ADNOC L&S reports 327% year-on-year increase in H1 2023 net profit

In the first half of 2023, ADNOC L&S recorded a net profit of US$307 million, or US$0.04 or AED0.15 per share, representing a more-than fourfold increase compared to the net profit of US$72 million recorded in H1 2022.

The Company recorded revenues of US$1,225 million in the first half of 2023, marking an increase of 62 percent compared to the first half of 2022. This increase was driven by revenue growth across the Company’s three business segments: Integrated Logistics, Shipping, and Marine Services.

The Company reported an EBITDA of US$417 million in the first half of 2023, representing a 188 percent year-on-year (YoY) increase. This was driven by a higher contribution from all three business segments. This translated into an EBITDA margin of 34.1 percent in the first half of 2023, substantially higher than the EBITDA margin of 19.2 percent in the first half of 2022.

ADNOC L&S delivered a positive free cash flow of US$82 million in the first half of 2023. The Company had no debt financing drawn by 30th June 2023, strategically positioning itself for the implementation of its announced smart growth strategy.

Commenting on the Company’s strong maiden results, Captain Abdulkareem Al Masabi, CEO of ADNOC L&S, said, “Following our record-breaking IPO, ADNOC L&S has delivered exceptionally strong financial results for the first half of 2023 with a 327 percent growth in net profit over the same period from last year. This impressive performance is driven by our responsible plans to expand our asset and customer base, decarbonise our operations and enter new verticals in a timely manner, while strategically positioning ADNOC L&S to capitalise on ADNOC’s ambitious growth strategy. As part of our smart growth strategy, we remain focused on extending our geographical footprint, exploring new revenue streams, and unlocking further value for our shareholders.”

Segment-wise Financial Performances

ADNOC L&S’ Integrated Logistics segment reported revenues of US$729 million in the first half of 2023, an increase of 136 percent YoY following the successful acquisition of Zakher Marine International (ZMI) and expanding its Integrated Logistics service offering.

Integrated Logistics reported EBITDA of US$232 million in the first half of 2023, an increase of 519 percent YoY. The EBITDA margins in H1 2023 showed significant improvement, reaching 31.8 percent compared to 12.1 percent achieved in H1 2022.

The Company’s Shipping segment reported revenues of US$408 million in the first half of 2023, an increase of 9 percent YoY primarily driven by higher charter rates and increased vessel days for Tanker and Gas Carriers. This growth was partially offset by a lower contribution from Dry-bulk shipping due to reduced charter rates.

Shipping reported EBITDA of US$168 million in the first half of 2023, reflecting an increase of 61 percent YoY. EBITDA was further supported by a 7 percent reduction in direct costs during the first half of 2023. This translated into delivered EBITDA margins of 41.2 percent in H1 2023, significantly higher than 28 percent in H1 2022.

The Marine Services segment reported revenues of US$88 million in the first half of 2023, an increase of 19 percent YoY. Marine Services reported an EBITDA of US$17 million in the first half of 2023, an increase of 70 percent YoY. EBITDA margins of 19 percent in H1 2023 were significantly higher than 14 percent in H1 2022.

Strategic Update

ADNOC L&S continues to make significant strides in executing its smart growth strategy by expanding into new business verticals, creating fresh revenue streams, and continuing to strategically expand its fleet. During Q2 2023, the Company secured a US$975 million Engineering, Procurement and Construction (EPC) contract from ADNOC Offshore for the construction of an offshore artificial island. The provision of EPC services in the integrated logistics sector is a new offering by ADNOC L&S, aligned with the Company’s smart growth strategy, enabling it to generate fresh revenue streams by expanding into new business areas.

In addition, ADNOC L&S took the delivery of two of the four newbuild, LNG dual-fuel Very Large Crude Carriers (VLCCs) schedued to be delivered this year as part of its strategic fleet expansion. These vessels are categorised as one of the most environmentally efficient in operation today as a result of their dual-fuel engine that is also designed to run on lower emitting Liquified Natural Gas (LNG). ADNOC L&S has committed approximately US$2 billion to building more environmentally efficient vessels and has successfully reduced the carbon intensity of its owned fleet by more than 20 percent between 2018 and 2022.

Health, Safety and Environment (HSE)

ADNOC L&S remains fully committed to achieving 100 percent compliance with HSE standards and was honored with an International Marine Contractors Association (IMCA) Award for Safety for its “Smart Vessels” in Q2 2023. This award recognises ADNOC L&S for its successful implementation of the “Smart Vessels” initiative which uses advanced Artificial Intelligence systems on more than 80 offshore vessels, harnessing the capabilities of CCTVs, sensors and intelligent video analytics to bolster safety protocols and elevate the level of monitoring and control onboard.

Outlook

In line with guidance issued at the time of our IPO, the medium-term targets are as follows:
• Consolidated Revenue: We target mid-to-high single digit growth year-on-year in the medium term.
• Consolidated EBITDA: We target an EBITDA margin of above 30 percent in 2023. Over the medium term, we target average annual EBITDA growth in the low teens towards an EBITDA margin of 35 percent.
• Capital Structure: We target 2.0-2.5x net debt / EBITDA over the medium term.

Dividend

The Board has adopted a dividend policy aimed at maximising shareholder value while reflecting the Company’s strong earnings potential and cash flow generation. This approach enables the Company to retain sufficient capital to fund ongoing operations while investing in long-term value-accretive growth.

The Company intends to pay a dividend in Q4 2023 for the first half of 2023, with the specific dividend amount to be determined by the Board. At the time of listing, the Company indicated an H1 2023 dividend of US$65 million, which equates to a dividend of AED0.032 per share to be paid in Q4 2023. A final dividend is anticipated to be paid in Q2 2024 for the second half of 2023. At the time of listing, the Company indicated an H2 2023 dividend of US$130 million.

Subsequently, the Company expects to progressively increase the 2023 annual dividend per share on a basis of at least 5 percent annual growth over the medium term, while regularly reviewing the policy in light of value-accretive growth opportunities. The Company intends to pay dividends twice each financial year, with the initial payment of the first-half results to be made in the fourth quarter of that year, and the second payment following the second-half results to be made in the second quarter of the following calendar year.