency, realized losses from other equity investments and securities,
unrealized losses from securities, and other financial expenses including payments under interest rate hedge instruments. Interest is
recognized in accordance with the accrual basis of accounting considering the effective interest rate.
F-35
NOTE 8 – TAX
USDm | 2024 | 2023 | 2022 | |||
Tax on profit for the year | ||||||
Current tax for the year | ||||||
Adjustments related to previous years | ( | ( | ||||
Adjustment of deferred tax | ( | ( | ||||
Income tax charge for the year | ( | ( | ||||
Tonnage tax charge for the year | ||||||
Total | ( | ( |
Adjustment of deferred tax of USD (3.3 )m for the year ended December 31, 2024 primarily consists of the recognition of deferred tax
assets for unused tax credits for charges subject to the corporate interest restriction and for carried forward losses.
The majority of the Group's taxable income is located in Denmark, and therefore the majority of the tax base is subject to Danish tax
legislation. As such, the Group has elected to participate in the Danish tonnage tax scheme; the participation is binding until December
31, 2034.
The Group expects to participate in the tonnage tax scheme after the binding period and, as a minimum, to maintain an investment and
activity level equivalent to that at the time of entering the tonnage tax scheme.
Under the different tonnage tax schemes that TORM is subject to, income and expenses from shipping activities are not subject to direct
taxation, and accordingly, an effective rate reconciliation has not been provided, as it would not provide any meaningful information.
Instead, the taxable income is calculated from:
•The net tonnage of the vessels used to generate the income from shipping activities
•A rate applicable to the specific net tonnage of the vessels based on a sliding scale
Corporate income tax is primarily levied on the Group’s non-vessel-related activities. The effective tax rate of the Group is 0.3 % (2023:
USDm | 2024 | 2023 | 2022 | |||
Deferred tax assets | ||||||
Deferred tax assets related to Corporate Interest Restriction | ||||||
Deferred tax assets related to trading losses | ||||||
Other temporary differences | ||||||
Deferred tax assets before offset | ||||||
Offset against deferred tax liabilities from Corporate Interest Restriction | ( | ( | ||||
Offset against deferred tax liabilities from trading losses | ( | ( | ||||
Offset from tax liabilities | ( | |||||
Deferred tax assets, net as of December 31 | ||||||
Deferred tax liabilities | ||||||
Deferred tax liabilities arising from changes in equity | ||||||
Other temporary differences | ||||||
Deferred tax liabilities before offset | ||||||
Offset against tax liabilities arising from changes in equity | ( | |||||
Offset from tax assets | ( | ( | ||||
Deferred tax liabilities in the balance sheet |
F-36
NOTE 8 – continued
Deferred tax assets and liabilities are offset and reported net where appropriate within territories.
Deferred tax at the balance sheet date have been measured using the appropriate enacted tax rates and are reflected in these financial
statements and all deferred tax movements arise from the origination and reversal of temporary differences.
Deferred tax assets are recognized to the extent that the realization of the relaxed tax benefit through future taxable profits is probable.
As per December 31, 2024, there are unused tax credits of USD2.2 m (2023: USD 2.2 m, 2022 2.2 m) relating to prior year losses, as the
utilization of these losses may not be used to offset taxable profit due to a high degree of uncertainty of future taxable profits.
The deferred tax liability is derived from temporary differences between the accounting and tax values of derivative financial
instruments of USD 5.9 m (2023: USD 8.5 m, 2022: USD 13.2 m) and intangible assets of USD 0.0 m (2023: USD 0.0 m, 2022: 0.3 m).
USDm | 2024 | 2023 | 2022 | |||
Non-current tax liability related to held-over gains | ||||||
Balance as of December 31 | ( | ( | ( |
The non-current tax liability related to held-over gains is the undiscounted income tax payable calculated on the realized gain on sale of
vessels which came from corporate income taxation into the Danish tonnage tax scheme upon initial application in 2001 (the held-over
gain reflected in the transition account under the Danish tonnage tax scheme). This tax liability will become payable, in part or in full, if
the Danish owned fleet of vessels is significantly or fully disposed of, or if operated to end of useful life and sold for scrap.
If TORM discontinues its participation in the Danish tonnage tax scheme, a deferred tax liability would arise in relation to the vessels
held by the Group and taken out of the tonnage tax scheme. The Management considers this to be a remote scenario.
The Group operates in a wide variety of jurisdictions, in some of which the tax law is subject to varying interpretations and potentially
inconsistent enforcement. As a result, there can be practical uncertainties in applying tax legislation to the Group's activities. Whilst
the Group considers that it operates in accordance with applicable tax law, there are potential tax exposures in respect of its operations,
the impact of which cannot be reliably estimated but could be material.
Accounting Policies
Pillar Two Tax Effects
Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Group operates. Under the
legislation, the parent company will be required to pay, in UK, top-up tax on profits of its subsidiaries that are taxed at an effective tax
rate of less than 15%. The main jurisdictions in which exposures to this tax may exist include Denmark, Singapore and the US.
As the majority of these companies’ revenue consist of international shipping income, it is assessed that this income will be excluded
from the GloBE income with reference to the shipping carveout described in Article 3.3.
TORM has applied the exception in IAS 12 'Income Taxes' to recognizing and disclosing information about deferred tax assets and
liabilities related to Pillar Two income taxes.
Based on our fiscal year for 2024, the Group has prepared a preliminary Transitional Country-by-Country Reporting (CbCR) Safe
Harbour assessment concluding that we expect to be eligible for the Transitional CbCR Safe Harbour in a majority of jurisdictions in
which we are present. As of December 31, 2024, the calculated top-up tax does not have a material impact on our financial result.
F-37
NOTE 8 – continued
Tax expenses comprise the expected income tax charge for the year in accordance with IAS 12 as well as tonnage tax related to the
Group’s vessels for the year. The income tax charge for the year includes adjustments relating to previous years and the change in
deferred tax for the year. However, income tax relating to items in other comprehensive income is recognized directly in the statement
of other comprehensive income.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Deferred tax is calculated at the income tax rates which are
expected to apply in the period when the liability is settled or the asset is realized, based on the laws which have been enacted or
substantially enacted at the balance sheet date. The deferred tax is charged through the income statement except when it relates to
other comprehensive income items. No deferred tax is recognized related to assets and liabilities, including vessels which are subject
to tonnage tax.
The expected income tax payable on the taxable profits for the year is classified as current tax in the balance sheet. Income taxes
expected to fall due after more than one year are classified as non-current liabilities or assets in the balance sheet. Income tax is
measured using tax rates enacted or substantially enacted at the balance sheet date and includes any adjustment to tax payable in
respect of previous years. Current and non-current income tax balances are not discounted.
F-38
USDm | 2024 | 2023 | 2022 | |||
GOODWILL | ||||||
Cost: | ||||||
Balance as of January 01 | ||||||
Exchange rate adjustments | ( | |||||
Additions from business combinations | ||||||
Balance as of December 31 | ||||||
Impairment: | ||||||
Balance as of January 01 | ||||||
Impairment losses | ||||||
Balance as of December 31 | ||||||
Carrying amount |
The opening balance in 2022 on goodwill cost and impairment relates to the reverse acquisition of TORM A/S in 2015, which was
impaired in 2016. The goodwill addition in 2022 of USD 1.8 m relates to the acquisition of Marine Exhaust Technology A/S, which is
allocated to the Marine Engineering cash-generating unit. Please refer to note 34 for further reference on acquisition and note 12 for
further reference on impairment testing.
USDm | 2024 | 2023 | 2022 | |||
OTHER INTANGIBLE ASSETS | ||||||
Cost: | ||||||
Balance as of January 01 | ||||||
Exchange rate adjustments | ||||||
Additions | ||||||
Additions from business combinations | ||||||
Transfer from other items | ||||||
Balance as of December 31 | ||||||
Amortization: | ||||||
Balance as of January 01 | ||||||
Amortization for the year | ||||||
Transfer from other items | ||||||
Balance as of December 31 | ||||||
Carrying amount | ||||||
Accounting Policies
Goodwill is measured as the excess of the cost of the business combination over the fair value of the acquired assets, liabilities, and
contingent liabilities and is recognized as an asset under intangible assets. For each business combination, TORM elects whether to
measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred and included in administrative expenses. Goodwill is not amortized as it is considered
to have an indefinite useful life, but the recoverable amount of goodwill is assessed annually. For impairment testing purposes, goodwill
is on initial recognition allocated to the cash generating unit expected to benefit from the synergies of the combination. If the
recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is first allocated to
F-39
reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the
carrying amount of each asset in the unit. An impairment loss for goodwill is not reversed in a subsequent period.
NOTE 9 – continued
Other intangible assets consist of software as well as scrubber test facility development costs and customer list acquired in connection
with the Marine Exhaust Technology A/S acquisition. Other intangible assets are measured at cost less accumulated amortization and
impairment losses. Other intangible assets are considered as having finite useful lives and are amortized on a straight-line basis over:
•Software: 3 years
•Scrubber test facility: 2 years
•Customer list: 7 years
F-40
USDm | 2024 | 2023 | 2022 | |||
LAND AND BUILDINGS | ||||||
Cost: | ||||||
Balance as of January 01 | ||||||
Exchange rate adjustment | ( | ( | ( | |||
Additions | ||||||
Additions from business combinations | ||||||
Disposals | ( | ( | ||||
Balance as of December 31 | ||||||
Depreciation: | ||||||
Balance as of January 01 | ||||||
Exchange rate adjustment | ( | |||||
Disposals | ( | ( | ||||
Depreciation for the year | ||||||
Balance as of December 31 | ||||||
Carrying amount as of December 31 |
USDm | 2024 | 2023 | 2022 | |||
VESSELS AND CAPITALIZED DRY-DOCKING | ||||||
Cost: | ||||||
Balance as of January 01 | ||||||
Additions | ||||||
Disposals | ( | ( | ( | |||
Transferred from prepayments | ||||||
Transferred to assets held for sale | ( | ( | ( | |||
Balance as of December 31 | ||||||
Depreciation: | ||||||
Balance as of January 01 | ||||||
Disposals | ( | ( | ( | |||
Depreciation for the year | ||||||
Transferred to assets held for sale | ( | ( | ( | |||
Balance as of December 31 | ||||||
Impairment: | ||||||
Balance as of January 01 | ||||||
Impairment losses on tangible fixed assets¹⁾ | ||||||
Transferred to assets held for sale | ( | ( | ( | |||
Balance as of December 31 | ||||||
Carrying amount as of December 31 |
¹⁾ For additional information regarding impairment considerations, please refer to Note 12
F-41
NOTE 10 – continued
Included in the carrying amount for “Vessels and capitalized dry-docking” are capitalized dry-docking costs in the amount of USD
Included in the carrying amount for “Vessels and capitalized dry-docking” are vessels on time charter leases (as lessor) in the amount of
USD 395.5 m (2023: 169.8 m, 2022: 13.7 m). Please refer to Note 23 for expected redelivery of the vessels.
In 2024 TORM took delivery of 19 (2023: 5 , 2022: 0 ) vessels in connection with partly share-based transactions for a total purchase
price of USD 864.5 m (2023: USD 173.0 m, 2022: 0.0 m), of which USD 86.0 m was paid in 2023. The fair value of the vessels is based
on the market approach which considers the valuations from two internationally acknowledged shipbrokers with appropriate
qualifications and recent experience in the valuation of vessels. The shipbrokers’ primary input is deadweight tonnage, yard, and age
of the vessel. The fair value assumes that the vessels are in good and seaworthy condition and with prompt, charter-free delivery.
USDm | 2024 | 2023 | 2022 | |||
PREPAYMENTS ON VESSELS | ||||||
Cost: | ||||||
Balance as of January 01 | ||||||
Additions | ||||||
Transferred to vessels | ( | ( | ( | |||
Balance as of December 31 | ||||||
Carrying amount as of December 31 |
USDm | 2024 | 2023 | 2022 | |||
OTHER PLANT AND OPERATING EQUIPMENT | ||||||
Cost: | ||||||
Balance as of January 01 | ||||||
Exchange rate adjustment | ( | ( | ||||
Additions | ||||||
Additions from business combinations | ||||||
Disposals | ( | ( | ( | |||
Transfers | ( | |||||
Balance as of December 31 | ||||||
Depreciation: | ||||||
Balance as of January 01 | ||||||
Exchange rate adjustment | ( | ( | ||||
Disposals | ( | ( | ( | |||
Depreciation for the year | ||||||
Transfers | ( | |||||
Balance as of December 31 | ||||||
Carrying amount as of December 31 | ||||||
F-42
NOTE 10 – continued
For information on assets provided as collateral security, please refer to Note 21. Please refer to Note 12 for information on impairment
testing.
The depreciation expense related to “Other plant and operating equipment” of USD 1.8 m relates to “Administrative expense” (2023:
USD 2.5 m, 2022: USD 2.8 m). Depreciation and impairment losses on tangible fixed assets on “Vessels and capitalized dry-docking”
relate to operating expenses.
Accounting Policies
Vessels consist of owned vessels and vessels financed via sale and leaseback transactions. Vessels are measured at cost less
accumulated depreciation and accumulated impairment losses. Costs comprise acquisition costs and costs directly related to the
acquisition up until the time when the asset is ready for use, including interest expenses incurred during the period of construction. In
partly share-based acquisitions, vessels are measured at fair value at the delivery date, where the purchase price is compared to
valuations from two internationally acknowledged shipbrokers with appropriate qualifications and recent experience in the valuation
of vessels and adjusted if a material difference is identified. All major components of vessels (scrubbers, etc.) except for dry-docking
costs are depreciated on a straight-line basis to the estimated residual value over their estimated useful life. Different drivers such as
TORM’s short and long-term climate targets, the revised IMO’s Green House Gas Strategy, and other new regulation and policies
with increased focus on carbon reduction on both short and long-term impact the determination of the estimated useful life.
Considering the different drivers, TORM estimates the useful life to be 25 years for newbuildings - in line with previous years and
with what is used by other shipowners with comparable tonnage. Depreciation is based on costs less the estimated residual value.
Residual value is estimated as the lightweight tonnage of each vessel multiplied by the recycling prices per ton. TORM has completed
phasing in green recycling prices in the calculation of residual values by applying a weighted average of green recycling and
conventional recycling prices, while using a 3 -year average to limit volatility. The useful life and the residual value of the vessels are
reviewed at least at each financial year-end based on market conditions, regulatory requirements, and TORM’s business plans.
TORM also evaluates the carrying amounts to determine if events have occurred which indicate impairment and would require a
modification of the carrying amounts at the reporting date. Prepayment on vessels is measured at costs incurred.
Dry-docking
Approximately every 24 and 60 months, depending on the nature of work and external requirements, the vessels are required to undergo
planned dry-dockings for replacement of certain components, major repairs, and major maintenance of other components, which cannot
be carried out while the vessels are operating. These dry-docking costs are capitalized and depreciated on a straight-line basis over the
estimated period until the next dry-docking. The residual value of such components is estimated at nil. The useful life of the dry-docking
costs is reviewed at least at each financial year-end based on market conditions, regulatory requirements, and TORM’s business plans.
A portion of the cost of acquiring a new vessel is allocated to the components expected to be replaced or refurbished at the next dry-
docking. Depreciation thereof is carried over the period until the next dry-docking. For newbuildings, the initial dry-docking asset is
estimated based on the expected costs related to the first-coming dry-docking, which again is based on experience and history of similar
vessels. For second-hand vessels, a dry-docking asset is also segregated and capitalized separately, taking into account the normal
docking intervals of the vessels.
At subsequent dry-dockings, the costs comprise the actual costs incurred at the dry-docking yard. Dry-docking costs may include the
cost of hiring crews to carry out replacements and repairs, the cost of parts and materials used, the cost of travel, lodging and
supervision of Company personnel as well as the cost of hiring third-party personnel to oversee a dry-docking. Dry-docking activities
include, but are not limited to, the inspection, service on turbocharger, replacement of shaft seals, service on boiler, replacement of hull
anodes, applying of anti-fouling and hull paint, steel repairs as well as refurbishment and replacement of other parts of the vessel.
Prepayments on vessels
Prepayments consist of prepayments related to the purchase of second-hand vessels not yet delivered and to newbuilding contracts for
vessels not yet delivered which also include the share of borrowing costs directly attributable to the acquisition of the underlying vessel.
When a vessel is delivered, the prepaid amount is reallocated to the financial statement line “Vessels and capitalized dry-docking”.
F-43
NOTE 10 – continued
Land and buildings and other plant and operating equipment
Land and buildings and other plant and operating equipment consist of leaseholds regarding office buildings, leasehold improvements,
company cars, IT equipment, and software and is measured at historical cost less accumulated depreciation and any impairment loss.
Any subsequent cost is included in the asset’s carrying amount or recognized as a separate asset only when it is probable that future
economic benefits are associated with the item and the cost of the item can be measured reliably. Depreciation is based on the straight-
line method over the estimated useful life of the assets. The current estimates are:
•Land and buildings
•Office buildings: Over the shorter of the remaining leasing term and the estimated useful life
•Leasehold improvements: Over the shorter of the remaining leasing term and the estimated useful life
•Other plant and operating equipment
•Company cars: Over the lease term, typically 3 years
•IT equipment: 3 –5 years
•Software: 3 –5 years
•Other equipment 3 –15 years
The depreciation commences when the asset is available for use, i.e. when it is in the location and condition necessary for it to be
capable of operating in the manner intended by the Management. For a right-of-use asset, depreciation commences at the
Assets are classified as held-for-sale if the carrying amount will be recovered principally through a sales transaction rather than
through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition
subject to terms which are usual and customary for sales of such assets, and when its sale is highly probable. The Management must
be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of
classification.
Assets held for sale mainly refer to vessels being sold and are measured at the lower of their previous carrying amount and fair value
less costs to sell. Gains are recognized on delivery to the new owners in the income statement in the item “Profit from sale of vessels”.
Anticipated losses are recognized at the time when the asset is classified as held-for-sale in the item “Impairment losses on tangible
and intangible assets”.
F-44
TORM leases office buildings, some vehicles, and other administrative equipment. Except for short-term leases and leases of low-value
assets, each lease is reflected on the balance sheet as a right-of-use asset with a corresponding lease liability. The right-of-use assets are
included in the financial statement line item in which the corresponding underlying assets would be presented if they were owned.
Please refer to Note 10.
USDm | Land and buildings | Other plant and operating equipment | ||
Cost: | ||||
Balance as of January 01, 2024 | ||||
Exchange rate adjustments | ( | |||
Additions | ||||
Disposals | ( | ( | ||
Balance as of December 31, 2024 | ||||
Depreciation: | ||||
Balance as of January 01, 2024 | ||||
Exchange rate adjustment | ||||
Disposals | ( | ( | ||
Depreciation for the year | ||||
Balance as of December 31, 2024 | ||||
Carrying amount as of December 31, 2024 |
USDm | Land and buildings | Other plant and operating equipment | ||
Cost: | ||||
Balance as of January 01, 2023 | ||||
Exchange rate adjustments | ( | |||
Additions | ||||
Disposals | ( | |||
Balance as of December 31, 2023 | ||||
Depreciation: | ||||
Balance as of January 01, 2023 | ||||
Exchange rate adjustments | ( | |||
Disposals | ( | |||
Depreciation for the year | ||||
Balance as of December 31, 2023 | ||||
Carrying amount as of December 31, 2023 |
F-45
NOTE 11 – continued
USDm | Land and buildings | Other plant and operating equipment | ||
Cost: | ||||
Balance as of January 01, 2022 | ||||
Exchange rate adjustments | ( | |||
Additions | ||||
Additions from business combinations | ||||
Disposals | ( | |||
Balance as of December 31, 2022 | ||||
Depreciation: | ||||
Balance as of January 01, 2022 | ||||
Disposals | ( | |||
Depreciation for the year | ||||
Balance as of December 31, 2022 | ||||
Carrying amount as of December 31, 2022 |
December 31, 2024:
Land and buildings | Other plant and operating equipment | ||||
No. of right-of-use assets leased | |||||
Range of remaining term | years | years | |||
Average remaining lease term | years | years | |||
No. of leases with extension options | |||||
No. of leases with options to purchase | |||||
No. of leases with termination options |
Lease liabilities regarding right-of-use assets are included on the balance sheet under “Borrowings”.
USDm | 2024 | 2023 | 2022 | |||
Maturity analysis - contractual undiscounted cash flow | ||||||
Less than one year | ||||||
One to five years | ||||||
More than five years | ||||||
Total undiscounted lease liabilities as of December 31 | ||||||
Lease liabilities included under “Borrowings” as of December 31 | ||||||
Non-current | ||||||
Current |
F-46
NOTE 11 – continued
Extension and termination options are included in several leases in order to optimize operational flexibility in terms of managing
contracts. The lease term determined by TORM is the non-cancellable period of a lease, together with any extension/termination options
if these are/are not reasonably certain to be exercised.
Lease payments not recognized as a liability
TORM has elected not to recognize a lease liability for short-term leases (leases of an expected term of 12 months or less) or for leases
of low-value assets. Payments made under such leases are expensed on a straight-line basis. The expenses relating to payments not
recognized as a lease liability are insignificant.
Cash outflow for leases
The total cash outflow for leases amounts to USD 3.6 m (2023: USD 3.2 m, 2022: USD 2.7 m).
Accounting policies
corresponding lease liabilities at the lease commencement date, except for short-term leases and leases of low value. For these leases,
TORM recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Agreements to charter in vessels and to lease land and buildings and other plant and operating equipment for which TORM substantially
has the control are recognized on the balance sheet as right-of-use assets and initially measured at cost, which comprises the initial
amount of the lease liabilities adjusted for any lease payments made at or before the commencement date. Subsequently the right-of-use
assets are measured at cost less accumulated depreciation and impairment losses. The right-of-use assets are depreciated and written
down under the same accounting policy as the assets owned by the Company or over the lease period depending on the lease terms.
The corresponding lease obligation is recognized as a liability in the balance sheet under “Borrowings” and initially measured at the
present value of the lease payments that are not paid at the commencement date. The Company uses its incremental borrowing rate at
the lease commencement date because the interest rate implicit in the lease is not readily determinable. Subsequently lease liabilities are
measured at amortized cost using the effective interest method, where the lease liabilities are remeasured when there is a change in
future lease payments.
Leases to charter out vessels are classified as operating leases as the leases are short-term in nature and usually less than one year.
Chartered-out vessels are presented as part of Vessels and capitalized dry-docking. Please refer to Note 6. The lease income is
recognized in the income statement on a straight-line basis over the lease term.
Following a sale transaction, for agreements to immediately charter in the related vessels (sale and leaseback) but for which TORM
maintains substantially all the risks and rewards incidental to economic ownership including repurchase options at lower value that the
initial sales price, the proceeds received are presented as a financial liability in “Borrowings”. No gain or loss is recorded, and the asset
remains recognized on the balance sheet under Vessels and capitalized dry-docking.
F-47
The Management of TORM has assessed that TORM has two CGUs being the Main Fleet and the Marine Engineering cash-generating
unit, following the acquisition of Marine Exhaust Technology A/S in 2022 and the disposal of the two remaining Handysize vessel in
2022.
The Main Fleet is comprised of TORM’s LR1, LR2 and MR vessels, which are operated collectively as a combined internal pool,
employed principally in the spot market and actively managed to meet the needs of our customers in that market, particularly
regarding the location of vessels meeting required specifications. All vessels in the Main Fleet can handle multiple sizes of refined oil
cargos and sail all seas and oceans, over both short and long distances. Given the technical specifications and capacity of the vessels,
the Main Fleet is relatively homogenous with a very high degree of interoperability. The Main Fleet includes the 2021 acquired MR
vessels with chemical trading capability, which are operated as all other product tanker vessels.
The Marine Engineering segment represent a single CGU because cash inflows are generated independent of the cash inflows from the
Main Fleet from serving the existing external customer base of the Marine Engineering segment.
As of December 31, 2024, the Management tested the carrying amount of Marine Engineering investment for impairment as further set
out below.
Tanker Segment
As of December 31, 2024, the Management has assessed indicators of impairment that include, but are not limited to, broker vessel
values, time charter rates, weighted average cost of capital, any other adverse impacts from current economic, environmental, and
geopolitical uncertainty, as well as the carrying amount of the net assets against the market capitalization. Vessel values from two
internationally recognized shipbrokers were on average 26.0 % above the carrying value of the vessels in the Main Fleet CGU,
supporting the carrying amount. Consequently, the Management did not determine the recoverable amount of the CGU as no
indicators were identified.
value less cost of disposal.
Recoverable amount | Excess values (recoverable amount less carrying amount) ¹⁾ | |||||||||||
2024 | 2023 | 2022 | 2024 | 2023 | 2022 | |||||||
CGU | USDm | USDm | USDm | USDm | USDm | USDm | ||||||
Main Fleet ²⁾ | N/A | N/A | ||||||||||
Total | N/A | N/A | ||||||||||
¹⁾ Included in the excess value is the outstanding installments for purchased not delivered vessels.
²⁾ No impairment losses and reversals was incurred in 2024, 2023 and 2022.
December 31, 2024
As noted above, the recoverable amount of the Main Fleet CGU was not determined as no indicators of impairment were identified.
Additionally, no impairment was recognized during 2024 in connection with disposal of individual vessels as set out in Note 10.
F-48
NOTE 12 – continued
December 31, 2023
As of December 31, 2023, the assessment of the recoverable amount of the Main Fleet is based on the fair value less cost of disposal
of the vessels. The recoverable amount of the Main Fleet as of December 31, 2023 amounts to USD 3,495 m, and is based on the
market approach which considers the valuations from two internationally acknowledged shipbrokers with appropriate qualifications
and recent experience in the valuation of vessels. The shipbrokers’ primary input is deadweight tonnage, yard, and age of the vessel.
The fair value assumes that the vessels are in good and seaworthy condition and with prompt, charter-free delivery. The fair value less
costs of disposal of the vessels is determined to be within Level 3 of the fair value hierarchy.
We have assessed the impact from climate changes and the potential adverse impact on vessel values, however, no specific
adjustments in this respect have been reflected in the impairment testing of the Main Fleet given the recoverable amount has been
based on the fair value less costs of disposal. Further discussion can be found in the Audit Committee Report, page 102 and TCFD
pages 87-89 in the Annual Report for 2023. We continue to monitor the development closely, and we continuously work on more
specific plans for our ambition to have zero CO2 emissions from operating our fleet by 2050, which may impact our impairment
testing in the future.
Based on this review, the Management concluded that as of December 31, 2023 assets within the Main Fleet were not impaired as fair
value less costs of disposal exceeded the carrying amount by USD 952 m.
2023.
December 31, 2022
As of 31 December 2022, the assessment of the recoverable amount of the Main Fleet is based on the fair value less cost of disposal of
the vessels. The recoverable amount of the Main Fleet as of December 31, 2022 amounts to USD 2,647 m, and is based on the market
approach which considers the valuations from two internationally acknowledged shipbrokers with appropriate qualifications and
recent experience in the valuation of vessels. The shipbrokers’ primary input is deadweight tonnage, yard, and age of the vessel. The
fair value assumes that the vessels are in good and seaworthy condition and with prompt, charter-free delivery. The fair value less
costs of disposal of the vessels is determined to be within Level 3 of the fair value hierarchy.
We have assessed the impact from climate changes and the potential adverse impact on vessel values, however, no specific
adjustments in this respect have been reflected in the impairment testing of the Main Fleet given the recoverable amount has been
based on the fair value less costs of disposal. Further discussion can be found in the Audit Committee Report, page 91 and TCFD
pages 75-77 in the Annual Report for 2022. We continue to monitor the development closely, and we continuously work on more
specific plans for our ambition to have zero CO2 emissions from operating our fleet by 2050, which may impact our impairment
testing in the future.
Based on this review, the Management concluded that as of December 31, 2022 assets within the Main Fleet were not impaired as fair
value less costs of disposal exceeded the carrying amount by USD 784 m.
Impairments recognized during 2022 of USD 2.7 m (2021: USD 4.6 m) as set out in Note 8 of the 2022 Annual Report relate to the
disposal of individual vessels during the year. The recoverable amount of the vessels was based on fair value less costs of disposal,
which amounted to USD 31.8 m. The fair value was based on sales price less transaction costs (fair value hierarchy Level 2).
F-49
Marine Engineering Segment
Marine Exhaust Technology A/S was acquired in 2022 which was also the first year the impairment testing was performed.
December 31, 2024
As of December 31, 2024, the assessment of the recoverable amount of the Marine Engineering cash-generating unit is based on value
in use. The result of the impairment test showed an excess value of USD 28.6 m compared to the carrying amount. No impairment of
goodwill was recognized as of December 31, 2024.
Key assumptions used in the determination of value in use
The value in use is calculated based on future cash flows using a five-year budget period from 2025-2029. The future cash flows are
based on the budget for 2025, assuming no growth in sales. Cost of goods sold is calculated using the gross margins from the 2025
budget. The gross margins are assumed to be constant in the budget period. Operating costs are based on the 2025 budget and are
being inflated in the forecast period with the assumed inflation rates of 2 % - 3 % p.a. Cash levels are assumed constant in the forecast
period, investments in non-current assets are USD 0.2 m in 2025 and zero afterwards, and lastly, leasing liabilities are assumed
constant. The terminal value extending beyond 2029 are based on a continuation of before mentioned parameters.
The discount rate used in the value in use calculation was based on a Weighted Average Cost of Capital (WACC) of 7.4 % as of
December 31, 2024. The WACC was calculated by using a standard WACC model in which cost of equity, cost of debt and capital
structure were the key parameters.
The impairment test was sensitive to reasonably possible changes in the key assumptions, which may result in future impairments.
These were related to the future development in sales across all revenue segments. All other things being equal, the sensitivities to the
value in use have been assessed as follows:
•An increase/decrease in the total sales of 10.0 % from 2025 and onwards would result in an increase/decrease in the value in use
of USD 13.3 m.
December 31, 2023
As of December 31, 2023, the assessment of the recoverable amount of the Marine Engineering cash-generating unit is based on value
in use. The result of the impairment test showed an excess value of USD 9.8 m compared to the carrying amount. No impairment of
goodwill was recognized as of December 31, 2023.
Key assumptions used in the determination of value in use
The value in use is calculated based on future cash flows using a five-year budget period from 2024-2028. The future cash flows are
based on the budget for 2024, assuming no growth in sales. Cost of goods sold is calculated using the gross margins from the 2024
budget. The gross margins are assumed to be constant in the budget period. Operating costs are based on the 2024 budget and are
being inflated in the forecast period with the assumed inflation rates of 2 % - 3 % p.a. Cash levels are assumed constant in the forecast
period, investments in non-current assets are USD 0.1 m in 2024 and zero afterwards, and lastly, leasing liabilities are assumed
constant. The terminal value extending beyond 2028 are based on a continuation of before mentioned parameters.
The discount rate used in the value in use calculation was based on a Weighted Average Cost of Capital (WACC) of 8.8 % as of
December 31, 2023. The WACC was calculated by using a standard WACC model in which cost of equity, cost of debt and capital
structure were the key parameters.
The impairment test was sensitive to reasonably possible changes in the key assumptions, which may result in future impairments.
These were related to the future development in sales across all revenue segments. All other things being equal, the sensitivities to the
value in use have been assessed as follows:
•An increase/decrease in the total sales of 10.0 % from 2024 and onwards would result in an increase/decrease in the value in use of
USD 12.1 m.
F-50
December 31, 2022
As of December 31, 2022, the assessment of the recoverable amount of the Marine Engineering cash-generating unit is based on value
in use. The result of the impairment test showed an excess value of USD 3.2 m compared to the carrying amount. No impairment of
goodwill was recognized as of December 31, 2022.
Key assumptions used in the determination of value in use
The value in use is calculated based on future cash flows using a five-year budget period from 2023-2027. The future cash flows are
based on the budget for 2023, assuming no growth in sales. Cost of goods sold is calculated using the gross margins from the 2023
budget. The gross margins are assumed to be constant in the budget period. Operating costs are based on the 2023 budget and are
being inflated in the forecast period with the assumed inflation rates of 2 % - 3 % p.a. Cash levels are assumed constant in the forecast
period, investments in non-current assets are USD 0.3 m in 2023 and zero afterwards, and lastly, leasing liabilities are assumed
constant. The terminal value extending beyond 2027 are based on a continuation of before mentioned parameters.
The discount rate used in the value in use calculation was based on a Weighted Average Cost of Capital (WACC) of 10.8 % as of
December 31, 2022. The WACC was calculated by using a standard WACC model in which cost of equity, cost of debt and capital
structure were the key parameters.
The impairment test was sensitive to reasonably possible changes in the key assumptions, which may result in future impairments.
These were related to the future development in sales across all revenue segments. All other things being equal, the sensitivities to the
value in use have been assessed as follows:
•An increase/decrease in the total sales of 10.0 % from 2023 and onwards would result in an increase/decrease in the value in use of
USD 3.8 m.
Accounting Policies
Non-current assets are reviewed at the reporting date to determine any indication of impairment including a significant decline in
either the assets’ market value, increase in market rates of return, or in the cash flows expected to be generated by the fleet. At least
annually, or if impairment indicator(s) exists, an impairment test on a CGU level will be performed. A CGU is determined as the
smallest group of assets that generates independent cash inflows. An asset/CGU is impaired if the recoverable amount is below the
carrying amount.
The recoverable amount of the CGU is estimated as the higher of fair value less costs of disposal and value in use. The value in use is
the present value of the future cash flows expected to be derived from a CGU, utilizing a pre-tax discount rate that reflects current
market estimates of the time value of money and the risks specific to the unit for which the estimates of future cash flows have not been
adjusted. If the recoverable amount is less than the carrying amount of the cash generating unit, the carrying amount is reduced to the
recoverable amount.
The impairment loss is recognized immediately in the income statement. Where an impairment loss subsequently reverses, the carrying
amount of the CGU is increased to the revised estimate of the recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined, had no impairment loss been recognized in prior years.
For the purpose of assessing impairment, assets, time charter and bareboat contracts are grouped at the lowest levels at which
F-51
USDm | 2024 | 2023 | 2022 | |||
Loan receivables | ||||||
Cost: | ||||||
Balance as of January 01 | ||||||
Balance as of December 31 | ||||||
Expected credit loss: | ||||||
Balance as of January 01 | ||||||
Additions during the year | ||||||
Balance as of December 31 | ||||||
Carrying amount as of December 31 |
The loans were issued as part of sale and lease back transactions in 2019 for two MR vessels. The loans will mature in 2026 and have an
interest rate applicable fixed at 1 % per annum.
Expected credit loss is recognized based on the 12 -month expected credit losses.
Accounting Policies
Loan receivables are initially recognized on the balance sheet as fair value less transaction costs. After initial recognition, loan
receivables are measured at amortized cost. Amortized cost is defined as the amount initially recognized reduced by principal
repayments and allowances for the expected credit loss (ECL).
F-52
USDm | 2024 | 2023 | 2022 | |||
Bunkers | ||||||
Lubeoil | ||||||
EU Emission Allowances | ||||||
Other | ||||||
Balance as of 31 December |
During 2024, bunker inventories of USD 278.2 m (2023:USD 272.4 m, 2022: USD 295.5 m) were recognized as an expense in Port
expenses, bunkers, commissions, and other cost of goods and services sold.
During 2024, lubeoil inventories of USD 8.1 m (2023: USD 7.5 m, 2022: USD 6.4 m) were recognized as an expense in Operating
expenses.
During 2024, EU Emission Allowances inventories of USD 5.0 m (2023: USD 0.0 m, 2022: USD 0.0 m) were recognized as an expense
in Port expenses, bunkers, commissions, and other cost of goods and services sold.
During 2024, other inventories of USD 9.3 m (2023: USD 22.7 m, 2022: USD 0.6 m) were recognized as an expense in Port expenses,
bunkers, commissions, and other cost of goods and services sold.
Accounting Policies
Bunkers, lubeoil and other inventories are stated at the lower of cost in accordance with the FIFO-principle and net realizable value.
Cost of bunkers and lubeoil includes expenditure incurred in acquiring bunkers and lubeoil including delivery costs less discounts. The
cost of other inventories consists of raw materials and components based on direct costs, direct payroll costs and a proportionate share
of indirect production costs. Indirect production costs include the proportionate share of capacity costs directly relating hereto, which
are allocated on the basis of the normal capacity of the production facility .
At January 01, 2024 the EU Emission Trading System was extended to maritime transport emissions, where shipping companies must
surrender allowances to cover emissions related to EU port calls. EU Emission Allowances are purchased in connection with TORM's
cargo transportation only, similar to a tax on purchase of bunkers. TORM has no intention of selling or trading the allowances.
In the absence of any specific IFRS standards or IFRIC interpretations on accounting for emission rights of carbon dioxide generated
as part of the EU Emission Trading scheme (EU ETS), and considering the above, EU Emission Allowances are treated similar to
bunker inventories. The following policies are applied for EU Emission Allowances:
The emission rights are considered as a part of the bunker consumption for the delivery of transportation services and thus recognized
as inventories at their acquisition cost.
As these allowances are utilized during the voyage, the carrying amount of these allowances are recognized as an expense against a
liability in the period in which the associated revenue is recognized.
F-53
USDm | 2024 | 2023 | 2022 | |||
Analysis as of December 31 of trade receivables: | ||||||
Gross trade receivables: | ||||||
Not due | ||||||
Due < 30 days | ||||||
Due between 30 and 180 days | ||||||
Due > 180 days | ||||||
Total gross | ||||||
Allowance for expected credit loss | ||||||
Total net |
The Management makes allowances for expected credit losses based on “the simplified approach” according to IFRS 9 to provide for
expected credit losses, which permits the use of the lifetime expected loss provision for all trade receivables.
As a result of improved collection efforts and decreased losses on trade receivables, the Management reassessed the accounting
estimates included in the expected credit loss allowance matrix during 2024. The outcome of the reassessment resulted in an updated
allowance matrix, reversing allowances of USD 5.9 m in 2024.
Expected credit loss for receivables overdue 180 days or less is 0 %-3 %, depending on the category of the receivable. Expected credit
loss for receivables overdue more than 180 days is 10 %-100 %, depending on the category of the receivable. Expected credit loss for
receivables overdue more than one year is 50 %-100 %, also depending on the category of the receivable. For all “legal” cases,
allowances of 100 % are made.
USDm | 2024 | 2023 | 2022 | |||
Allowance for expected credit loss | ||||||
Balance as of January 01 | ||||||
Provisions for the year | ||||||
Provisions reversed during the year | ( | ( | ( | |||
Balance as of December 31 |
Allowance for expected credit loss of trade receivables has been recognized in the income statement under “Port expenses, bunkers,
commissions, and other costs of goods sold”.
Allowance for expected credit loss of trade receivables is calculated using an aging factor as well as specific customer knowledge and is
based on a provision matrix on days past due.
Accounting Policies
Outstanding trade receivables and other receivables which are expected to be realized within 12 months from the balance sheet date are
classified as “Trade receivables” or “Other receivables” and presented as current assets.
Receivables are, at initial recognition, measured at their transaction price less allowance for expected credit losses over the lifetime of
the receivable and are subsequently measured at amortized cost adjusted for changes in expected credit losses. Derivative financial
instruments included in other receivables are measured at fair value.
F-54
Expected credit losses are, at initial recognition, determined using an ageing factor as well as a specific customer knowledge such as
customers’ ability to pay, considering historical information about payment patterns, credit risks, customer concentrations, customer
creditworthiness as well as prevailing economic conditions. The estimates are updated subsequently, and if the debtor’s ability to pay is
becoming doubtful, expected credit losses are calculated on an individual basis. When there are no reasonable expectations of
recovering the carrying amount, the receivable is written off in part or entirely.
USDm | 2024 | 2023 | 2022 | |||
Derivative financial instruments | ||||||
Escrow accounts | ||||||
Vessel sale | ||||||
Other | ||||||
Balance as of December 31 |
No significant other receivables are past due or credit impaired.
The carrying amount is a reasonable approximation of fair value due to the short-term nature of the receivables. Please refer to Note 26
USDm | 2024 | 2023 | 2022 | |||
Prepaid operating expenses | ||||||
Prepaid bareboat hire | ||||||
Prepaid customer contract assets | ||||||
Other prepayments | ||||||
Balance as of December 31 |
F-55
Common shares | 2024 | 2023 | 2022 | |||||
Nominal value per share (USD) | Number of shares | Number of shares | Number of shares | |||||
A-shares | ||||||||
B-shares | ||||||||
C-shares | ||||||||
Total |
During the year, the share capital was increased by 11,588,367 A-shares with a nominal value of USD 115,883.67 . The total amount
including share premium amounted to USD 331.7 m. USD 319.2 m was non-cash increases in conjunction with the acquisition of the
During 2023, the share capital was increased by 3,914,385 A-shares with a nominal value of USD 39,143.90 .The total amount
including share premium amounted to USD 92.7 m. USD 86.5 m was a non-cash increase in conjunction with the acquisition of the five
vessels, and USD 6.2 m was contributed in cash in connection with exercises of Restricted Share Units.
During 2022, the share capital was increased by 1,078,030 A-shares with a nominal value of USD 10,780.30 in connection with
exercise of Restricted Share Units leading to a total cash contribution of USD 8.0 m.
The A-shares are listed on Nasdaq in Copenhagen and Nasdaq in New York and are publicly available for trading. Each A-share
carries one vote at the General Meetings and gives the shareholders the right to dividends, liquidation proceeds, or other distributions.
The A-shares carry no other rights or obligations. The B-share has one vote at the General Meetings, has no pre-emption rights in
relation to any issue of new shares of other classes, and carries no right to receive dividends, liquidation proceeds, or other
distributions from TORM.
The holder of the B-share has the right to elect one member to the Board of Directors (being the Deputy Chairman), up to three
alternates as well as one Board Observer. The B-share cannot be transferred or pledged, except for a transfer to a replacement trustee.
The C-share represents 350,000,000 votes at the General Meetings in respect of certain Specified Matters, including election of
members to the Board of Directors (including the Chairman, but excluding the Deputy Chairman) and certain amendments to the
Articles of Association proposed by the Board of Directors. The C-share has no pre-emption rights in relation to any issue of new
shares of other classes and carries no right to receive dividends, liquidation proceeds, or other distributions from TORM. The C-share
cannot be transferred or pledged, except to an affiliate of Njord Luxco.
The B-share and the C-share are redeemable by TORM in the event that (i) TORM has received written notification from Njord Luxco
(or its affiliates) that Njord Luxco and its affiliates (as defined in the Articles of Association) hold less than 1/3 in aggregate of
TORM’s issued and outstanding shares, (ii) 5 business days have elapsed from the Board of Directors’ receipt of such written notice
either without any Board member disputing such notice or with at least 2/3 of the Board members confirming such notice, and (iii)
both of the B-share and the C-share are redeemed at the same time.
F-56
NOTE 18 – continued
Treasury shares | 2024 | 2023 | 2022 | |||
Number of shares ('000) | ||||||
Balance as of January 01 | ||||||
Balance as of December 31 |
2024 | 2023 | 2022 | |||||
Nominal value USD '000 | |||||||
Balance as of January 01 | |||||||
Balance as of December 31 | |||||||
Treasury shares - continued | 2024 | 2023 | 2022 | ||||
Percentage of share capital | |||||||
Balance as of January 01 | % | % | % | ||||
Dilution due to capital increases | ( | % | % | ||||
Balance as of December 31 | % | % | % |
As of December 31, 2024, the Company's holding of treasury shares represented 493,371 shares (2023: 493,371 shares, 2022: 493,371
shares) of USD 0.01 each at a total nominal value of USD 0.0 m (2023: USD 0.0 m, 2022: USD 0.0 m) and a market value of USD 9.6 m
(2023: USD 14.9 m, 2022: USD 14.0 m).
We plan to solicit the approval of our shareholders and apply for a court order from the Companies Court in England and Wales to
effect the cancellation of 493,371 treasury shares that we purchased in share buybacks on Nasdaq Copenhagen A/S in 2016 and 2020.
The cancellation of these treasury shares is intended to rectify the fact that these repurchases were not made in accordance with the
UK Companies Act, which distinguishes between buybacks effected through “market purchases” and “off-market purchases.” We
effected these buybacks under “market purchase” resolutions; however, for purposes of the UK Companies Act, Nasdaq Copenhagen
A/S is an overseas exchange, making it ineligible for buybacks conducted under the “market purchase” provisions. The cancellation of
the affected treasury shares will not affect the rights attached to, or result in any other change to, any of our other shares (or their
nominal value).
Restricted Share Units
Key management participates in an LTIP program, which gives the right to buy TORM shares at a predefined share price. Please refer
to note 5.
F-57
USDm | 2024 | 2023 | 2022 | |||
Accrued operating expenses | ||||||
Accrued interest | ||||||
Wages and social expenses | ||||||
Accrued administration expenses | ||||||
Derivative financial instruments | ||||||
EU Emission Allowances | ||||||
Other | ||||||
Balance as of December 31 | ||||||
Hereof non-current | ||||||
Hereof current |
The carrying amount is a reasonable approximation of fair value due to the short-term nature of the payable. Please refer to note 26 for
further information on fair value hierarchies.
Accounting Policies
fair value.
F-58
2024 | 2023 | 2022 | ||||||||||||||||||
USDm | Fixed/ floating | Maturity | Effective interest¹⁾ | Carrying value²⁾ | Maturity | Effective interest¹⁾ | Carrying value²⁾ | Maturity | Effective interest¹⁾ | Carrying value²⁾ | ||||||||||
Borrowings | ||||||||||||||||||||
Syndicate Facility⁵⁾ | Floating | 2029 | % | 2028 | % | 2026 | % | |||||||||||||
Bond Facility⁵⁾ | Fixed | 2029 | % | — | — | — | ||||||||||||||
DSF Facility⁵⁾ | Floating | 2029 | % | 2029 | % | 2027 | % | |||||||||||||
DSF Facility 2⁵⁾ | Floating | 2029 | % | 2029 | % | — | ||||||||||||||
DSF Facility 3⁵⁾ | Floating | 2031 | % | — | — | |||||||||||||||
HCOB Facility⁵⁾ | Floating | 2031 | % | 2029 | % | 2025 | % | |||||||||||||
ING⁵⁾ | Floating | 2029 | % | 2029 | % | — | ||||||||||||||
KFW Facility⁵⁾ | Floating | 2032 | % | 2032 | % | 2032 | % | |||||||||||||
BoComm 2 (USD)³⁾ | Floating | 2032 | % | 2032 | % | 2031 | % | |||||||||||||
BoComm 3 (USD)³⁾ | Floating | 2029 | % | 2029 | % | 2029 | % | |||||||||||||
CDBL³⁾ | Fixed | 2032 | % | 2032 | % | 2029 | % | |||||||||||||
Springliner (USD)³⁾ | Fixed | 2026 | % | 2026 | % | 2026 | % | |||||||||||||
CMBFL³⁾ | Fixed | 2033 | % | 2033 | % | 2033 | % | |||||||||||||
Other credit facilities | Floating | 2026 | % | 2026 | % | 2026 | % | |||||||||||||
CEXIM (USD)⁵⁾ | Floating | — | — | 2030 | % | |||||||||||||||
HCOB Facility 2⁵⁾ | Floating | — | — | 2026 | % | |||||||||||||||
BoComm 1 (USD)³⁾ | Floating | — | — | 2025 | % | |||||||||||||||
Eifuku (USD)³⁾ | Floating | — | — | 2026 | % | |||||||||||||||
Showa (USD)³⁾ | Floating | — | — | 2024 | % | |||||||||||||||
Weighted average effective interest rate⁴⁾ | % | % | % | |||||||||||||||||
Total borrowings | ||||||||||||||||||||
Borrowing costs | ( | ( | ( | |||||||||||||||||
Right-of-use lease liabilities | ||||||||||||||||||||
Total | ||||||||||||||||||||
Hereof non-current | ||||||||||||||||||||
Hereof current | ||||||||||||||||||||
¹⁾ Effective interest rate includes deferred borrowing costs.
²⁾ Because of the floating interest rate, the carrying value of the Group's borrowings is approximately equal to the fair value except for
fixed rate borrowings, where the fair value amounts to USD 544.8 m (2023: USD 402.8 m, 2022: USD 223.5 m (compared to a total
carrying value as of December 31, 2024 of USD 521.0 m, 2023: USD 372.7 m, 2022: USD 233.7 m).
³⁾ Lease debt recognized under sale and leaseback arrangement with repurchase options (accounted for as finance transactions).
⁴⁾ Please refer to Note 24 for average interest rate including hedges.
⁵⁾ Facility with financial covenant. Total carrying value amounts to USD 776.3 m as of December 31, 2024 (2023: USD 540.5 m, 2022:
In addition to the facilities above, TORM had undrawn credit facilities of USD 323.6 m as of December 31, 2024. Please refer to Note
2 for further information on the Company’s liquidity and capital resources and Notes 24 and 25 for further information on interest rate
swaps and financial risks.
F-59
NOTE 20 – continued
Cash movements | Non-cash movements | |||||||||||
USDm | Opening balance as of January 01, 2024 | Borrowings | Repayments | Business combin- ations | Other changes | End balance as of December 31, 2024 | ||||||
Borrowings | ( | |||||||||||
Total | ( | |||||||||||
Cash movements | Non-cash movements | |||||||||||
USDm | Opening balance as of January 01, 2023 | Borrowings | Repayments | Business combin- ations | Other changes | End balance as of December 31, 2023 | ||||||
Borrowings | ( | |||||||||||
Total | ( | |||||||||||
Cash movements | Non-cash movements | |||||||||||
USDm | Opening balance as of January 01, 2022 | Borrowings | Repayments | Business combin- ations | Other changes | End balance as of December 31, 2022 | ||||||
Borrowings | ( | |||||||||||
Total | ( | |||||||||||
Accounting Policies
Borrowings are initially measured at fair value less transaction costs. Mortgage debt and bank loans are subsequently measured at
amortized cost. This means that the difference between the net proceeds at the time of borrowing and the nominal amount of the loan
is recognized in the income statement as a financial expense over the term of the loan applying the effective interest method.
When terms of existing financial liabilities are renegotiated, or other changes regarding the effective interest rate occur, TORM
performs a test to evaluate whether the new terms are substantially different from the original terms. If the new terms are substantially
different from the original terms, TORM accounts for the change as an extinguishment of the original financial liability and the
F-60
The total carrying amount of vessels which have been provided as security for borrowings amounts to USD 2,827 m as of December 31,
2024 (2023: USD 2,070 m, 2022: USD 1,856 m), including transferred ownership under sale and leaseback arrangements accounted for
as financing transactions, where the vessels are not derecognized and where vessels are provided as security for lease debt.
USD 0.7 m (2023: USD 0.7 m, 2022: USD 0.7 m) in floating charge in Marine Exhaust Technology A/S have been provided as security
for loans to other lenders.
USD 0.3 m (2023: USD 0.4 m, 2022: USD 0.4 m) in floating charge in Marine Exhaust Technology A/S have been provided as security
for loans to banks.
In 2024 zero shares (2023: 10,500 shares, 2022: 10,500 shares) in ME Production A/S with a book value of zero (2023: USD 2.1 m,
2022: USD 2.1 m) have been provided as security for loans to the lenders of Marine Exhaust Technology A/S.
USD 6.2 m (2023: USD 6.6 m, 2022: USD 6.4 m) in floating charge in ME Production A/S with a book value of 7.4 m (2023: USD
Please refer to Note 1 for further information.
The guarantee commitments of the Group are less than USD 0.1 m (2023: USD 0.1 m, 2022: USD 0.1 m) and relate to guarantee
commitments to Danish Shipping.
The Group is involved in certain other legal proceedings and disputes (refer to Note 31). It is the Management's opinion that the
outcome of these proceedings and disputes will not have any material impact on the Group's financial position, results of operations, and
cash flows.
F-61
USDm | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||
Borrowings ¹⁾ | ||||||||||||||
Interest payments related to scheduled interest fixing | ||||||||||||||
Estimated variable interest payments ²⁾ | ||||||||||||||
Committed scrubber installations ³⁾ | ||||||||||||||
Trade payables and other obligations | ||||||||||||||
Total |
The following table summarizes the Group's contractual obligations as of December 31, 2023.
USDm | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | |||||||
Borrowings ¹⁾ | ||||||||||||||
Interest payments related to scheduled interest fixing | ||||||||||||||
Estimated variable interest payments ²⁾ | ||||||||||||||
Secondhand vessel commitments | ||||||||||||||
Committed scrubber installations ³⁾ | ||||||||||||||
Trade payables and other obligations | ||||||||||||||
Total |
The following table summarizes the Group's contractual obligations as of December 31, 2022
USDm | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||
Borrowings ¹⁾ | ||||||||||||||
Interest payments related to scheduled interest fixing | ||||||||||||||
Estimated variable interest payments ²⁾ | ||||||||||||||
Committed scrubber installations ³⁾ | ||||||||||||||
Trade payables and other obligations | ||||||||||||||
Total |
¹⁾ The presented amounts to be repaid do not include directly related borrowing costs arising from the issuing of the loans of USD
year amount to USD 7.3 m (2023: USD 9.0 m, 2022: USD 0.7 m).
²⁾ Variable interest payments are estimated based on the forward rates for each interest period including hedging instruments.
³⁾ Commitments for pollution reduction installations
F-62
NOTE 23 – continued
TORM has contractual rights to receive future payments as lessor of vessels on time charter and bareboat charter to customers.
USDm | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | |||||||
Contractual rights - as lessor: | ||||||||||||||
Charter hire income for vessels ⁵⁾ | ||||||||||||||
Total |
The following table summarizes the Group's contractual rights as of December 31, 2023
USDm | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | |||||||
Contractual rights - as lessor: | ||||||||||||||
Charter hire income for vessels ⁵⁾ | ||||||||||||||
Total |
The following table summarizes the Group's contractual rights as of December 31, 2022
USDm | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||
Contractual rights - as lessor: | ||||||||||||||
Charter hire income for vessels ⁵⁾ | ||||||||||||||
Total |
⁵⁾ Charter hire income for vessels on time charter is recognized under "Revenue". During the years revenue from time charter
amounted to USD 145.6 m (2023: USD 43.8 m, 2022: USD 64.7 m).
The average period until redelivery of the vessels for the period ended December 31, 2024 was 1.8 years (2023: 1.6 years, 2022: 0.4
years).
F-63
Please refer to Note 26 for further information on fair value hierarchies.
USDm | 2024 | 2023 | 2022 | |||
Fair value of derivatives: | ||||||
Derivative financial instruments regarding freight and bunkers: | ||||||
Forward freight agreements — fair value through profit and loss | ||||||
Bunker swaps — fair value through profit and loss | ( | |||||
Bunker swaps — hedge accounting | ( | |||||
Derivative financial instruments regarding interest and currency exchange rate: | ||||||
Forward exchange contracts — hedge accounting | ( | |||||
Interest rate swaps — hedge accounting | ||||||
Fair value of derivatives as of December 31 |
Financial | Financial | |||
USDm | assets | liabilities | ||
2024 | ||||
Offsetting financial assets and financial liabilities: | ||||
Gross amount | ( | |||
Offsetting amount | ||||
Net amount presented in the balance sheet | ( |
Financial | Financial | |||
USDm | assets | liabilities | ||
2023 | ||||
Offsetting financial assets and financial liabilities: | ||||
Gross amount | ( | |||
Offsetting amount | ( | |||
Net amount presented in the balance sheet | ( |
Financial | Financial | |||
USDm | assets | liabilities | ||
2022 | ||||
Offsetting financial assets and financial liabilities: | ||||
Gross amount | ( | |||
Offsetting amount | ||||
Net amount presented in the balance sheet | ( |
Derivative financial instruments assets are offset against derivative financial instruments liabilities where the counterparty is identical,
where TORM has legal right to offset and intends to settle on a net basis..
Hedging of risks with derivative financial instruments is made with a ratio of 1 :1 and where hedge items can be a portion of exposure.
Sources of ineffectiveness are mainly derived from differences in timing and interest base rate. Any ineffective portions of the cash flow
hedges are recognized in the income statement as financial items. Value adjustments of the effective part of cash flow hedges are
recognized directly to other comprehensive income. Gains and losses on cash flow hedges are transferred upon realization from the
hedging reserve into the income statement.
F-64
NOTE 24 - continued
FFAs are used to mitigate fluctuations in the freight rates of vessels with a duration of 0-24 months. The FFAs are not designated for
hedge accounting.
Forward exchange contracts with a fair value of USD -2.3 m (net loss) are designated as hedge accounting relationships to hedge a part
of TORM payments in 2025 regarding administrative and operating expenses denominated in DKK with a notional value of DKK
Interest rate swaps with a fair value of USD 24.7 m (net gain) applying the USD Secured Overnight Financing Rate ("SOFR")
compounded in arrears are designated as hedge accounting relationships to fix a part of TORM's interest payments during the period
2025-2032 with a notional value of USD 498.7 m (2023: USD 923.0 m, 2022: USD 687.2 m).
Bunker swaps with a fair value USD 0.1 m (net gain) are designated as hedge accounting relationships and are used to reduce the
exposure to fluctuations in bunker prices for fixed voyages denominated in MT with a notional value of MT 9,000 (2023: MT 9,600 ,
2022 MT 0 ).
2024 | Notional value | Unit | 2025 | 2026 | After 2026 | |||||
Forward exchange contracts (USD/DKK) ¹⁾ | DKKm | |||||||||
Interest rate swaps ²⁾ | USDm | |||||||||
Bunker swaps ³⁾ | MT |
¹⁾ The average hedge of USD/DKK currency was 6.8
²⁾ The average interest rate was 1.29 % p.a. plus margin.
³⁾ The average price of the hedging instruments was USD 391.0
Hedge accounting | Expected maturity | |||||||||
2023 | Notional value | Unit | 2024 | 2025 | After 2025 | |||||
Forward exchange contracts (USD/DKK) ¹⁾ | DKKm | |||||||||
Interest rate swaps ²⁾ | USDm | |||||||||
Bunker swaps ³⁾ | MT | |||||||||
¹⁾ The average hedge of USD/DKK currency was 6.8
²⁾ The average interest rate was 1.45 p.a. plus margin.
³⁾ The average price of the hedging instruments was 539.2
Hedge accounting | Expected maturity | |||||||||
2022 | Notional value | Unit | 2023 | 2024 | After 2024 | |||||
Forward exchange contracts (USD/DKK) ¹⁾ | DKKm | |||||||||
Interest rate swaps ²⁾ | USDm | |||||||||
Bunker swaps ³⁾ | MT | |||||||||
¹⁾ The average hedge of USD/DKK currency was 6.9
²⁾ The average interest rate was 1.37 p.a. plus margin.
F-65
TORM only enters into interest derivatives under established ISDA agreements supported with or without credit support annexes with
predefined credit thresholds.
Cash collateral of USD 11.3 m (2023: USD 27.9 m, 2022: USD 1.4 m) has been provided as security for the agreements relating to
derivative financial instruments, which does not meet the offsetting criteria in IAS 32, but which can be offset against the net amount of
the derivative asset and derivative liability in case of default, and insolvency, or bankruptcy in accordance with associated collateral
arrangements.
TORM did not enter into any enforceable netting arrangements.
Further details on derivative financial instruments are provided in Notes 25 and 26.
income statements and equity in 2024, 2023 and 2022.
Income statement | Other comprehensive income | Equity | |||||||
USDm | Port expenses, bunkers, and commissions | Financial items | Operating expenses | Admini- strative expenses | Transfer to income statement | Fair value adjustment | Hedging reserves as of December 31 | ||
2024 | |||||||||
Forward freight agreements | |||||||||
Bunker swaps | ( | ||||||||
Forward exchange contracts | ( | ( | ( | ( | |||||
Interest rate swaps | ( | ||||||||
Total | ( | ( | ( | ||||||
2023 | |||||||||
Forward freight agreements | |||||||||
Bunker swaps | ( | ( | |||||||
Forward exchange contracts | ( | ||||||||
Interest rate swaps | ( | ||||||||
Total | ( | ( | |||||||
2022 | |||||||||
Forward freight agreements | ( | ||||||||
Bunker swaps | ( | ||||||||
Forward exchange contracts | ( | ( | ( | ||||||
Interest rate swaps | |||||||||
Total | ( | ( | ( | ||||||
The hedging reserves as of December 31 relates to derivatives used for cash flow hedge for open hedging instruments, only. Certain
interest rate swaps fair value change are considered ineffective and is recognized in "Financial expenses" in the income statement.
Please refer to Note 22 for further information on commercial and financial risks.
F-66
NOTE 24 - continued
Accounting Policies
Derivative financial instruments, primarily forward currency exchange contracts, forward freight agreements, interest rate hedges, and
forward contracts regarding bunker purchases are entered into to mitigate risks relating to future fluctuations in prices and interest rates,
etc. on future committed or anticipated transactions. TORM applies hedge accounting under the specific rules on cash flow hedges,
when appropriate, as described below for each type of derivative.
directly in “Other comprehensive income”. When the hedged transaction is recognized in the income statement, the cumulative value
adjustment recognized in “Other comprehensive income” is transferred to the income statement and included in the same line as the
hedged transaction. Portion of the changes in fair value deemed to be ineffective is recognized immediately in the income statement.
Changes in the fair value of derivative financial instruments not designated as hedges are recognized in the income statement. While
effectively reducing cash flow risk in accordance with the Company’s risk management policy, certain forward freight agreements and
forward contracts regarding bunker purchases do not qualify for hedge accounting. Changes in fair value of these derivative financial
instruments are therefore recognized in the income statement under “Financial income” or “Financial expenses” for interest rate swaps
and under “Port expenses, bunkers and commissions” for forward freight agreements and forward bunker contracts.
F-67
TORM’s overall risk tolerance and inherited exposure to risks is divided into five main categories:
•Emerging risks
•Industry and market risks
•Operational risks
•Compliance and IT risks
•Financial risks
The risks described below under each of the five categories are considered to be among the most significant and quantifiable risks for
TORM.
Emerging Risks
Industry-changing risks, such as the substitution of oil for other energy sources and radical changes in transportation patterns, are
considered to have a relatively high potential impact but are long-term risks. The Management continues to monitor long-term strategic
risks to ensure the earliest possible mitigation of potential risks and develop the necessary capabilities to exploit opportunities created by
the same risks.
Please refer to the Risk Management section in our Sustainability Statement under E1 Climate Change section on page 64 in the
Annual Report 2024 for a detailed description of emerging risks.
Industry and Market Risks
Industry and market-related risk factors relate to changes in the markets and in the political, economic, and physical environment which
the Management cannot control, such as freight rates and vessel and bunker prices.
Freight rate fluctuations
TORM’s income is primarily generated from voyages carried out using the Company’s fleet of vessels. As such, TORM is exposed to
the considerable volatility which characterizes freight rates for such voyages.
It is TORM’s strategy to seek a certain exposure to this risk, as volatility also represents an opportunity because earnings have
historically been higher in the day-to-day market compared to time charters. The fluctuations in freight rates for different routes may
vary substantially. However, TORM aims to reduce the sensitivity to the volatility of such specific freight rates by actively seeking the
optimal geographical positioning of the fleet and by optimizing the services offered to customers. Please refer to Note 12 for details on
impairment testing.
Tanker freight income is to a certain extent covered against general fluctuations through the use of physical contracts such as cargo
contracts and time charter agreements with durations of 6 -36 months . In addition, TORM uses derivative financial instruments such
as forward freight agreements (FFAs) with coverage of typically 0 -24 months ahead, based on market expectations and in accordance
with TORM’s risk management policies.
During 2024, 8.5 % (2023: 12.6 %, 2022: 12.8 %) of the 31,287 earning days deriving from operating the Company’s product tankers
were covered in this way. Physical time charter contracts accounted for 65.6 % (2023: 8.5 %, 2022: 46.1 %) of overall coverage. In
2024, the Company sold FFAs with a notional contract value of USD 82.6 m (2023: USD 213.9 m, 2022: USD 58.3 m) and bought
FFAs with a notional contract value of USD 11.7 m (2023: USD 0 m, 2022: USD 92.3 m). The total notional contract volume sold in
2024 was 2,430,000 metric tons (2023: 5,400,000 metric tons; 2022: 2,310,000 metric tons), and the total notional volume bought was
2025 was 12.8 % through time charters, current spot voyages and cargo contracts (2023: 11.3 %, 2022: 3.7 %).
FFA trade and other freight-related derivatives are subject to specific policies and guidelines approved by the Risk Committee,
including trading limits, stop-loss policies, segregation of duties, and other internal control procedures.
F-68
NOTE 25 – continued
All things being equal and to the extent the Company’s vessels have not already been chartered out at fixed rates, a freight rate change
of USD/day 1,000 would lead to the following changes in profit before tax based on the expected number of earning days for the
coming financial year:
Sensitivity to changes in freight rates
USDm | 2025 | 2024 | 2023 | |||
Decrease in freight rates of USD/day 1,000: | ||||||
Changes in profit/loss before tax for the following year | ( | ( | ( | |||
Changes in equity for the following year | ( | ( | ( |
Sales and purchase price fluctuations
As an owner of vessels, TORM is exposed to risks associated with changes in the value of the vessels, which can vary considerably
during their useful lives. As of December 31, 2024, the carrying value of the fleet was USD 2,826.7 m (2023: USD 2,070.2 m, 2022:
USD 1,855.9 m). Based on broker valuations, TORM’s fleet had a market value of USD 3,582.9 m as of December 31, 2024 (2023: USD
Bunker price fluctuations
The cost of fuel oil consumed by the vessels, known in the industry as bunkers, accounted for 69.0 % (2023: 66.6 % 61.3 %) of the total
voyage costs in 2024 and is by far the biggest single cost related to a voyage.
TORM is exposed to fluctuations in bunker prices which are not reflected in the freight rates achieved by TORM. To reduce this
exposure, TORM hedges the bunker exposure with oil product instruments to the extent bunker element in the freight rates achieved is
considered fixed.
Bunker trade is subject to specific risk policies and guidelines approved by the Risk Committee including trading limits, stop-loss,
stop-gain and stop-at-zero policies, segregation of duties and other internal control procedures.
TORM only hedges bunker exposure whenever the freight is fixed beyond one month. In 2024, 6.0 % (2023: 17.7 %, 2022: 15.2 %) of
TORM’s total bunker purchase was hedged through bunker hedging contracts. At the end of 2024, TORM had covered 7 % (2023: 5 %,
2022: — %) of its bunker requirements for 2025. The total bunker exposure is estimated to be approximately 432,316 metric tons.
All things being equal, a price change of 10 % per ton of bunker oil (without subsequent changes in freight rates) would lead to the
following changes in expenditure based on the expected bunker consumption in the spot market:
Sensitivity to changes in the bunker price
USDm | 2025 | 2024 | 2023 | |||
Increase in the bunker prices of 10% per ton: | ||||||
Changes in profit/loss before tax for the following year | ( | ( | ( | |||
Changes in equity for the following year | ( | ( | ( |
Operational Risks
Operational risks are risks associated with the ongoing operations of the business and include risks such as the safe operation of vessels,
the availability of experienced seafarers and staff, terrorism, piracy as well as insurance and counterparty risk.
F-69
NOTE 25 – continued
Insurance Coverage
During the fleet’s operation, various casualties, accidents, and other incidents may occur which may result in financial losses for
TORM. For example national and international rules, regulations, and conventions could mean that TORM may incur substantial
liabilities if a vessel is involved in an oil spill or emission of other environmentally hazardous agents.
To reduce the exposure to these risks, the fleet is insured against such risks to the extent possible. The total insurance program
comprises a broad cover of risks in relation to the operation of vessels and transportation of cargo, including personal injury,
environmental damage and pollution, cargo damage, third-party casualty and liability, hull and machinery damage, total loss, and war.
All TORM’s owned vessels are insured for an amount corresponding to their market value plus a margin to cover any fluctuations.
Liability risks are covered in line with international standards. It is TORM’s policy to cooperate with financially sound international
insurance companies with a credit rating of BBB or better, presently some 14 -16 companies along with two P&I clubs, to diversify
risk. The P&I clubs are members of the internationally recognized collaboration, International Group of P&I clubs, and TORM’s
vessels are each insured for the maximum amount available in the P&I system. At the end of 2024, the aggregate insured value of hull
and machinery and interest for TORM’s owned vessels amounted to USD 4.32 bn (2023: USD 2.34 bn, 2022: USD 2.8 bn).
Counterparty Risk
Counterparty risk is an ever-present challenge demanding close monitoring to manage and decide on actions to minimize possible
losses. The maximum counterparty risk associated is equal to the values recognized in the balance sheet. A consequential effect of the
counterparty risk is loss of income in future periods, e.g. counterparties not being able to fulfill their responsibilities under a time
charter, a contract of affreightment, or an option. The main risk is the difference between the fixed rates under a time charter or a
contract of affreightment and the market rates prevailing upon default. This characterizes the method for identifying the market value of
a derivative instrument.
TORM has a close focus on its risk policies and procedures to ensure that risks managed in the day-to-day business are kept at agreed
levels, and that changes in the risk situation are brought to the Management’s attention.
TORM’s counterparty risks are primarily associated with:
•Receivables, cash and cash equivalents, including restricted cash
•Contracts of affreightment with a positive fair value
•Derivative financial instruments and commodity instruments with a positive fair value
Receivables, cash, and cash equivalents, including restricted cash
The majority of TORM’s customers are companies operating in the oil industry. It has been assessed that these companies are, to a great
extent, subject to the same risk factors as those identified for TORM.
A major part of TORM’s freight revenues stem from a small group of customers. In 2024, one customer accounted for 8 % of TORM’s
freight revenues (2023: one accounted for 8 %, 2022: one accounted for 12 %). The concentration of earnings on a few customers
requires extra attention to credit risk. TORM has a credit policy under which continued credit evaluations of new and existing customers
take place. For long-standing customers, payment of freight normally takes place after a vessel’s cargo has been discharged. For new
and smaller customers, TORM’s credit risk is limited as freight is usually paid prior to the cargo’s discharge, or, alternatively, a suitable
bank guarantee is placed in lieu thereof.
Because of the payment patterns mentioned above, TORM’s receivables primarily consist of receivables from voyages in progress at
year-end and outstanding demurrage. For the past five years, TORM has not experienced any significant losses in respect of charter
payments or any other freight agreements. With regard to the collection of original demurrage claims, TORM’s average stands at 98.4 %
(2023: 98.6 %, 2022: 98.6 %), which is considered to be satisfactory given the differences in interpretation of events. In 2024, demurrage
represented 13 % (2023: 16.0 %, 2022: 14.0 %) of the total freight revenues. Please refer to Note 1 for more details on recognition of
demurrage claims into revenue.
F-70
NOTE 25 – continued
Excess liquidity is placed on deposit accounts with major banks with strong and acceptable credit ratings or invested in secure papers
such as American or Danish government bonds, or triple AAA-rated money market funds. Cash is invested with the aim of getting the
highest possible yield, while maintaining a low counterparty risk, and having adequate liquidity reserves for possible investment
opportunities or to withstand a sudden drop in freight rates.
Derivative Financial Instruments and Commodity Instruments
In 2024, 100 % (2023: 100 %, 2022: 100 %) of TORM’s forward freight agreements (FFAs) were traded via clearing houses or over-
the-counter (OTC). Trade via clearing houses effectively reduces counterparty credit risk by daily clearing of balance and OTC trades
are only done with investment grade counterparties. Over-the-counter fuel swaps have restrictively been entered into with major oil
companies, banks, or highly reputed partners with a satisfactory credit rating. TORM also trades FX and interest derivatives. All such
derivatives were entered into with investment grade counterparties.
Financial risks
Financial risks relate to TORM’s financial position, financing, and cash flows generated by the business, including foreign exchange
risk and interest rate risk. TORM’s liquidity and capital resources are described in Note 2.
Foreign Exchange Risk
TORM uses USD as its functional currency because most of the Company’s transactions are denominated in USD. The foreign
exchange risk is thereby limited to cash flows not denominated in USD. The primary risk relates to transactions denominated in DKK,
EUR, and SGD and relates to administrative and operating expenses.
The part of TORM’s expenses denominated in currencies other than USD accounts for approximately 57.8 % (2023: 60.2 %, 2022:
administrative and operating expenses in DKK and EUR for 2025 are approximately DKK 494.0 m, whereof 69.1 % (2023: 68.3 %, 2022:
USD/DKK currency rate is 6.8 . FX exposure is hedged in its entirety for all risks.
TORM assumes identical currency risks arising from exposures in DKK and EUR.
Sensitivity to Changes in the USD/DKK and USD/EUR Exchange Rate
before tax and equity as follows:
USDm | 2025 | 2024 | 2023 | |||
Effect of a 10% increase of DKK and EUR: | ||||||
Changes in profit/loss before tax for the following year | ( | ( | ( | |||
Changes in equity for the following year | ( | ( | ( |
Interest rate risk
TORM’s interest rate risk generally relates to interest-bearing borrowings. All TORM’s loans for financing vessels are denominated in
USD. Please refer to Note 20 for additional information on borrowings. At the end of 2024, TORM had fixed 82.7 % (2023: 86.9 %,
2022: 94.6 %) of the debt then outstanding with interest rate swaps, fixed rate leasing debt and senior unsecured bond corresponding to
an amount of USD 1,019.7 m. USD 498.7 m of this amount is hedged at an interest rate of 1.29 % plus margin with interest rate swaps
with maturity in the period 2025-2030.
F-71
NOTE 25 – continued
Sensitivity to Changes in Interest Rates
USDm | 2025 | 2024 | 2023 | |||
Effect of a 1%-point increase in interest rates: | ||||||
Changes in profit/loss before tax for the following year | ( | ( | ( | |||
Changes in equity for the following year |
Liquidity risk
TORM’s strategy is to ensure continuous access to funding sources by maintaining a robust capital structure and a close relationship
with several financial partners. As of December 31, 2024, TORM’s loan portfolio was spread across 13 different banks.
As of December 31, 2024, TORM maintains a liquidity reserve of USD 291.2 m in cash and cash equivalents, including restricted cash,
combined with USD 323.6 m in undrawn and committed credit facilities. Cash is only placed in banks with an investment grade rating.
For further information on contractual obligations, including a maturity analysis, please refer to Note 23.
F-72
Observable input (Level 2) | Financial instruments measured at fair value | Financial instruments measured at amortized cost | Total carrying value | |||||
2024 | ||||||||
Financial assets | ||||||||
Loan receivables¹⁾ | ||||||||
Trade receivables¹⁾ | ||||||||
Other receivables | ||||||||
Cash and cash equivalents, including restricted cash¹⁾ | ||||||||
Total | ||||||||
Financial liabilities | ||||||||
Borrowings¹⁾²⁾ | ||||||||
Other non-current liabilities | ||||||||
Trade payables¹⁾ | ||||||||
Other liabilities¹⁾ | ||||||||
Total | ||||||||
2023 | ||||||||
Financial assets | ||||||||
Loan receivables¹⁾ | ||||||||
Trade receivables¹⁾ | ||||||||
Other receivables | ||||||||
Cash and cash equivalents, including restricted cash¹⁾ | ||||||||
Total | ||||||||
Financial liabilities | ||||||||
Borrowings¹⁾²⁾ | ||||||||
Other non-current liabilities | ||||||||
Trade payables¹⁾ | ||||||||
Other liabilities¹⁾ | ||||||||
Total | ||||||||
2022 | ||||||||
Financial assets | ||||||||
Loan receivables¹⁾ | ||||||||
Trade receivables¹⁾ | ||||||||
Other receivables | ||||||||
Cash and cash equivalents, including restricted cash¹⁾ | ||||||||
Total | ||||||||
Financial liabilities | ||||||||
Borrowings¹⁾²⁾ | ||||||||
Other non-current liabilities | ||||||||
Trade payables¹⁾ | ||||||||
Other liabilities¹⁾ | ||||||||
Total |
¹⁾ Due to the short maturity, the carrying value is considered to be an appropriate expression of the fair value.
²⁾ See Note 21.
³⁾ Derivative financial instruments are presented in the balance sheet line "Other receivables" and "Other liabilities".
Fair value hierarchy for financial instruments measured at fair value in the balance sheet
Below, please find the fair value hierarchy for financial instruments measured at fair value in the balance sheet. The financial
instruments in question are grouped into levels 1 to 3 based on the degree to which the fair value is observable.
•Level 2 fair value measurements are those derived from input other than quoted prices included in Level 1 which are
observable for the asset or liability, either directly (as prices) or indirectly (derived from prices)
F-73
NOTE 26 - Continued
Methods and assumptions in determining fair value of financial instruments
Derivative part of other receivables and other liabilities
The fair value of derivatives in other receivables and other liabilities is measured using accepted valuation methods with input variables
such as yield curves, forward curves, spreads, etc. and compared to financial counterparties to ensure acceptable valuations. The
TORM’s ultimate controlling party is Brookfield Oaktree Holdings, LLC, a limited liability company incorporated in the USA. The
immediate controlling shareholder is OCM Njord Holdings S.á.r.l. (Njord Luxco).
Shareholders' contribution and dividends paid are disclosed in the consolidated statement of changes in equity. Dividends to related
parties are paid out based on the related parties’ ownership of shares.
The remuneration of key management personnel, which consists of the Board of Directors, Executive Director and the Senior
Management Team, is disclosed in Note 5.
On September 01, 2022, TORM purchased 75 % of the shares in Marine Exhaust Technology A/S, thereby obtaining a controlling
interest in its joint venture entity Marine Exhaust Technology (Hong Kong) Ltd. Until September 01, 2022, TORM’s transactions with
F-74
During 2024, TORM delivered three vessels sold in 2023 for a total consideration of USD 66.5 m. The vessels had a carrying value of
USD 47.2 m. After deducting related bunker costs, the sales resulted in a profit of USD 17.2 m, which is recognized in the income
statement for 2024.
During 2024, TORM sold and delivered four vessels for a total consideration of USD 83.0 m. The vessels had a carrying value of USD
for 2024. The sales consideration for one vessel of USD 18.9 m has not yet been received as per 31 December 2024.
During 2023, TORM sold and delivered eight vessels for a total consideration of USD 166.4 m. The vessels sold and delivered to new
owners during 2023 had a carrying value of USD 111.4 m. After deducting related bunker cost, the sales resulted in a profit of USD
During 2022, TORM sold seven vessels. All the vessels sold in 2022 and one vessel sold in 2021 were delivered to the new owners to
a total consideration of USD 106.6 m. The vessels sold and delivered to the new owners during 2022 had a carrying value of USD
statement for 2022.
USDm | 2024 | 2023 | 2022 | |||
Reversal of other non-cash movements: | ||||||
Exchange rate adjustments | ( | ( | ||||
Share-based payments | ||||||
Fair value adjustments on derivative financial instruments | ( | ( | ||||
Reversal of provisions adjustments | ( | ( | ||||
Other adjustments | ( | ( | ||||
Total | ( |
USDm | 2024 | 2023 | 2022 | |||
Change in inventories, receivables, and payables: | ||||||
Change in inventories | ( | ( | ||||
Change in receivables | ( | |||||
Change in prepayments | ( | ( | ||||
Change in trade payables and other liabilities | ||||||
Total | ( |
F-75
Entity | Country | ||||
TORM plc | United Kingdom | ||||
Investments in subsidiaries ⁵⁾: | |||||
Entity | Country | Ownership ⁴⁾ | |||
TORM A/S | Denmark | % | |||
OCM Singapore Njord Holdings Almena, Pte. Ltd ¹⁾ | Singapore | % | |||
OCM Singapore Njord Holdings Hardrada, Pte. Ltd | Singapore | % | |||
OCM Singapore Njord Holdings St.Michaelis Pte. Ltd ¹⁾ | Singapore | % | |||
OCM Singapore Njord Holdings St. Gabriel Pte. Ltd ¹⁾ | Singapore | % | |||
OCM Singapore Njord Holdings Agnete, Pte. Ltd ¹⁾ | Singapore | % | |||
OMI Holding Ltd.¹⁾ | Mauritius | % | |||
TORM Crewing Service Ltd.¹⁾ | Bermuda | % | |||
TORM Middle East DMCC | Emirates | % | |||
TORM Shipping India Private Limited ³⁾ | India | % | |||
TORM Singapore Pte. Ltd. | Singapore | % | |||
TORM Tanker Corporation ⁶⁾ | USA | % | |||
TORM USA LLC ⁶⁾ | USA | % | |||
TORM VesselCo UK Limited | United Kingdom | % | |||
VesselCo 8 Pte. Ltd. ¹⁾ | Singapore | % | |||
VesselCo 9 Pte. Ltd. | Singapore | % | |||
VesselCo 10 Pte. Ltd. ²⁾ | Singapore | % | |||
VesselCo 11 Pte. Ltd. ¹⁾ | Singapore | % | |||
VesselCo 12 Pte. Ltd. | Singapore | % | |||
TORM SHIPPING (PHILS.), INC. ⁴⁾ | Philippines | % | |||
Marine Exhaust Technology A/S | Denmark | % | |||
ME Production A/S | Denmark | % | |||
Marine Exhaust Technology (Hong Kong) Ltd. | China | % | |||
ME Production (Zhejiang) Co, Ltd. | China | % | |||
Suzhou ME Production Technology Co, Ltd.⁶⁾ | China | % |
¹⁾ Entities dissolved in the financial year ended December 31, 2022
²⁾ Entities dissolved in the financial year ended December 31, 2023
³⁾ Entities with different reporting periods: TORM Shipping India has a financial reporting period that runs from April 01 to March 31
as required by the Indian government's laws and legislations.
⁴⁾For all subsidiaries, ownership and voting rights are the same except for TORM SHIPPING (PHILS.), INC where voting rights are
⁵⁾ All subsidiaries are consolidated in full.
⁶⁾ Entities not audited
F-76
NOTE 30-continued
Interest in legal entities included as joint ventures:
There has been no activity in the Danish joint venture, Long Range 2 A/S for which TORM controls 50 %.
TORM obtained control over Marine Exhaust Technology (Hong Kong) Ltd. on September 01, 2022 following the acquisition of
Marine Exhaust Technology A/S, where it affected the profit and loss from continuing operations in 2022 with -0.1 m. Before the
acquisition, TORM controlled 28 % of Marine Exhaust Technology A/S.
Denmark | India | Philippines |
Tuborg Havnevej 18 | 2nd Floor | 7th Floor |
DK-2900 Hellerup | Leela Business Park | Salcedo Towers, 169 |
Denmark | Andheri-Kurla Road | HV dela Costa Street |
Andheri (E) | Salcedo Village, | |
Mumbai 400059 | Makati City | |
India | Philippines 1227 | |
Singapore | United Kingdom | USA |
6 Battery Road #27-02 | 4th Floor | Suite 1625 |
Six Battery Road | 120 Cannon Street | 2500 City West |
Singapore 049909 | London, EC4N 6AS | Boulevard |
Singapore | United Kingdom | 77042, Houston , Texas |
USA | ||
Denmark | China | Hong Kong |
Sandholm 7 | 208 Longward Road | Room 12, 10/F |
9900 Frederikshavn | Zhapu Town Ping Hu | Kwai Cheong Centre |
Denmark | Jiaxing City | No. 50 Kwai Cheong Road |
Zhejiang Provice | Kwai Chung, New Territories | |
China | Hong Kong | |
United Arab Emirates | ||
DMCC Business Centre | ||
AU Tower 15-G | ||
JLT Cluster I | ||
Dubai, UAE | ||
United Arab Emirates | ||
F-77
USDm | 2024 | 2023 | 2022 | |||
Cargo claim provisions | ||||||
Warranty provisions | ||||||
Balance as of December 31 |
In 2020, TORM was involved in cargo claims relating to a customer having granted indemnities for discharge of cargoes, and not
being able to honor those obligations. The cases involved irregular activities by the customer. Legal action was initiated by TORM in
the UK and in India against the customer and related individuals. During 2022, TORM settled one claim and reassessed its provisions
for the remaining part of the case complex, which led to the reversal of provisions amounting to USD 6.3 m.
As expected at the end of 2023, the remaining part of the case complex was resolved in arbitration during the first quarter of 2024 with
an award in favor of TORM.
Warranty provisions relate to sold marine engineering equipment.
Accounting Policies
this will lead to an outflow of resources which can be reliably estimated. Provisions are measured at the estimated liability expected to
arise, considering the time value of money.
F-78
2024 | 2023 | 2022 | ||||
Earnings per share | ||||||
Net profit/(loss) for the year attributable to TORM plc shareholders (USDm) | ||||||
Million shares | ||||||
Weighted average number of shares | ||||||
Weighted average number of treasury shares | ( | ( | ( | |||
Weighted average number of shares outstanding | ||||||
Dilutive effect of outstanding share options | ||||||
Weighted average number of shares outstanding incl. dilutive effect of share options | ||||||
Basic earnings/(loss) per share (USD) | ||||||
Diluted earnings/(loss) per share (USD) |
2024 | 2023 | 2022 | ||||
Dividend per share | ||||||
Declared dividend per share (USD) | ||||||
Declared dividend for the year (USDm) | ||||||
Proposed dividend per share for approval at Annual General Meeting (USD) | ||||||
Proposed dividend for approval at Annual General Meeting (USDm) | ||||||
Dividends paid per share (USD) | ||||||
Dividends paid during the year (USDm) | ||||||
Number of shares | ||||||
Number of shares, end of period (million) | ||||||
Number of treasury shares, end of period (million) | ( | ( | ( | |||
Number of shares outstanding, end of period (million) |
Accounting Policies
the weighted average number of common shares outstanding during the period. Treasury shares are not included in the calculation.
Purchases of treasury shares during the period are weighted based on the remaining period.
Diluted earnings per share are calculated by adjusting the consolidated profit or loss available to common shareholders and the weighted
average number of common shares outstanding for the effects of all potentially dilutive shares. Such potentially dilutive common shares
are excluded when the effect of including them would be to increase earnings per share or reduce a loss per share.
F-79
2024 | 2023 | 2022 | ||||
Cash at banks and on hand | ||||||
Cash and cash equivalents | ||||||
Cash provided as security for initial margin calls and negative market values on derivatives, etc.¹⁾ | ||||||
Restricted cash | ||||||
Cash and cash equivalents, including restricted cash |
¹⁾ The counterparties have an obligation to return any excess cash provided as security to the Group upon settlement or early
There were no business combinations in 2023 or 2024.
On September 01, 2022, TORM acquired an ownership stake of 75 % of Marine Exhaust Technology A/S (MET), a Danish industrial
company specialized in developing and producing advanced and green marine equipment for a cash consideration of USD 2.0 m.
TORM acquired MET because the entity has gained strong expertise in developing and producing components for the maritime
industry, including scrubbers for the shipping industry. As part of the transaction, TORM also obtained control over the joint venture
entity Marine Exhaust Technology (Hong Kong) Ltd in which TORM previously held a 27.5 % interest.
TORM has elected to measure the non-controlling interest in the acquiree at fair value.
The fair value of the non-controlling interest in MET has been assessed based on the EBITDA multiples method using estimated 2023
financials based on expected scrubber orders. The value includes an adjustment based on development costs to account for potential
future income from the sales of Flettner rotors. Based on the enterprise value estimate, the equity value is calculated through a standard
adjustment for net interest-bearing debt.
The previously held interest in Marine Exhaust Technology (Hong Kong) Ltd was remeasured at fair value as part of the transaction
leading to a gain of USD 0.3 m recognized in the share of profit/loss from joint ventures in the consolidated income statement.
The acquired assets include contractual receivables of USD 5.7 m of which USD 0.3 m were considered to be uncollectible at the day of
the acquisition.
Transaction costs in connection with the acquisition amounted to less than USD 0.1 m and are recognized as administration expenses.
The goodwill of USD 1.8 m represents the value of expected synergies arising from the acquisition and is allocated entirely to the
Marine Engineering segment. The goodwill recognized is not expected to be deductible for tax purposes.
Revenue and profit for the period generated by the acquired entity amounted to USD 5.9 m and 0.0 m, respectively, and have been
recognized in the consolidated income statement since the acquisition. Had the acquisition taken place on January 01, 2022, the
revenue and profit for the Group for 2022 would have been USD 1,455.9 m and USD 561.9 m, respectively.
F-80
NOTE 34 –continued
01 September | ||
USDm | 2022 | |
Intangible assets | ||
Tangible fixed assets | ||
Inventories | ||
Trade receivables | ||
Other receivables | ||
Prepayments | ||
Cash and cash equivalents | ||
Borrowings | ( | |
Deferred tax liabilities | ( | |
Provisions | ( | |
Other non-current liabilities | ( | |
Trade payables | ( | |
Other liabilities | ( | |
Deferred income | ( | |
Current tax liabilities | ( | |
Net identifiable assets acquired | ||
Goodwill | ||
Total net assets acquired | ||
Of which fair value of non-controlling interest | ( | |
Total purchase consideration | ||
Cash consideration | ||
Fair value of previously held interests | ||
Total purchase consideration | ||
Cash acquired | ||
Cash consideration | ( | |
Acquisition of subsidiaries, net of cash acquired |
Accounting Policies
date of acquisition is the date on which control over the entity is effectively transferred.
Newly acquired or formed entities are recognized in the consolidated financial statements from the date of acquisition or formation. The
date of acquisition is the date on which control over the entity is effectively transferred.
When a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the
amount of that adjustment is included in the cost of the combination if the event is probable and the adjustment can be measured
reliably. Costs of issuing debt or equity instruments in connection with a business combination are accounted for together with the debt
or equity issuance. All other costs associated with the acquisition are expensed in the income statement.
The excess of the cost of the business combination over the fair value of the acquired assets, liabilities, and contingent liabilities is
recognized as goodwill under intangible assets and is tested for impairment at least once a year. Upon acquisition, goodwill is allocated
to the cash generating units that subsequently form the basis for the impairment test. If the fair value of the acquired assets, liabilities,
and contingent liabilities exceeds the cost of the business combination, the identification of assets and liabilities and the processes of
measuring the fair value of the assets and liabilities and the cost of the business combination are reassessed. If the fair value of the
business combination continues to exceed the cost, the resulting gain is recognized in the income statement.
F-81
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of TORM plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TORM plc (the Company) as of December 31, 2024, 2023 and 2022,
the related consolidated income statements, statements of comprehensive income, statements of changes in equity and cash flow
statements for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2024, 2023 and 2022, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2024, in conformity with IFRS Accounting Standards as issued by the International
Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our
report dated March 06, 2025, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the
critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures
to which it relates.
F-82
Vessel impairment indicator assessment
Description of the Matter | At December 31, 2024, the carrying value of the Company’s vessels and capitalized dry-docking was USD 2,827 million. As discussed in Notes 1 and 12 to the consolidated financial statements, the Company assesses impairment indicators at each reporting date or whenever events or changes in circumstances would indicate that the carrying amounts of its vessels might not be recoverable in accordance with IAS 36 Impairment of Assets. The Company prepares the impairment indicator assessment at the cash generating unit (CGU) level, which has been determined as the LR1, LR2 and MR vessels (the Main Fleet) as they are operated collectively, are largely interchangeable and the cash flows generated by them are interdependent from other vessels. In assessing vessel impairment indicators, the Company monitors the fair value of the vessels, which was calculated as the average of two valuations prepared by independent shipbrokers. Based on the assessment, the Company concluded that the no vessel impairment indicators required the Company to prepare an impairment test as of December 31, 2024. | |
Auditing the Company’s vessel impairment indicator assessment was complex due to the significant judgment required by Management in determining the CGUs and determining whether impairment indicators required the Company to prepare an impairment test. The vessel impairment indicator with significant judgment was Management’s assessment of the fair value of the vessels using independent shipbroker valuations, which use a combination of vessel specific inputs such as size, yard and age of the vessels and assumptions based on market data, including recent comparable vessel transactions. | ||
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of the controls over the Company’s impairment indicator assessment process, including controls over the identification of CGUs and review of the vessels’ fair value. | |
We performed audit procedures on the impairment indicator assessment that included, among others, assessing management’s CGU determination by evaluating their analysis in respect of the smallest group of assets that generate largely independent cash flows. We inspected evidence used in Management's determination of the collective operation and homogenous nature of the Main Fleet. We evaluated the determination of the fair value of the vessels by comparing them to the average of two valuations prepared by independent shipbrokers. We performed inquiries with the independent shipbrokers regarding the valuation methodology applied and input data used and evaluated their competence, capabilities and objectivity. We tested the input data used for the valuation of the vessels in the Main Fleet by comparing vessel specific inputs with vessel records and supporting documentation as well as evidence obtained in other areas of the audit. We further performed a retrospective comparison of historical sales prices of vessels with the independent broker valuations near the time of disposal and compared the valuations to recent market data for comparable vessels. We assessed the adequacy of the Company’s disclosures in Notes 1 and 12 to the consolidated financial statements. |
/s/ EY Godkendt Revisionspartnerselskab
We have served as the Company’s auditor since 2020.
March 06, 2025
F-83
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of TORM plc
Opinion on Internal Control Over Financial Reporting
We have audited TORM plc’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)
(the COSO criteria). In our opinion, TORM plc (the Company) maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the 2024 consolidated financial statements of the Company and our report dated March 6, 2025, expressed an unqualified opinion
thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ EY Godkendt Revisionspartnerselskab
Copenhagen, Denmark
March 06, 2025
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the
undersigned to sign this annual report on its behalf.
TORM PLC | ||||
By: | /s/ Jacob Meldgaard | |||
Name: Jacob Meldgaard | ||||
Title: Executive Director and Principal Executive Officer | ||||
Date: March 06, 2025
TABLE OF CONTENTS
Part I: Gender IdentityPart Ii: Demographic BackgroundItem 10. Additional Information A.- Restricted Share UnitsItem 7. Major Shareholders and Related Party TransactionsItem 8. Financial InformationNote 2 Liquidity,Item 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosures About Market RiskItem 12. Description Of Securities Other Than Equity SecuritiesPart IIItem 13. Defaults, Dividend Arrearages and DelinquenciesItem 14. Material Modifications To The Rights Of Security Holders and Use Of ProceedsItem 15. Controls and ProceduresItem 16. [reserved]Item 16A. Audit Committee Financial ExpertItem 16B. Code Of EthicsItem 16C. Principal Accountant Fees and ServicesItem 16D. Exemptions From The Listing Standards For Audit CommitteesItem 16E. Purchases Of Equity Securities By The Issuer and Affiliated PurchasersItem 16F. Change in Registrant S Certifying AccountantItem 16G. Corporate GovernanceItem 16H. Mine Safety DisclosureItem 16I. Disclosure Regarding Foreign Jurisdictions That Prevent InspectionsItem 16J. Insider Trading PoliciesItem 16J. InsiderItem 16K. CybersecurityPart IIIItem 17. Financial StatementsItem 18. Financial StatementsItem 19. ExhibitsNote 18 For Further ReferenceNote 1 Accounting Policies, Critical Accounting Estimates and JudgementsNote 1 ContinuedNote 2 Liquidity, Capital Resources and Subsequent EventsNote 3 SegmentNote 3 Continuedsegment Reporting - Consolidated Balance SheetNote 3 ContinuedNote 4 Revenue From Contracts with CustomersNote 4 ContinuedNote 5 Staff CostsNote 5 ContinuedNote 6 Remuneration To Auditors Appointed At The Parent Company S Annual General MeetingNote 7 Financial ItemsNote 8 TaxNote 8 ContinuedNote 9 Intangible AssetsNote 9 ContinuedNote 10 Tangible Fixed AssetsNote 10 ContinuedNote 11 LeasingNote 11 ContinuedNote 12 Impairment TestingNote 12 ContinuedNote 13 Loan ReceivablesNote 14 InventoriesNote 15 Trade ReceivablesNote 16 Other ReceivablesNote 17 PrepaymentsNote 18 Common Shares and Treasury SharesNote 18 ContinuedNote 19 Other LiabilitiesNote 20 Effective Interest Rate, Outstanding BorrowingsNote 20 ContinuedNote 21 Collateral Security For BorrowingsNote 22 Guarantee Commitments and Contingent LiabilitiesNote 23 Contractual Rights and ObligationsNote 23 ContinuedNote 24 Derivative Financial InstrumentsNote 24 - ContinuedNote 25 Risks Associated with Torm S ActivitiesNote 25 ContinuedNote 26 Financial InstrumentsNote 26 - ContinuedNote 27 Related Party TransactionsNote 28 Assets Held For Sale and Non-current Assets Sold During The YearNote 29 Cash FlowsNote 30 Entities in The GroupNote 30-continuedNote 31 ProvisionsNote 32 Earnings Per Share and Dividend Per ShareNote 33 Cash and Cash Equivalents, Including Restricted CashNote 34 Business CombinationsNote 34 Continued