Annual Report 2023
TORM PLC
Office 105, 20 St Dunstan’s Hill
London, EC3R 8HL, United Kingdom
COMPANY: 09818726
Contents
Strategic Report
At a Glance
TORM at a Glance
Letter from the Chairman and the CEO
2023 in Review
Business Model and Strategic Choices
The Value Chain in Oil Transportation
Strategic Framework and Highlights
The Reference Company in Transportation
Leading Product Tanker Owner
Vessel Flexibility
Positioned to Capitalize on a Strong Market
Greener Future with Zero Emissions
2030 Energy Transition Plan
Path Towards Zero Emissions in 2050
Superior Operating Platform
Utilizing the Integrated One TORM Platform
Our Responsibility
Responsibility Report
TORM’s ESG Targets
ESG Reporting in 2023
Stakeholder Engagement and Materiality
Environment
Social
Governance
ESG Data and Accounting Policies
Review and Risk
Market Review
Market Drivers and Outlook
Financial Outlook and Coverage 2024
TORM Fleet Development
Financial Review 2023
Risk Management
Climate-Related Risk Analysis and TCFD
TORM ANNUAL REPORT 2023
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Governance
Governance Introduction
Governance at TORM
Chairman’s Introduction
Governance Structure
TORM’s Governance Structure
Board of Directors
Board and Committee Meeting Attendance
Leadership, Governance, and Engagement
Board Activities 2023
Committee Reports
Audit Committee Report
Risk Committee Report
Nomination Committee Report
Remuneration Committee Report
Other
Investor Information
Engagement and Decision-Making
Directors’ Report
Statement of Directors’ Responsibilities
Safe Harbor Statement
Financial Statements
Consolidated Financial Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Parent Company Financial Statements
Management Review for TORM plc
Income Statement
Statement of Comprehensive Income
Company Balance Sheet
Company Statement of Changes in Equity
Cash Flow Statement
Notes to Parent Company Financial Statements
Other
Independent Auditor’s Report
TORM Fleet Overview
Glossary and Alternative Performance Measures
144
144
145
146
148
149
198
199
199
200
201
202
203
210
216
219
90
92
95
96
97
98
99
100
106
108
111
131
134
137
140
142
TORM
Strategy
Responsibility
Report
Corporate
Governance
Financial
Statements
10 24 90 144
CONTENTS
2
Key Figures
TCE Earnings (USD/Day)
EBITDA (USDm)
Adjusted ROIC (%)
Dividend/Share (USD)
2023
2022
2021
2020
2019
2023
2022
2021
2020
2019
Income statement (USDm)
Revenue
Time charter equivalent earnings (TCE) ¹⁾ ⁵⁾
Gross profit ¹⁾
EBITDA ¹⁾
Adjusted EBITDA ¹⁾
Operating profit (EBIT)
Financial items
Profit/(loss) before tax
Net profit/(loss) for the year
Net profit/(loss) ex. non-recurrent items¹⁾
Balance sheet and cash flow (USDm)
Non-current assets
Total assets
Equity
1,520
1,443
1,084
982
874
848
846
699
-47
652
648
596
782
743
744
601
-45
557
563
548
620
379
188
137
137
1
-42
-41
-42
-36
747
520
341
272
269
139
-49
90
88
122
693
425
252
202
202
206
-39
167
166
51
Key financial figures ¹⁾
Gross margins:
Gross profit
EBITDA
Adjusted EBITDA
Operating profit (EBIT)
Return on Equity (RoE)
Return on Invested Capital (RoIC)
Adjusted RoIC
Equity ratio
TCE per day (USD) ⁵⁾
OPEX per day (USD) ⁵⁾
Loan-to-value (LTV) ratio ⁵⁾
2,179
1,874
1,968
1,755
1,788
2,870 2,614 2,331
1,999 2,004
1,666
1,504
1,052
1,017
1,008
Share-related key figures ¹⁾
Basic earnings/(loss) per share (USD)
Total liabilities
Invested capital ¹⁾
Net interest-bearing debt ¹⁾
Net Asset Value (NAV) excl. NCI ²⁾
Cash and cash equivalents, incl. restricted cash
Investment in tangible fixed assets
Free cash flow
296
608
435
324
121
172
371
513
-243
136
173
116
72
386
-152
1,204
1,111
1,279
981
996
Diluted earnings/(loss) per share (USD)
2,425 2,142
2,011
1,720
1,786
Declared dividend per share Q1-Q3 2023 (USD)
773
650
972
713
786
Declared dividend Q1-Q3 2023 (USDm)
370.9
378.7
2,858 2,330
1,047
902
1,016
Proposed dividend per share Q4 2023 (USD)
57.5 % 54.2 % 30.4 % 45.6 % 36.4 %
55.8 %
55.7 %
45.9 %
51.5 %
51.5 %
41.7 %
40.9 % 44.0 %
30.4 % 29.2 %
0.01 %
27.6 %
28.1 %
0.2 %
22.1 % 36.4 %
22.1 % 36.0 %
29.1 %
29.1 %
0.2 %
-4.1 %
18.6 % 29.7 %
8.7 %
7.8 %
9.3 %
17.9 %
12.6 %
5.2 %
58.0 % 57.5 %
45.1 % 50.9 % 50.3 %
37,124 34,154 13,703 19,800 16,526
7,069
6,825
6,633
6,398
6,371
27.6 % 24.8 %
51.2 % 50.8 %
46.1 %
7.75
7.48
4.42
6.92
6.80
4.63
1.36
126.3
7.01
33.3
—
—
2.04
28.5
204.2
198.4
30.4
85.7
83.6
29.1
81.8
81.3
-0.54
-0.54
—
—
—
—
—
13.0
51.7
8.0
80.7
78.1
1.19
1.19
0.85
63.2
—
—
0.95
12.1
45.0
7.1
74.4
74.3
2.24
2.24
0.10
7.4
—
—
—
13.6
74.5
10.8
74.4
74.0
Proposed dividend per share Q4 2023 (USDm)
Dividend paid per share (USD)
Net Asset Value per share (NAV/share) ²⁾
Share price in DKK ³⁾
Share price in USD ³⁾
Number of shares (m) ³⁾ ⁴⁾
Number of shares, weighted average (m) ⁴⁾
⁴⁾ Excluding treasury shares.
⁵⁾ For Tanker segment
¹⁾ For a definition of the calculated key figures (the APMs), please refer to the glossary on pages 219 - 225
²⁾ Based on broker valuations as of 31 December 2023, excluding charter commitments.
³⁾ End of period.
TORM ANNUAL REPORT 2023
KEY FIGURES
3
37,12434,15413,70319,80016,52620232022202120202019010,00020,00030,00040,00050,0008487431372722022023202220212020201902004006008001,00027.628.10.29.35.2202320222021202020190102030405.784.630.000.850.102023202220212020201902468
21
10
59
As of 07 March 2024, including acquired vessels not yet delivered.
We all have an obligation to do our utmost to reduce CO2
emissions. TORM is pushing fast forward in our environmental
efforts and will reduce our carbon intensity by 40% compared
to the IMO baseline by 2025 – ahead of IMO’s 2030 target.
9
OFFICES
~3,300
SEAFARERS
~370
LAND-BASED
EMPLOYEES
TORM ANNUAL REPORT 2023
AT A GLANCE
4
Christopher
H. Boehringer
CHAIRMAN OF THE BOARD
"We strengthened our position in the
product tanker market while delivering
superior ROIC. We both expanded the
fleet and shared a large part of our
earnings with our shareholders."
Jacob
Meldgaard
CEO / EXECUTIVE DIRECTOR
"In 2023, the One TORM platform
pushed us to stay focused on safety
and optimize daily operations while
also ensuring a continuous
improvement in our emissions
intensity. As a result, we delivered
superior earnings compared to peers,
while already being very close to
delivering on our 2025 emission
reduction target."
TORM ANNUAL REPORT 2023
AT A GLANCE
5
Letter from the Chairman and the CEO
TORM achieved record earnings in 2023 and returned substantial distributions to
shareholders. Utilizing the strong market, we expanded our fleet, increasing our share
of long-haul vessels. We remain committed to delivering superior returns and reducing
carbon intensity.
Supportive Market Developments
The product tanker market remained strong but volatile in
Fleet Expansion and Optimization
Pursuing selective fleet replenishment and growth is vital to
2023 with average TCE rates increasing from USD 34,154 /
our strategy, and we were active by selling 11 and taking
day in 2022 to USD 37,124 / day in 2023. EU imports of oil
over 23 vessels since the start of 2023, bringing the total
products have changed from previously short haul to
fleet up to 90 vessels on a fully delivered basis.
predominantly long haul since late 2022. Limited product
tanker shipyard capacity combined with continued aging of
We took advantage of a strong market for second-hand
the fleet means that both supply and demand are expected
product tankers to divest our oldest vessels and acquire
to remain supportive of product tanker freight rates.
newer eco vessels. This has improved the environmental
However, the geopolitical landscape is becoming more
profile of our total fleet. Since the beginning of 2023, we
tense, and we have thus increased our monitoring and
increased our long-haul fleet significantly by acquiring nine
analysis of the geopolitical developments.
LR2 and seven LR1 vessels. We see attractive returns in this
One TORM Platform
In 2023, we again witnessed the strength of our One TORM
platform, which integrates commercial and technical
vessel class over coming years due to changing trading
patterns, not least caused by the change in the global
refinery landscape.
management in-house. We have benefited from having a
In 2023, we also entered into a collaboration with Seabulk
globally available fleet with high operational standards,
to participate in the Tanker Security Program (TSP) led by
enabling us to take advantage of the most attractive
the U.S. Maritime Administration (MARAD), involving three
regional freight markets throughout the year. The One
MR vessels that have been reflagged to U.S. flag in late
TORM platform also allowed us to position our vessels in
2023. We believe this cooperation will be value-enhancing
the right basins thanks to our proprietary AI/algorithms and
for all parties.
skilled employees.
We firmly believe that the integrated One TORM platform is
Strong Financial Performance
High freight rates and earnings have enabled us to declare
what enables us to operate our vessels optimally, and
and propose dividends of USD 497m in 2023 based on the
consistently obtain a superior return on invested capital
distribution policy implemented in 2022 by which all excess
compared to most peers in the product tanker industry. In
cash is shared with investors on a quarterly basis. The
2023, TORM delivered an adjusted Return on Invested
distribution in 2023 will be equivalent to 77% of net profit
Capital (ROIC) of 27.6%.
and to 19% of the market cap at the end of 2023. This is a
result that all employees can be proud of.
27.6%
Adjusted Return on Invested Capital
(ROIC)
Green Transition Progress
Heading a leading product tanker company, TORM’s Board
of Directors and the Management take great interest in
future prospects and the sustainability of the oil and
transportation industries. We are deeply engaged in
decarbonization challenges, including the availability of
green fuels and the transition to zero-emission vessels. Not
least in the role that TORM can and will play in this context.
We believe that the world will be dependent on oil for the
next couple of decades at least, and we will support the
industry in the transition towards zero-emission fuels and
vessels.
In 2023, we achieved a 39.6% reduction in carbon intensity
compared to 2008, and we are thus close to our 2025
target of a 40% reduction. However, our work does not stop
here. We are prepared to raise the bar and will continue our
quest to deliver superior returns on invested capital while
embracing the industry’s decarbonization challenges.
Christopher H. Boehringer,
Jacob Meldgaard
Chairman of the Board of Directors Executive Director
TORM ANNUAL REPORT 2023
AT A GLANCE
6
2023 in Review
FIRST QUARTER
PAGE 70
MARCH
PAGE 70
AUGUST
Seven LR1 Vessels Join the
Fleet
To take advantage of the strong product
Fleet Grows Again with
Three MRs
tanker market, TORM signed a deal to
Agreement to buy three 2013-built MR
add seven LR1 vessels built in 2011-2013
eco product tanker in a partly share-
to the fleet.
based transaction.
TORM Tanker Corporation
is Created
TORM enters into an agreement with
Seabulk to offer cargo shipping to the US
government on newly US-flagged
vessels, providing access to an exclusive
market and enhancing our fleet flexibility.
DURING THE YEAR
PAGE 37
FULL YEAR
PAGE 64
Blowing Bubbles
TORM tested a new system using air bubbles to reduce
energy consumption, as part of our dedication to test and
implement new technologies and achieve better
efficiency.
TORM ANNUAL REPORT 2023
Strong Rate Environment
2023 was characterized by a strong rate environment due
to increased long-haul trade.
AT A GLANCE
7
2023 in Review
AUGUST
PAGE 15
NOVEMBER
PAGE 70
DECEMBER
PAGE 46
DECEMBER
PAGE 34
Enhancing Fleet Flexibility
Growth Spurt
Fighting Corruption
Ready for EU ETS
By January 2024, shipping became
subject to the EU Emissions Trading
TORM acquired eight LR2 vessels and
TORM signed the UN Global Compact's
System (EU ETS), a pricing of CO2
To increase the flexibility of our fleet, we
four MR vessels in two partly share-
Anti-Corruption Call-to-Action
emissions, which TORM strongly
upgraded a number of our vessels to
based transactions thereby adding new
presented at the 10th session of the
supports. In December, we commenced
carry new fuels such as methanol.
investors to the TORM share.
Conference of the States Parties.
buying EU ETS Allowances (EUAs).
DURING THE YEAR
PAGE 72
FULL YEAR
PAGE 38
Refinancing
TORM completed debt refinance of USD 528m extending
maturities to 2028 and 2029 and further financed
vessels for USD 288.4m.
Seafarer Safety at a High
TORM's continued efforts to improve safety for our
seafarers resulted in a lost time accident frequency of
just 0.32.
TORM ANNUAL REPORT 2023
AT A GLANCE
8
The Value Chain in Oil Transportation
The global oil industry covers a range of activities and processes that contribute to the
transformation of primary petroleum resources into usable end products for industrial
and private customers.
The value chain of the global oil industry begins with the
In addition to clean products, TORM uses some of our
The transportation patterns of both refined and unrefined
identification and subsequent exploration of productive
vessels for the transportation of residual fuels from the
products are subject to constant change. However, the
petroleum fields. The unrefined crude oil is transported
refineries as well as crude oil directly from the production
different products may be affected differently. As an
from the production area to refinery facilities by crude oil
field to the refinery. These fuel types are commonly referred
example, shutdowns of refineries in oil-importing regions
tankers, pipelines, roads, and rail.
to as dirty petroleum products. Extensive cleaning of the
mean that these regions will require less transportation of
vessel’s cargo tanks is required before a vessel can
unrefined oil, while it, at the same time, will require more
TORM is primarily involved in the transportation of refined
transport clean products following the transportation of
transportation of refined oil.
oil products from the refineries to the onshore distributors
dirty cargo. In 2023, 97.7% of TORM’s turnover was
who transport refined oil products to the end users. Refined
generated from the transportation of clean products,
Hence, short- and long-term changes will impact the value
oil products (or clean products) are mainly used in the road
whereof 6.1%-points were non-fossil liquids such as
chain of the global oil industry, and vessel operators should
transportation sector (gasoline, diesel), in the aviation
Vegetable oil, Ethanol, Palm oil and Biofuels.
be ready to adapt to the changes.
sector (jet fuel), and as a feedstock to the petrochemical
industry (naphtha).
Value Chain in Oil Transportation
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
9
Strategic Highlights
Leading Product
Tanker Owner
90
Vessels in all major product
tanker vessel classes*
Including acquired vessels as of 07 March 2024
27.6%
Adjusted RoIC
27.6%
Net LTV
USDm
3,495
Vessels values (89 vessels)
Including acquired and excluding sold - not delivered -
vessels as of 31 December 2023
* Corresponding number per end 2023 was 89 vessels
Responsibility Progress
39.6%
AER reduction compared
to IMO baseline (2008)
0.32
Accidents per one million
exposure hours LTAF
(Lost Time Accidents Frequency)
20%
Women in leadership positions
ZERO
Carbon shipping in 2050
Superior Operating
Platform
USDm
1,084
TCE Earnings
USDm
648
Net profit
USD
37,124
TCE/day
Across all vessel classes
USDm
497
Dividends declared and proposed for 2023
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
10
Strategic Framework
OUR
VISION
OUR STRATEGIC
OUR WAY OF
CHOICES
WORKING
The Reference Company in the
Leading Product Tanker Owner
Superior Operating Platform
Transportation Industry
> Financial flexibility and fleet optimization
> Commercial management
Our dedicated team strives to be the reference
> Active management and optionality
> Optimal vessel positioning
company, servicing our customers via our
> Integrated operations
> Safe technical management
integrated business model – safely, reliably, and
environmentally responsible.
Green Future with Zero Emissions
operational performance
> Ambitious and ongoing energy optimization
> Integrated decarbonization efforts
> An integrated digital foundation leveraging
> Zero CO2 emissions by 2050
Pages 12-21
Pages 12-19
Pages 20-21
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
11
The Reference Company in
the Transportation Industry
TORM continuously works to be the reference company in the transportation industry.
This supports us in creating optionality to maximize earnings and minimize risk as well
as stay at the forefront when it comes to emission reductions.
It is our vision at TORM to be the reference company in the
Our unique integrated One TORM platform is at the core of
transportation industry. We use a disciplined approach to
how we work together and how we do business, and it will
develop and execute on our strategic direction and to help
support us in reaching our long term goals. The One TORM
achieve our visionary goal.
platform has consistently shown its value in the market and
ensured that we provide significant value to our customers
We have made our key strategic decisions based on our
and shareholders.
position as the leading product tanker owner in the industry
while striving towards a green future with zero emissions.
One concrete example of the value of our One TORM
We recognize the challenges of operating in an ever
continuously outperform the industry by ensuring that our
changing world. For this reason, TORM has built in a level of
vessels are optimally positioned around the world. Another
optionality in our strategic choices. By combining our
example is how our One TORM platform has enabled us to
platform is our vessel positioning model that enables us to
structured approach with strategic optionality, we ensure
that we have the flexibility to engage in interesting new
opportunities when they arise. One example of how TORM
has benefited from this optionality has been our ability to
engage in methanol trades with our MR vessels. Another
example is our active management exposure through
freight-forwarding agreements (FFAs).
deliver tangible and innovative energy efficiency initiatives
across our fleet to reduce CO2 emissions. We aim to reduce
emissions to a level where we can reach our ambitious
2030 CO2 intensity reduction target through a range of for
us known technological solutions.
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
12
Leading Product Tanker Owner
TORM is an internationally leading product tanker company. One of our core
competences is to actively manage market exposure.
LEADING PRODUCT TANKER OWNER
GREENER FUTURE WITH ZERO EMISSIONS
SUPERIOR OPERATING PLATFORM
Active Management of Market Exposure
We primarily employ our fleet of 90 vessels in the spot
The benefit of FFAs compared to TC contracts is that it is
Throughout 2023, we have utilized our position at TORM to
easier to adjust the length and volume of FFAs, and there is
benefit from improving market conditions. In 2023, about
market. However, when freight rates are attractive, we use
flexibility to end the contract early. TORM also keeps
90% of our coverage was through FFAs, as we chose to
medium- and long-term contracts to lock in rates and
control of the vessel. On the other hand, TC contracts
increase FFA coverage as a result of our increased scale in
create more future cash flow certainty. We use a
potentially have longer maturity and better pricing. Each
the LR1 vessel class following the recent vessel acquisitions
combination of three types of contracts:
element is only initiated when levels are assessed to be
during 2023.
•
Time charter (TC) contracts are contracts where a
attractive, and timing is key when choosing which option to
specific vessel is chartered out to a customer for a
pursue.
longer period.
Read more on the operational leverage of TORM’s
spot market exposure in the Financial Outlook on
• Contracts of affreightment (CoA) are contracts
Through a combination of the coverage options and active
page 68
involving several consecutive cargos with a customer at
fleet management, TORM aims to capitalize from
agreed freight rates.
movements in freight rates, and to have higher market
•
Forward freight agreements (FFA) are financial
exposure when freight rates are high and lower market
instruments hedging the forward price for freight for a
exposure when freight rates are low.
defined period.
Typical Contract Lengths
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
13
Leading Product Tanker Owner
LEADING PRODUCT TANKER OWNER
GREENER FUTURE WITH ZERO EMISSIONS
SUPERIOR OPERATING PLATFORM
Fleet Optimization
At TORM, we seek to selectively grow our fleet and to serve
as a consolidator in the product tanker segment if the right
tanker market is accessible for our older vessels compared
to similarly aged vessels for our peers.
opportunities arise. We continuously assess opportunities
At TORM, we also seek to improve the trading optionality of
to optimize our fleet by acquiring attractive high-
the fleet through enhanced cargo optionality. TORM is
specification product tankers originally built at high quality
investigating opportunities to further diversify the cargo
shipyards.
transported by our fleet and carry more chemicals. We
currently have 17 vessels certified to carry chemicals
During 2023 and Q1 2024, TORM decided to sell one older
whereof seven are also capable of carrying methanol, and
LR2 vessel, five older LR1 vessels, and five older MR
we are in the process of obtaining the required certification
vessels. In the same period, TORM purchased more modern
for additional nine vessels to carry chemicals bringing the
tonnage in the form of nine LR2 vessels, seven LR1 vessels,
total capacity for chemicals up to 26 vessels.
and seven MR vessels delivered in 2023, Q1 2024 and April
2024. As such, TORM has increased the DWT ratio of the
LR vessels classes in our fleet from ~40% to ~50%.
Fleet Development (based on deliveries)
23
-11
An important aspect of having an optimal fleet is about
maximizing tradability and flexibility to deploy vessels.
Vessels
Optionality ensures that TORM can capitalize on attractive
business opportunities and move swiftly between the most
attractive basins in a constantly changing market.
One of the main drivers for optionality is our One TORM
platform, which has proven to be key to our strong
operational performance and competitive advantage. The
One TORM platform defines how we work together in
operations and technical management, and how we
maintain and operate our fleet. Our high operational
standards allow us the optionality to keep vessels in the
fleet that are older than 15 years and continue to trade
them to the same customer base as vessels that are
younger if this is deemed more attractive than selling the
vessels. This means that a larger share of the product
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
14
7890 LR2LR1MRTotal fleet, end 2022PurchasesSalesTotal fleet, end April 2024 (expected)0102030405060708090100 Vessel Flexibility
TORM is present in all large vessel classes in the product tanker market, which
provides synergies for an enhanced offering to our customers. We continue to focus
on vessel flexibility to increase the attractiveness of our fleet.
LEADING PRODUCT TANKER OWNER
GREENER FUTURE WITH ZERO EMISSIONS
SUPERIOR OPERATING PLATFORM
21
Our LR2 vessels have the flexibility to enter into the Afra/
crude markets when we see attractive opportunities in these
markets. With a large presence in the LR2 vessel class, we
have the optionality to switch between Afra and crude trades
without losing scale within each market.
10
59
Finally, some of our MR vessels can enter into
chemical trades, which have been an increased focus
in recent years. TORM is actively investigating
opportunities to make a larger part of our MR fleet fit
to carry chemicals including methanol.
Our LR1 vessels have the possibility to shift between trades
and can enter both the LR2 and MR trades. The LR1
vessels will for example enter MR trades for export out of
the US Gulf and LR2 trades such as Arabian Gulf to Japan.
The numbers are as of 07 March 2024, including acquired vessels not yet delivered.
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
15
Positioned to Capitalize on a
Strong Market
As the product tanker market has improved during 2023, TORM has generated strong
financial results over the year.
LEADING PRODUCT TANKER OWNER
GREENER FUTURE WITH ZERO EMISSIONS
SUPERIOR OPERATING PLATFORM
Strong Markets Provide Significant Cashflow
Generation
TCE/DAY, USD
2023
2024
During 2023 and Q1 2024, TORM has increased
operational leverage through the delivery of 23 acquired
vessels offset by the sale of 11 vessels at attractive prices.
TORM has purposely increased capacity to benefit from an
expected continued strong market. We are mindful of the
peaks and volatility that we see in the market and are
continuously assessing if and when it would be desirable to
sell or buy additional vessels.
Distribution Policy
In 2023, TORM has continued to execute on the policy
introduced in 2022 to distribute excess liquidity above a
threshold level based on a mechanical calculation.
Including the proposed dividend of USD 126m related to the
fourth quarter, the total dividend declared for 2023 will be
USD 497m.
As of 07 March 2024, TORM amended the Distribution
Policy slightly. The distribution will continue to be up to the
Board of Directors’ discretion considering TORM’s capital
structure, strategic opportunities, future obligations, and
market trends. The overall principle will be maintained to
distribute, on a quarterly basis, excess liquidity above a
threshold liquidity level per vessel based the on the number
of owned and leased vessels in TORM’s fleet as of the
balance sheet day. The Distribution Policy will no longer
have the earmarked proceeds mechanism.
TORM ANNUAL REPORT 2023
BUSINESS MODEL AND STRATEGIC CHOICES
16
81.8%
fixed
24.7%
fixed
13,70334,15441,71736,36033,01037,98545,03644,089FY 2021FY 2022Q1Q2Q3Q4Q1FY—10,00020,00030,00040,00050,000 LEADING PRODUCT TANKER OWNER
GREENER FUTURE WITH ZERO EMISSIONS
SUPERIOR OPERATING PLATFORM
Greener Future With Zero
Emissions
We strive to utilize our market position to lead the product tanker industry into a more
environmentally friendly future and to develop innovative solutions for generations to
come.
It is a priority for TORM to combat accelerating global
climate change and to minimize pollution of the seas and
the atmosphere. To contribute in these efforts, TORM has a
strong focus on reducing CO2 emissions. We do this with a
structured approach and a commitment to optimizing
2030 and 2050 Energy Transition
To ensure that we will reach our ambitious 2030 CO2
intensity reduction target and our 2050 ambition, we have
developed an energy transition plan detailing several
scenarios and assessing the likelihood of reaching them.
performance in the short, medium, and long terms.
The 2030 transition plan is integrated into the annual cycle
and our budget process, ensuring that the Senior
We believe that both the decarbonization and the ESG
Management Team and the Board of Directors focus on the
agendas will be decisive factors for the future of the
our progress in improving at the needed pace to reach our
product tanker business. We also acknowledge that oil and
targets. The energy transition plan towards 2030 is based
refined oil products are essential resources for societies,
on concrete initiatives and known technologies.The path
and therefore, we want to distribute refined oil products as
CO2-efficiently as possible with accessible means.
post-2030 towards 2050 is based to a greater extent on
overarching elements that must be in place to successfully
reach our 2050 ambition.
Decarbonizing Shipping
2030 Target and 2050 Ambition
To quantify our green ambitions, we aim to accelerate our
climate target and deliver at least a 40% CO2 intensity
reduction by 2025 compared to 2008 using IMO’s defined
methodology. We also aim for a 45% CO2 intensity
reduction by 2030. Both targets are well ahead of IMO's
industry wide target of 40% CO2 intensity reduction by
2030. At the end of 2023, TORM has reduced its CO2
intensity by 39.6%. For the long term, TORM has an
ambition to have zero CO2 emissions from operating our
fleet in 2050. To support these goals, TORM’s
management and organization have specific performance
measures on achieving these targets.
TORM ANNUAL REPORT 2023
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17
2030 Energy Transition Plan
TORM has a formalized approach to reaching our 2025 and 2030 carbon intensity
targets.
As part of our carbon reduction efforts at TORM, we have
As carbon reduction is not a static process, additional
developed an energy transition plan towards 2030 to
energy efficiency initiatives are also evaluated on a
continuously assess the required effort and likelihood of
reaching our ambitious 2030 CO2 intensity reduction
target. We are working with scenarios related to vessel
speed and fleet size to stress test the robustness of our
transition plan towards our 2030 target. It is important for
TORM to not just set an ambitious target for the future, but
continuous basis throughout the year. All approved energy
efficiency initiatives have had a positive business case both
in terms of expected financial performance and in terms of
further reducing our global carbon footprint. TORM remains
confident that we will reach our 2030 CO2 intensity
reduction target based on our current progress and the
to help lower global carbon emissions now and improve the
upcoming funded initiatives that we have identified. As
sustainability of the TORM fleet. In our energy transition
stated above, all identified initiatives are known to us
technologies, meaning that implementation risk is
significantly reduced.
Read more about TORM's environmental efforts on
pages 32 to 37
plan, we have only included known technologies in the
assessment of reaching our 2030 CO2 intensity reduction
target. This means that there is a potential upside if new
technologies continue to be developed and show
commercial viability.
To ensure that the transition plan is well-anchored
throughout the organization, the discussion and approval of
energy efficiency initiatives to further reduce our carbon
emissions have also become an integral part of our yearly
budgeting process. This approach ensures adequate
funding for all relevant initiatives. This is ultimately
approved by our Board of Directors to ensure full alignment
between the Board of Directors, our shareholders, and the
TORM organization.
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Carbon Intensity Reduction Progress
% reduction in AER compared to the IMO’s 2008 base year using the CII
reference line using CO2 g/dwt x nm.
Examples of known technologies paving the way for TORM
to meet the 2030 CO2 intensity reduction target of 45%:
Hull coating on page 35
Variable Frequency Drives on page 36
Ultrasound on page 36
TORM ANNUAL REPORT 2023
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37.637.139.640.045.02021202220232025 Climate Target2030 Climate Target3035404550 Path Towards Zero Emissions in 2050
We aim to have zero CO2 emissions from operating our fleet by 2050. To achieve this,
we must overcome infrastructure gaps and ensure global availability of green fuels.
Today, we actively collaborate on sustainable solutions, positioning for future zero-
emission vessels.
TORM has set an ambitious CO2 reduction ambition for
2050 with zero CO2 emissions from operating our fleet. It
will be challenging to achieve but we will work towards this
One main challenge in the tanker industry for reaching zero
transportation in tankers is often done through smaller
emissions is establishing the required global infrastructure
ports and with no established trading routes or trading
to ensure sufficient global availability of green fuels for
patterns. Our ability to reach zero carbon emissions will be
with a structured approach, dedication, ingenuity, and
tanker vessels. In other shipping segments, this is not as big
contingent on required infrastructure and global availability
industry wide collaboration.
of a hurdle as the transport of cargoes is done through
of green fuels in smaller ports.
established trading routes and major ports whereas
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Global industry collaboration is needed in order to deliver on
the infrastructure and availability for green fuels as well as
to overcome technological challenges. TORM actively
participates in several coalitions and industry groups to
push for sustainable solutions in the tanker industry to curb
these challenges.
Once sustainable industry wide solutions have been
developed, we are ready for zero emission carbon vessels to
take TORM to zero emissions by 2050.
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LEADING PRODUCT TANKER OWNER
GREENER FUTURE WITH ZERO EMISSIONS
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Superior Operating Platform
TORM’s fleet is effectively managed on the in-house integrated operating platform
known as One TORM. Operations are conducted jointly for the entire fleet to reap
synergies across vessel classes.
One main purpose of our One TORM platform is to ensure
In line with our strategic focus on safety, the One TORM
that our fleet has the highest possible tradability. We
platform features the One TORM Safety Culture program.
believe that we do this best with integrated commercial and
The purpose of this program is to continuously strengthen
technical management, where people, vessels, and systems
TORM’s safety culture beyond mere compliance, and it
work together focusing on all possible synergies.
reflects the belief that profitability and safety need to go
The integrated nature of TORM’s operating platform
hand in hand.
provides transparency and clear alignment of management
In short, on the One TORM platform, the commercial,
and shareholder interests, which mitigates the potential for
technical, sale and purchase, and support divisions all work
actual or perceived conflicts of interest with related parties.
towards common goals in a network-based organization
We also believe that our integrated business model creates
decision-making. The One TORM platform will continue to
a unique customer offering as it provides our customers
optimize and improve while striving for best-in-class return
with better accountability and insights into safety and
on invested capital for the benefit of our shareholders.
with easy access to stakeholders supporting efficient
vessel performance. By across-the-fleet monitoring and
information sharing, we constantly look to reduce the
resources we spend, for the benefit of the environment and
to lower costs. If a vessel does not operate optimally, we
want to know sooner rather than later.
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20
Utilizing the Integrated One TORM Platform
At TORM, the integrated One TORM platform is fundamental to how we operate, creating a unified environment where shared values,
a robust safety culture, and collective goals guide all employees.
LEADING PRODUCT TANKER OWNER
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Way of Working
Our operational practices are deeply rooted in the One
Drydock Case Study
Our approach to dry-docking exemplifies the One TORM
This committee meets biweekly to discuss dry-docking
options and strategies, adopting a holistic approach that
TORM platform, emphasizing shared core values, a
platform's effectiveness. When scheduling dry-docks, we
considers the entire fleet rather than focusing on individual
commitment to safety, and aligned priorities and targets.
aim to identify the optimal timing based on current
vessels.
This integration is bolstered by a sophisticated data
commercial opportunities, technical considerations, and
platform that prioritizes collaboration and transparency,
crewing logistics.
focusing on data quality and consistency in our processes
This collaborative effort enables us to strategically plan the
positioning of vessels for dry-docking, minimizing
and deliverables. This ensures our customers a clear and
To facilitate this, we have established a dry-docking
unnecessary ballast journeys and thus reducing costs.
consistent understanding of what to expect from us. We
coordination working group comprised by representatives
Additionally, our ability to adjust dry-docking schedules
believe the integrated One TORM platform enables better
from all relevant internal stakeholders, including Chartering,
offers a competitive edge, allowing us to respond with
decision-making, leading to improved results for our
Vessel Management, and Technical Projects teams.
flexibility to delays and seize attractive commercial
shareholders and other key stakeholders, as decisions are
always made with TORM’s best interest in mind.
opportunities for specific vessels.
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22
TORM's Responsibility Report
22-62
25
30
31
32
38
45
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OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
EU Taxonomy
PAGE 26
Scope 1, 2, 3
PAGE 27
TCFD Guidelines
PAGE 29
SASB Tables
PAGE 48
UN SDGs
PAGE 24
Diversity Data
PAGE 42
UN Global Compact
PAGE 47
Non-Financial and
Sustainability Information
Statement
PAGE 57
ESG Accounting Policies
PAGE 58
TORM ANNUAL REPORT 2023
23
Responsibility Report
At TORM, we believe that responsible and sustainable business practices create value
for our customers and stakeholders as well as our employees, communities, and the
environment.
Decision-making at TORM is based on research, knowledge,
Sustainability is integrated into our work, in part by
and data. We pursue innovation and challenge ourselves in
implementing frameworks from respected guideline to
order to continue as industry leaders. A major part of this
operate in a responsible manner. These include SASB
pursuit happens in collaboration with peers and other
(Sustainability Accounting Standards Board) reporting,
industry stakeholders. As we grow and refine our business,
TCFD (Task Force on Financial Disclosures) reporting,
we recognize that transparency and accountability are key
Scope 1, 2, and 3 emissions reporting, and the EU
to remaining relevant and competitive in the eyes of
Taxonomy, to operate in a responsible manner. A
investors, customers, employees, financiers, and other key
materiality matrix guides the prioritization of our actions.
stakeholders.
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Governance Driving Sustainability
To empower the TORM organization to reduce emissions
and achieve our ambitious environmental goals, we
continue to focus on efforts in Environment, Social, and
Governance (ESG) categories. In 2023, we also continued
to expand our department of experts focusing on
accelerating our green efforts. In 2023, TORM further
created a new team dedicated to ESG reporting, which
operates as an integrated partner to all existing teams
This section (pages 22-62) of our Annual Report also
the UN Global Compact. This, together with the United
anchored in our Audit Committee, and our risk management
constitutes the Danish statutory reporting on corporate
Nations’ 17 Sustainability Goals (SDGs), is another way in
of ESG efforts is anchored in our Risk Committee.
social responsibility (CSR). Our business model, which is set
which we commit to an internationally recognized set of
out on page 9, forms an integral part of our statutory
principles on health, safety, labor rights, environment, and
As an additional governance measure, TORM has for
TORM was the first shipping company in Denmark to sign
across the organization. The reporting governance is
reporting.
anti-corruption. In our organization, we put special focus on
several years incorporated financial mechanisms to drive
SDG 4 Quality Education and SDG 13 Climate Action.
ESG efforts whereby the Senior Management and the rest
TORM continuously optimizes our business for the future to
ensure that we always make company-wide efforts to
deliver on our commitments and strategic choices.
See more about these efforts in the Environment
section on page 32 and the Social section on page
38
of the organization’s KPIs are directly linked to ESG targets
to ensure that TORM continues to prioritize sustainable
actions.
We will be subject to getting limited assurance for 2024
numbers and a higher level of assurance expected from
See more about TORM's gender diversity in
financial year 2028, with the benefit of improving data
management on page 43
transparency and ultimately increasing our focus on
sustainability in our business operations.
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TORM's ESG Targets
At TORM, we work as one team towards the same goals. The targets outlined below
have been selected in order to honor our commitments to investors, lenders,
customers, our employees, and other stakeholders.
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Our 2030 Carbon Intensity
Reduction Target
TORM continues to work towards the 2030
carbon intensity reduction target of 45%.
We are close to the accelerated 2025
target of a 40% reduction in carbon
intensity having reached a 39.6% reduction
at the end of 2023.
% reduction compared to the IMO’s 2008 base year
using the CII reference line using CO 2 g/dwt x nm.
Our 2030 Safety
Target
Safety is measured as a lost time accident
frequency (LTAF) per million exposure hours
for the operating fleet. In 2023, TORM’s
safety performance was 0.32, and our
target for 2030 is 0.30.
Our 2050 Climate Ambition
TORM is pursuing an ambitious climate
agenda whereby we will have zero CO2
emissions from operating our fleet by 2050.
Our 2030 Leadership
Diversity Target (%)
We believe that diverse teams led by
diverse leaders deliver better business
performance. Our goal is for at least 35%
of our leaders to be women by 2030.
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212035202220232030 target—102030405037.139.645.0202220232030 target010203040500.420.320.30202220232030 target0.000.100.200.300.400.50 ESG Reporting in 2023
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EU Taxonomy
The EU Taxonomy is a classification scheme established by
In screening the eligible activities for EU Taxonomy
alignment, we have concluded a non-alignment. The
EU Taxonomy Overview
the European Union aimed to provide transparency into a
primary reason being the current dedication of assets to the
company’s activities. It serves as a classification system
transportation of fossil fuels, which is explicitly deemed
that defines what constitutes an environmentally
non-aligned by the EU Taxonomy.
sustainable economic activity, according to the EU defined
criteria.
In 2023, TORM is reporting on the EU Taxonomy for the
three KPIs: Turnover (referred to as revenue), capital
The purpose is to assess whether or not the activity of a
expenditure (CAPEX), and operating expenditure (OPEX).
business is considered to substantially contribute to one of
the EU’s six environmental objectives. An activity is
considered eligible if the activity has the potential to
contribute.
See TORM's EU Taxonomy Tables on page 54
TORM's activities that relate to chartering, maintaining,
See TORM's EU Taxonomy Accounting Policy on
and operating vessels, including costs related to repairs and
page 59
maintenance, are covered by the EU Taxonomy category
'6.10 Sea and Coastal Freight Water Transport, Vessels for
Port Operations, and Auxiliary Activities' We therefore
assess TORM's activities to be eligible.
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ESG Reporting in 2023
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Continued Improvement of Scope 3
TORM's Scope 3
Scope 3 refers to emissions that are a consequence of
For example, efforts to reduce Scope 1 emissions on board
Going forward, we will use this data and our increased
our vessels, such as using less fuel to perform our routes,
understanding to adjust our ways of working to positively
will also positively impact our Scope 3 emissions as less
impact Scope 3 emissions.
TORM’s activities but occur from activities that are not
upstream fuel will be consumed.
owned or controlled/operated by TORM. We complete
The Scope 3 baseline is recalculated if there are significant
Scope 3 reporting in an effort to create data-based
In 2023, we have continued our focus on collecting data
changes to it based on our sales and purchases of vessels
awareness of our entire value chain enabling us to make
and refining our data collection methodology for our Scope
throughout the year.
decisions that reach beyond our own direct business.
3 reporting by increasing the ratio of primary data.
Scope 3: What Does It Consist Of?
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ESG Reporting in 2023
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OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Scope 1 to 3
Assessment of Relevant Categories for Scope 3
In 2022, the value chain was mapped and a screening of all
15 categories was performed based on five criteria,
according to which we considered the number of emissions,
the degree of influence we have, associated risks,
also the overall Scope 3 calculation where Category 2
amounts to 70% of the entire Scope emissions (compared
Total Greenhouse Gas (GHG) Emissions
The total Greenhouse Gas (GHG) emissions for 2023
to 32% in 2022).
Refined Data with New Emission Factors
With the aim of improving the data quality for TORM’s
increased due to vessel investments, with a resulting larger
fleet overall. At the same time, we achieved a continuous
reduction in the carbon intensity of our activities.
importance to our stakeholders, and if the activity is
Scope 3 spend-based data for 2023, the emission factors
TORM's AER (Annual Efficiency Ratio) decreased from 5.15
to 4.93, which reflects that the fleet operated more
efficiently in terms of lowering the CO2 footprint of cargo
transported per sailed nautical mile. By working together
cohesively as one unit, we are able to harness synergies
allowing us to optimize energy and fuel performance on
board vessels.
GHG Emissions in Recent Years
Thousands metric tons CO2
performed in-house or not.
This resulted in the following five categories:
• Category 1: Purchased goods and services
• Category 2: Capital goods – vessels and modifications
• Category 3: Upstream fuel and energy-related activities
• Category 6: Business travel
• Category 13: Downstream leased assets – T/C out > 3
months
A screening of the categories is conducted yearly, so far
with the result of the same categories in scope based on a
minimum threshold.
have been updated from WIOD (2009) emission factors
(EF) to Exiobase (2019). By using the updated emission
factors for spend data (secondary data), the total CO2
emissions were lowered by 12%.
Takeaways on Scope 1
TORM's Scope 1 CO2 emissions for 2023 have increased
compared to 2022 due to an increase in fleet size from 78
vessels to 82 vessels, excluding acquired vessels, that were
not yet delivered, and operating days increased from
29,610 to 30,605. In 2023, we increased our spot
employment and reduced our time charter out employment,
which caused a shift of emissions from Scope 3 to Scope 1.
Change in Share of Primary/Hybrid Data
TORM focuses on improving our data quality by pursuing
primary data. In 2023, the primary/hybrid data increased
Takeaways on Scope 2
The Scope 2 emissions mainly consist of electricity and are
at the same level as last year. From 2023, common areas
from 75% data to 92%. We collected more supplier specific
for the shared office space in Copenhagen have been
data from vendors, however, the main explanation behind
included, causing the shown increase.
the increase in this ratio stems from TORM’s ‘Category 2
Capital goods – vessels and modifications’.
The methodology used in this category for investment in
new vessels is the lightweight method for calculating the
CO2 footprint. During 2023, TORM invested in fleet
renewal and took delivery of 12 vessels. This not only
significantly impacted the ratio of primary/hybrid data but
Takeaways on Scope 3
The majority of TORM’s scope 3 CO2 footprint is derived
from Category 2, which mainly consists of investments in
vessels. TORM has a larger fleet in 2023 compared to
2022, which is reflected in the CO2 footprint.
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1,0810.51,2382,3201,3630.46081,9711,5580.59242,483202120222023Scope 1Scope 2Scope 3Total—1,0002,0003,000 ESG Reporting in 2023
Our Customers' Scope 3
In 2023, TORM has started to provide all customers with
automated CO2 reports for each voyage. In 2023,
emissions reports were shared on more than 500 voyages.
The emissions in these reports are within TORM’s Scope 1,
and for our customers, it constitutes part of their Scope 3
emissions. TORM provides this information to deliver on our
commitment to transparency to the participants in our
value chain and our clients, so they know the emissions in
their own value chain.
TCFD
In 2023, we revisited our climate-related scenario analysis
using the Task Force on Climate-related Financial
Disclosures (TCFD) guidelines to ensure that our analysis is
optimized for assessing transitional and physical risks and
opportunities, and how they might impact the resilience of
our company strategy.
We believe the TCFD framework provides insights to our
stakeholders and potential investors about how TORM is
prepared for the future. This also provides TORM with input
for focus areas to guide our strategy.
TORM’s TCFD Process
TORM continued with the three climate scenarios
developed in 2022 to assess risks and opportunities: Net
Zero 2050 (1.5°C), Delayed Transition (1.8°C), and Hot
House World (+3°C).
These scenarios are supplemented by data and insights
relevant to upstream and midstream oil and gas activities
and the transport of refined oil products.
TORM ANNUAL REPORT 2023
The Task Force on Climate Related Financial
Disclosures (TCFD) Framework
They also take into consideration TORM’s full value chain
including potential production of and demand for renewable
energy fuels and technologies.
The scenario analysis process involved senior
representatives from TORM’s organization and TORM’s
Risk Committee to fully analyze the consequences of the
risks and the opportunities ahead. The risks and
opportunities were assessed for financial materiality and
their potential impact on TORM’s business model and
strategy. We have identified four financially material
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climate-related risks. All are transitory and none are
physical. Risks are:
• Declining demand for oil products
• Higher cost of capital and reduced access
• Carbon price regulations
• Decarbonization of vessels
Three financial material climate-related opportunities were
identified. These are:
• Diversification into low-carbon fuels
• Market volatility due to extreme weather
• Higher utilization due to supply shortage
The findings from the scenario analysis were incorporated
into TORM’s corporate strategy process to improve its
resilience.
Further details are outlined in the risk section of
this report on pages 81 to 89.
Upcoming Reporting Preparations
In 2024, the focus is on the significant impact of the CSRD,
with new EU regulations mandating more comprehensive
reporting for TORM. We began our preparation in 2023 and
will feature a double materiality assessment in our annual
report for 2024 as a key component of our CSRD
compliance.
The double materiality assessment work in 2023 in
preparation for 2024 reporting has included inspiration
from GRI, TCFD, and the guidance from the CSRD and EU
Taxonomy. The stakeholder engagement has included a
larger deep dive compared to the stakeholder engagement
performed for the 2023 reporting. An ESG organizational
structure and reporting framework has been mapped and
agreed for the CSRD reporting framework. In 2024, TORM
will continue to work on the data quality for the KPIs.
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Stakeholder Engagement and
Materiality
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Stakeholder Engagement
Working in close collaboration with our customers and
stakeholders is an immense focus for TORM and is key to
delivering on our ambitious climate targets.
Throughout the year, specialists across TORM interact with
our stakeholders to ensure an open dialog. This includes our
ongoing dialog with financial institutions, customers,
investors, and others to ensure a high level of transparency
in our climate efforts, both ashore and at sea.
As part of our continued efforts to increase transparency in
our reporting, we included a materiality assessment in our
2021 and 2022 responsibility reporting. This assessment
has been reviewed and enhanced in 2023.
Materiality Assessment
TORM’s ESG materiality assessment is a process to identify
and prioritize the ESG issues which are most important and
have the most impact on TORM and our key stakeholders.
We have defined our key stakeholders as customers,
lenders, investors, regulators, employees, suppliers,
community, and environment.
Each score is evaluated relative to each other as all the
material topics are important to TORM and our key
stakeholders. The material topics and the materiality matrix
were approved by the the Senior Management.
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Stakeholder Engagement and
Materiality
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Environmental Efforts on page 32
Health and Safety on page 38
Security on page 40
People on page 41
Community on page 44
Legal Compliance on page 45
Human Rights and Business Ethics on page 46
Responsible Procurement on page 48
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Environment
Environmental Efforts
TORM believes in and supports the UN’s SDG 13 Climate Action as greenhouse gas
emissions constitute the largest environmental risk in the shipping industry.
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With ambitious climate goals, TORM is
committed to achieving significant reductions
in emissions by employing efforts in
operational behavior and collaboration as well
as technology development.
Industry Collaborations
To harness momentum and synergies, TORM continued to
We continued our participation in the Getting to Zero
Coalition, a collaboration between the Global Maritime
be an active contributor in several industry collaborations.
Forum and the World Economic Forum.
This involves active participation in Danish Shipping
through which TORM aims to impact the decision-making in
Our Decarbonization Journey
TORM is committed to people, including our employees and
IMO in relation to ongoing discussions on the
implementation of CO2-related regulations.
their communities, which makes it essential that we
commit to the environment for future generations. We work
During 2023, TORM has been involved in a Danish Shipping
relentlessly towards ambitious climate goals to reduce our
project, supported by a grant from The Danish Maritime
carbon footprint. With a fast forward approach, TORM aims
Fund, for the development of a life-cycle assessment tool
to reduce carbon intensity by 40% by 2025, instead of the
for older vessels. The ambition is to create a tool that
2030 goal put forth by the International Maritime
carriers such as TORM can use to assess whether it is most
Organization (IMO). The baseline for the target is in line with
beneficial to end-of-life an older vessel or extend the life of
the definition set forth by the IMO, which defines how this
the vessel through energy optimization like the ones used
should be measured and calculated.
by TORM.
Our decarbonization efforts in 2023 have enabled us to
Again in 2023, TORM supported and engaged in the Mærsk
reduce our carbon intensity, measured through the IMO
McKinney Møller Center for Zero Carbon Shipping as a
defined methodology using Annual Efficiency Ratio (AER),
Mission Ambassador to research ways to grow in a more
by 39.6%. This reduction is compared to the 2008 IMO
operationally, commercially, and sustainably viable way.
baseline. We are on track to achieve our goal of a 40%
reduction in carbon intensity by 2025.
In 2023, TORM was actively engaged in a project in this
collaboration, in which we gave input to the IMO on the
TORM prioritizes making reductions in our carbon footprint
upcoming revision on the CII regulation.
today, and not only in the long term. We want to ensure
that we are making strides in our progress to continuously
TORM also continued work in 2023 with the innovation
reduce emissions, while at the same time, we pursue
partnership ShippingLab, (a non-profit platform for
innovation by developing and testing new technologies.
maritime research), for development and innovation with
Reducing greenhouse gas emissions today provides TORM
30 partners from across the maritime industry.
with commercial benefits and synergies.
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Environment
Environmental Efforts
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Circular Process to Strengthen Environmental Efforts
Enhancing Operational Behavior and
Collaboration
Technical projects and innovation can only provide energy
efficiencies if the people operating the vessels on board and
managing operations from offices can perform their jobs in
the optimal way. For this reason, we focus heavily on
operational behavior of our teams in-office and at sea to
achieve the most impact possible in our energy efficiency
initiatives.
The graphic to the right illustrates our circular approach to
developing technologies, with human behavior at the core.
This refers to TORM's focus on how our teams operate and
utilize technologies, and how we leverage operational
insights when developing or optimizing technological
innovations.
At TORM, we ensure our people are up to date on training,
and we strive for all teams to know about new and
upcoming technologies along with the company’s
strategies for their utilization. Below are key aspects of how
we enhance operational behavior through the One TORM
platform, feedback, open communication, and specialized
systems.
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Environment
Environmental Efforts
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
When the activity has been analyzed, and the team has a
suggestion for how to alter operations, this is
European Union Emissions Trading System
The European Union Emissions Trading System (EU ETS) is
communicated to the crew initiating a collaboration. The
a key policy instrument for the EU in its efforts to combat
crews are the ones who must make the decisions on how to
climate change. The system is based on a "cap-and-trade"
One TORM Platform
TORM’s integrated operational platform One TORM builds
on the idea that we must all work towards the same goals in
a transparent and collaborative way, on all layers of the
organization. By working together cohesively as one unit,
we are able to harness synergies allowing us to optimize
energy and fuel performance on board vessels.
The TORM fleet is also effectively managed in-house as
part of the One TORM platform. This in-house cross-
functional approach allows us to reap synergies across
vessel classes. Daily engagement with the vessels
continues to create significant value to encourage and
support best practice behavior regarding energy
operate. At TORM, we have worked on optimizing the
feedback from office-based teams, so the onboard crews
receive information quickly, clearly, and know how to follow
up. We are working to further enhance this process with the
implementation of NEXUS.
Learn more about NEXUS on page 35.
In 2023, TORM's office-based decarbonization team
consumption. In addition, the efforts ensure that corrective
continued publishing monthly newsletters to the crews
actions can be taken swiftly, if needed. This is elaborated in
about fuel efficiency. These newsletters include reports on
the below section on feedback.
vessels doing well, with clear descriptions of their methods.
This provides guidance and inspiration for other vessel
Feedback for Improving Operations
At TORM, we have made it a priority to equip our crews with
crews.
support and feedback to achieve the best results when
When there are crew visits at a TORM office, the team
using innovative technologies. In 2023, TORM is seeing
there prioritizes meetings to foster relationships that will
great success with efforts in communication with positive
support the future work in reducing fuel consumption. The
collaborations between vessels and offices.
technical decarbonization teams based in offices also
prioritize vessel visits in their work. This is part of the One
To ensure key crews on board are aligned with our vision for
TORM platform vision, as meetings in-person help enhance
energy and fuel efficiency technologies, the annual junior
collaboration.
and senior officer seminars dedicate time to share, discuss,
and challenge upcoming technologies. To read about
training future leaders in our crews with regard to safety,
please visit the Safety section on page 38.
The office-based teams observe reports on energy
consumption on the vessels and note any outlier activity.
TORM ANNUAL REPORT 2023
Long-Term Decarbonization on page 17
principle, which means it sets an annual cap on the total
amount of CO2 that can be emitted by participating
industries.
For every ton of CO2 emitted, the reporting company will
have to surrender one EU ETS allowance (EUA). EAUs are
acquired at auctions held by authorities or traded. This
effectively sets a price on CO2 emissions. TORM and the
rest of the shipping industry is subject to this system from
01 January 2024 at a 40% level, which will gradually
increase and be fully phased in by 01 January 2026.
For voyages within the EU, 100% of the Scope 1 CO2
emissions are subject to the EU ETS. For voyages with one
leg outside of the EU, 50% of the Scope 1 CO2 emissions
are subject to the EU ETS.
TORM’s Approach to the EU ETS
In 2023, we established a cross organizational task force
involving our Technical, Chartering, Finance, and IT teams
to develop a methodology and system to automatically
estimate and collect the data which is also incorporated in
our decision base.
TORM welcomes the EU ETS implementation and its CO2
pricing. With our strong focus on fuel efficiency and
minimizing CO2 emissions, we believe the implementation
of EU ETS will give us a commercial advantage while
supporting the work towards a greener future.
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Environment
Environmental Efforts
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NEXUS
TORM initiated a complex IT development project called
Voyage Optimization
Another way to empower our crews is to provide an
Hull Coating
TORM continued our efforts to improve our vessel hulls to
NEXUS that covers all processes influencing fuel efficiency,
accurate weather forecast, as this is a key tool in the work
make them glide easier through the water, thereby requiring
not only vessel machinery performance but also voyage
of the vessel Bridge Team. With an algorithm developed in-
less power and producing less emissions.
planning, hull performance, and much more. It aims to be a
house, we can optimize voyages and continuously provide
central tool providing transparency through live data to the
our captains and their crew with updated routes,
One method to improve vessel hulls is applying silicone
operational teams and to improve the overall value creation.
considering factors such as wind, currents, and waves.
coating. Silicone-based coatings provide a smooth and low-
Combined with freight markets and bunker prices, this
friction surface with a higher resilience towards fouling
By gathering all relevant data in a single system, NEXUS
helps to ensure that every journey is as safe and efficient as
organisms sticking to the hull. By the end of 2023, more
can relieve simple administrative burdens. The data in
possible, while keeping emissions as low as possible and
than half of TORM’s vessels had this coating applied. TORM
NEXUS can be viewed by all TORM teams in real-time,
earnings in focus.
eliminating the need to communicate back and forth across
geographies and time zones with risks of delay.
In 2023, we have seen success in our ongoing project of
implementing “constant power.” We have been dedicating
has more than 55 vessels coated with silicone paint. This
helps us achieve emission reductions of more than 87,000
tons of CO2, or 5.9%, every single year.
The Connected Machinery project is the onboard aspect of
resources to help our crews apply constant power instead
Before applying paint on the hull, all old paint on the
NEXUS, which pulls data from all major components on the
of constant speed. Our data indicates savings for all longer
underwater part of the hull is removed to ensure a smooth
vessel and automatically guides the vessel crews when
voyages by applying constant power. In 2024, we will
there are apparent improvements to be made to optimize
continue to work on the constant power project to seek
fuel efficiency and other operating expenses. NEXUS
further improvements in energy savings.
empowers crews on vessels to use the data themselves and
take action immediately thereby minimizing resource
leakage.
Developing and Testing Fuel Efficiency
Technologies
In addition to operational and collaborative strategies,
NEXUS is being installed onboard, and by the end of 2023,
TORM maintains its efforts in the optimization and
half of our vessels had been added to the digital platform.
efficiency of our fleet by applying a broad set of technical
Learnings are still to be made to improve the value of
improvements. These efforts include smaller investments
NEXUS. During 2024, it is expected that all of TORM’s
with short payback time and also larger investments with an
vessels will have NEXUS installed.
expected larger impact. At TORM, we make sure to
continuously test and evaluate these technologies so that
the solutions are optimized after installation. On the
following pages is an overview of the main projects in
2023.
hull surface to reduce roughness and thereby the hull's
resistance in the water. This reduces CO2 emissions and
fuel consumption. For example, the impact on our largest
LR2 vessels is that we can save up to 620 tons of CO2
emissions per vessel every single year.
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ESG DATA TABLES AND POLICIES
Environment
Environmental Efforts
Variable Frequency Drives (VFD)
All systems onboard are designed for maximum loads and
Propeller Ultrasound
Algae make it harder for a vessel to move efficiently when it
temperatures. A vessel’s main engine develops excess heat
grows on the propeller. Algae growth is referred to as
when sailing in extreme conditions, at half load, or in colder
biofouling and is one of the main challenges when it comes
temperatures. Cooling pumps remove this heat with cooling
to energy efficiency in shipping.
water. When the conditions are not extreme, the cooling
need is less, and the power used for the cooling water
Ultrasound is a proven technology and promising method to
system can be reduced.
fight biofouling. An ultrasound system can produce a
pattern of increasing and decreasing vibrations on the
VFDs constitute a proven technology that controls the
surface of the propeller. This process can prevent surface
cooling systems’ capacity according to the situation and
algae and can ensure smoother, more energy-efficient
thus runs the systems more efficiently, by maintaining the
right temperature and ensuring that the cooling pump does
not over-cool and use unnecessary energy.
sailing. TORM has used ultrasound on propellers since 2017.
With a potential to save around 140 tons of CO2 per vessel
every single year, it is standard equipment on TORM
vessels. The Propeller Ultrasound program is completed
VFDs on cooling water systems save an average of 0.35
across our fleet except recently purchased vessels where
tons of fuel per day per vessel, which helps save on costs as
installation is in process.
well as emissions. VFDs can provide TORM a savings of
400 metric tons CO2 per vessel per year. The VFD program
is completed across our fleet except recently purchased
vessels where installation is in process.
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ESG DATA TABLES AND POLICIES
Environment
Environmental Efforts
Mewis Duct
The Mewis duct is an energy-saving device that can help
Challenges with air lubrication relate to the fact that the
technology’s efficiency depends highly on factors including
direct the water flow around the propeller. The system’s
the draft, speed of the vessel, the flow to the nozzles, and
duct component accelerates the hull wake into the
whether or not the vessel is even keel. We are dedicated to
propeller. The device also has a fin system that makes a
testing new technologies and optimizing to achieve better
pre-swirl, which reduces the loss in the propeller slipstream.
efficiency, and TORM is working closely with the supplier to
Combined, these components increase the propeller thrust,
achieve the expected results.
and the Mewis duct is expected to provide power savings of
4-5% per vessel.
New Fuels
TORM is actively monitoring the developments in engines
In 2023, TORM has installed Mewis ducts on five vessels
and supply chains and continuously assessing the
and made plans to install 30 more over years to come.
possibility of equipping the fleet to run on new fuels such as
methanol and ammonia. TORM currently uses traditional
Rotor Sails
Rotor sails utilize wind to help thrust the vessel forward.
fuels.
TORM is looking at testing prototypes produced by ME
As of 2025, TORM will commence using some biofuel on
Production and pending results, TORM will subsequently
voyages involving EU trading in order to comply with the
commence installation onboard two TORM vessels. The
Fuel EU Maritime Regulation. This regulation requires
rotor sails do not have many variables once installed and are
shipping companies to reduce the greenhouse gas intensity
expected to work well in various conditions. It is expected
in the fuel consumed, and not only reduce the amount of
that two rotor sails on a vessel could reduce up to 1000
metric tons of CO2 emissions per year, depending on sailing
patterns.
fuel consumed. Using biofuels does not require engines on
TORM vessels to be modified.
Air Lubrication
Air lubrication is a system which blows out microscopic air
bubbles at the bottom of the vessel, creating a layer of air
between the vessel and the water. This layer of air is
intended to reduce the vessel friction in water.
During 2022-2023, TORM has been installing and is
presently testing air lubrication on four vessels.
Read more details about TORM’s investments to
support the goal of zero emissions in the strategy
report on pages 17 to 19
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Social
Health and Safety
The majority of our workforce consists of seafarers. Healthy and safe conditions on
board our vessels are our primary focus.
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ESG DATA TABLES AND POLICIES
Audits and Inspections
Audits are an essential part of ensuring safety and
Lost Time Accident Frequency
Lost Time Accident Frequency (LTAF) is a measure of
In 2023, TORM initiated work on a new iteration of the
company’s core values, where the committee expressed full
compliance in TORM. Audits help identify areas where the
serious work-related personal injuries which result in more
support for maintaining the focus on safety leadership and
organization can improve its safety management system.
than one day off work. LTAF is measured as the number of
continuing with the safety leadership program and our ‘One
By identifying these areas, we can take corrective actions
injuries per million hours of work.
TORM Safety Culture – driving resilience’ program.
to improve our safety performance.
During 2023, we were able to effectively ensure TORM
and also conducted additional activities such as physical
tool consists of cycles where crews on TORM vessels can
achieved its safety management objectives. Established
seminars, virtual town halls, and information-sharing
anonymously evaluate all aspects of the safety culture on
procedures and policies have enabled us to perform several
sessions and deployed thorough review and analysis of data
board. The evaluation results are processed by office staff
independent audits and inspections, including ship
such as “near-miss” for better insight. A high number of
and used to create a report that the vessel then receives to
takeovers and flag changes. This has allowed us to identify
near-miss reports indicate that the organization proactively
review potential areas for improvement.
In 2023, TORM conducted physical visits on board vessels
TORM also continued the “Safety Delta” tool in 2023. This
improvement areas, measure performance, and ensure
monitors and responds to risks. Our work has resulted in
compliance, achieving time- and economical efficiencies,
that TORM’s LTAF measure in 2023 was 0.32 (2022:
and providing independent verification.
0.42).
Ship Inspection Report Programme
Ship Inspection Report Programme (SIRE) inspections are
governed by OCIMF (Oil Companies International Marine
Forum) and are used by charterers to ascertain the safety
standards of our vessels.
Safety
In 2023, TORM continued with our safety leadership
program and our ‘One TORM Safety Culture – driving
resilience’ program which defines standards and
expectations for excellent performance.
In 2022, OCIMF initiated a new SIRE inspection regime
called SIRE 2.0, which is expected to be fully applicable by
Q2 2024. At TORM, readiness for the new regime is being
An ongoing aspect of this program is the continuous
implementation of the Five Safety I’s, which are behavioral
principles that guide the work of all TORM employees, in
prioritized at our offices and onboard vessels.
offices and on vessels.
Lost Time Accident Frequency (LTAF)
Source: TORM
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0.650.370.420.320.3020202021202220232030 Target0.000.250.500.75 Social
Health and Safety
The crews thereby process the evaluation results
themselves, though dialogue and in the creation of
development plans, which enables them to take ownership
of the safety culture on board. Marine HR assesses this
procedure annually, and it continues to score positively. All
vessels have completed three Safety Delta cycles in 2023.
We held 12 physical onsite officer seminars in Denmark,
India, and the Philippines over the course of 2023. Office
and vessel-based colleagues came together to discuss and
align on our business strategy. A total of 310 senior and
junior officers attended the conferences.
Officer Safety Training
TORM continued to conduct safety leadership courses for
senior officers on board. The course includes workshops for
all senior officers and key office-based staff and focuses on
how to be a good leader when it comes to safety.
TORM increased the number of junior officer safety
trainings in 2023, which covers the mindsets,
competencies, and behaviors needed for safe operations.
This course serves as a supplement to the safety leadership
course for senior officers as junior officers should be
prepared for their future ambassador roles.
Officer safety training is a high priority at TORM. For this
reason, we ensure that all officers attend the trainings, and
we promote active participation. For in-person trainings,
there is a focus on all participants taking part in both theory
and group exercises. All trainings are adapted to the rank of
the officers, so they get the relevant knowledge and skills
for their duties.
TORM ANNUAL REPORT 2023
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Social
Security
Security
The security situation and developments in the various risk
Cyber Security
In 2023, we have worked to strengthen TORM’s cyber
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
At TORM, we are actively following the information security
community and we continue to monitor threats,
vulnerabilities, and threat actors as new threats
areas have been monitored closely throughout the year of
2023, and actions have been taken to safeguard TORM’s
security due to the increasingly eminent threats. We also
worked to ensure compliance with the new “Cybersecurity
continuously appear, the threat actors become increasingly
seafarers and vessels. Threats in the Red Sea are also being
Risk Management, Strategy, Governance, and Incident
well-organized, and the threats more advanced.
closely monitored, and in the beginning of 2024 TORM
decided to avoid transportation through the Red Sea..
Disclosure” act from the Securities and Exchange
Commission (SEC), and to prepare for the upcoming NIS2
Employees of TORM take part in ongoing trainings during
Another main area of concern remains the Gulf of Guinea.
Directive from the EU.
the year on a variety of cyber security topics, and we carry
out phishing campaigns to ensure maximum employee
This is despite the fact that reported incidents have
remained at a low level in comparison to previous years.
However, the root cause of piracy in the region has not
been eradicated, so piracy remains a threat.
To form the basis for an improved cyber security setup,
awareness. Apart from this, we continuously monitor
TORM has implemented new policies and procedures
security events in our information systems, scan for
primarily based on the ISO 27001 framework, including
vulnerabilities in our network, test our security posture
policies and procedures on IT security, crisis management,
through penetration testing, and improve our ability to
TORM’s response to piracy is founded on the Best
and IT risk management.
recover through drills on disaster recovery and business
Management Practice, which is the industry guideline for
companies and vessels sailing in areas with increased risk.
In 2023, TORM experienced an increase in the number of
minor security incidents. No persons were harmed during
We have also implemented new and updated cyber security
tools to strengthen our technical security, and we have
implemented new security controls to ensure secure
these incidents. In particular, petty thefts in South America
configuration of our IT systems and network.
continuity.
have seen an increase.
TORM continues to prepare vessels as per the Best
Management Practices when deemed necessary and
transiting areas with a history of conflict or any conflicts
have arisen recently.
TORM has adapted its procedures to the changing threat
levels across all areas called at by TORM vessels.
The security situation in certain areas is affected by
changes in geopolitical situations. TORM will continue
monitoring the situation globally and implement adequate
precautionary measures for risks identified.
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Social
People
People play an essential role in the One TORM platform, which supports us in working
together as one team and part of a cohesive culture with clear values.
In 2023, TORM has reiterated and reinforced our zero-
tolerance towards harassment, that is inconsistent with our
Reconnecting
TORM has continued our focus on gathering seafarers
policies and values, and we put extra focus on preventive
physically at seminars for junior, senior, and rating officers
measures. We also ensure that our employees have the
to make sure everybody meets and is sufficiently onboarded
right tools to handle such situations, along with the
knowledge that it is not accepted by the company. All
in the company. We have found that information sharing
works well online, while fostering relationships for certain
seafarers and office-based colleagues have participated in
types of learning and development is best achieved in
interactive training courses to understand different types of
person. We have implemented the two methods in
harassment, what to do if it occurs, and what tools are
conjunction.
available to support them.
On Vessels
Crew Satisfaction
TORM experienced a continued high retention rate for
TORM also had special focus in 2023 on leadership courses
to prepare junior officers for future senior positions. Safety
leadership is the main topic of this training, which also
includes harassment training and objection management.
seafarers over the course of 2023. Our annual crew
This helps us equip our next generation of leaders with the
engagement survey helps show what seafarers are satisfied
necessary tools and skills to move from technical tasks to
with and what areas could benefit from more focus. Results
generalist and leadership responsibilities.
show that the trend from 2022 continued and there is
overall high job satisfaction and a positive relationship with
leadership and teams. To keep our zero tolerance of
harassment top of mind, this was added to the survey in
2023 as a topic.
At the end of 2023, TORM employed 3,271 seafarers and
maintained our high retention rate for senior officers at
Crew Well-Being
The ‘Well at TORM’ program focuses on the well-being of
our seafarers by increasing engagement, mental resilience,
physical health, and embracing socialization among the
crew. In 2023, we optimized this program by taking control
of ‘Well at TORM’ as an in-house program.
95%. Thus, TORM demonstrated compliance with customer
In 2023, we also continued to work with suppliers on
requirements in ensuring the right level of experience
among senior officers per vessel across the fleet (the so-
called officer matrix compliance).
ensuring healthy, high-quality food for crews on board the
vessels. The mealtime for our seafarers is not just important
sustenance and nutrition, it is also a time to socialize and
nurture the unique tight knit group on board.
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Geographical Diversity of Seafarers in %
Total number of seafarers at the end of 2023: 3,271
In 2023, we continued our strategy to employ seafarers
with different nationalities as we believe that diversity on
board is an important foundation for high performance,
while keeping focus on cooperation and a safe working
environment.
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Europe, 9.6%India subcontinent, 41.3%Southeast Asia, 48.9%Other, 0.2% Social
People
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In Offices
Employee Satisfaction
We continued our bi-annual real-time data engagement
Building on Foundation of Well-Being
In 2023, we looked to how we could build on top of our
well-being foundation after focusing on fundamentals such
Diversity
In TORM, it is our policy to work towards a diverse
workforce irrespective of gender, religion, sexuality,
survey in 2023. 96% of all office-based employees
as harassment and stress management in previous years.
responded to the November survey which resulted in an
We continue to devote time and attention to reinforce our
nationality, ethnicity, or disabilities. A diverse workforce
provides a balance of voices and thought that inspires
engagement score of 8.6 out of 10. This is a small positive
anti-stress and anti-harassment efforts, where we have
innovation and creativity.
development from the November 2022 survey, which
seen positive results.
showed an 8.4 engagement score.
As part of further enhancing our employee well-being and
The overall positive outcome of the survey was maintained
implementing more preventive measures, we focused on
from previous years, and the engagement positions TORM
psychological safety in 2023. This concept is about
in the top five percent of companies across all industries
employees feeling safe to express opinions, including
using the same assessment tool. Our ambition is to improve
concerns and doubts, without fear of punishment or
and nurture the culture needed to fulfill our ambitious
humiliation. Fostering psychological safety is a key
strategy and develop initiatives which matter to our
ingredient to high-performing teams, as all team members
employees.
feel comfortable contributing and presenting new ideas. In
2023, we held training sessions for employees and leaders,
Actions from previous surveys that have been implemented
which resulted in a toolkit now available to all office-based
or are in progress include psychological safety sessions
employees.
In 2023, we continued to participate in Danish Shipping’s
taskforce for more women at sea. We have incorporated 10
recommendations into processes and procedures as best
practice. The recommendations include setting gender
diversity targets, supporting women through family-friendly
policies, and rethinking the recruitment process.
Also in 2023, we continued to review and optimize the
initiatives embedded in our daily operations, originally
developed as outputs from a project where Danish female
seafarers were supported in enhancing their network and
participated in mentoring for the unique lifestyle at sea.
(described below), physical improvements for ergonomics
and reducing noise pollution, and more focus on food
served at office locations with new catering services.
Diversity of Permanent Employees
Non-executive Directors of the Company
Executive Directors of the Company
Senior Executives
Managers not listed above (managers with one or more direct reports)
Other permanent employees of the Group
Male
Female
3
1
3
161
273
1
—
—
20
117
42
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Social
People
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ESG DATA TABLES AND POLICIES
Gender Diversity in Management
We actively monitor the representation of women in
recruitment strategies in order to increase the
We have recently set the target and therefore the target
representation of underrepresented groups.
has not been met. TORM will commence a process to
leadership, other levels of management, and the workforce.
At the end of 2023, the Board of Directors consisted of
prepare a policy for how and when to reach the target.
At the end of 2023, the proportion of female full-time
four male members and one female member elected at the
employees in the office-based workforce was 31%, while
Annual General Meeting. Since 2020, the Board of
women in leadership positions constituted 20%. TORM has
Directors has fulfilled its target of 20% female Board
a target for 2030 of 35% women in leadership positions.
members (1 out of 5).
These targets are depicted in the Social Table on page 52.
In 2022, TORM took over the Marine Exhaust segment.
The next target for the Board of Directors is for 2030,
where 40% of the members will be of the underrepresented
Including this segment and our permanent seafarers, we
gender.
have a total of 184 managers with one or more direct
reports, who are not members of the Board. The
Gender Diversity in Management
Diversity in Management Beyond Gender
TORM does not have a policy regarding diversity based on
other criteria than gender. The global structure of our
organization and the industry in general already ensure an
inherent level of diversity for criteria such as nationality and
educational background. We continuously monitor in what
ways diversity initiatives can benefit our organization.
underrepresented gender, women, constitutes 11% of this
group of managers, and we have a target of 20% women in
2030. Our percentage this year decreased mainly due to
the acquisition of the Marine Exhaust segment. We are in
the process of anchoring the policy and action plans from
TORM described below to the Marine Exhaust segment, and
we strive to prepare a more detailed plan in 2024 for Marine
Exhaust segment due to the business differences from
TORM.
and foster diversity within our leadership by identifying
internal candidates for leadership positions. We focus on
recruiting women for leadership positions if they are the
most qualified for the position or if we assess that the
diversity will benefit the relevant team. We have
implemented an initiative to make our job postings more
inclusive. In 2024, we will work to adapt the DEIB
(Diversity, Equity, Inclusion, Belonging) framework to our
Non-executive Directors of the Company and
Executive Directors of the Company (Board of
Directors)
Shore-based managers in TORM not listed above
(managers with one or more direct reports)
Total number of members
Percentage of the underrepresented gender
Target figures in percentages
Year of achievement of target figures
Total number of members
Percentage of the underrepresented gender for managers
Percentage of the underrepresented gender for Senior Executives
Target figures in percentages
Year of achievement of target figures
Total number of members
Percentage of the underrepresented gender
Target figures in percentages
Year of achievement of target figures
Total number of members
Managers - Permanent seafarers
(managers with one or more direct reports)
Percentage of the underrepresented gender
Total number of managers excluding Board of
Directors
Target figures in percentages
Year of achievement of target figures
Total number of members
Percentage of the underrepresented gender
Target figures in percentages
Year of achievement of target figures
2023
5
20 %
40 %
2030
80
20 %
0 %
35 %
2030
14
0 %
15 %
2030
90
6 %
10 %
2030
184
11 %
20 %
2030
We aim to ensure a robust pipeline for career advancement
(managers with one or more direct reports)
Managers - Marine Exhaust segment
TORM ANNUAL REPORT 2023
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43
Social
Community
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OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
TORM has a long history of supporting
education in India and the Philippines, making
the Sustainable Development Goal 4 Quality
Education an integrated part of our organization
and values.
equipment and training for teachers and students in 2023.
TORM sponsored 33 students at SAMPARC, providing
They conducted a virtual seminar on gender and
essential support for their education and well-being. As part
development, benefiting 30 educators, parents, and 130
of the tradition of Deepawali celebrations, a dedicated team
learners in Capoocan in the province of Leyte.
from TORM India visited SAMPARC Bhaje to distribute gifts
and get to know the students.
We believe that education is a cornerstone of development.
In 2023, TPEF donated learning equipment to the San
Our commitment ensures a strong pipeline for the industry
Isidro Elementary School in San Narciso in the province of
Recognizing the importance of a well-rounded education,
as a result of our support for maritime educational
Quezon. The donation included study chairs, blackboards,
TORM joined forces with Round Table India (RTI) to kick-
programs, while also serving as a way in which we can
whiteboards, lights, tables, electric fans, a SMART LED
start a transformative project in the state of Maharashtra.
contribute to society with general education support. This
television, and school bags with supplies. This equipment
This initiative involved the construction of four classrooms,
helps strengthen the culture of teamwork at TORM,
will benefit 64 learners and teachers.
benefiting around 60 students.
resulting in higher retention and positive brand recognition.
Education Foundation in the Philippines
The TORM Philippines Education Foundation (TPEF) is a
foundation set up by TORM Philippines in 2007 to support
education in Filipino society. TPEF's dedication to
education and community enhancement continues to make
a positive impact on scholars and communities in need.
During the educational year 2023-2024, we are
supporting:
•
•
44 scholars studying in various colleges and universities
24 apprentices within maritime courses
In 2023, TPEF celebrated the graduation of three scholars
in education, nursing, and medical laboratory science. Six
graduate scholars excelled in their board exams, with three
becoming licensed teachers, one a registered nurse, one a
psychometrician, and one a medical technologist.
Recognizing the importance of quality education, TPEF
extended support to rural schools by providing essential
Education Support in India
TORM India funds specific projects related to children,
In 2023, TORM completed a significant project, also in the
state of Maharashtra, by adding an extra floor to a school
education, and infrastructure. In 2023, TORM continued its
serving over 600 students. This expansion provided
commitment to education and community support with a
improved facilities and resources for the students. TORM
series of impactful initiatives led by four partner
organizations:
• SAMPARC – an organization taking care of
disadvantaged children across India
• Round Table India (RTI) – an organization dedicated to
improving education facilities in India
• BAIF – an organization working towards constructing,
also identified a school in Malvani, Mumbai, for a
transformative upgrade. An IT lab was inaugurated in the
school, equipped with modern desktop computers,
benefiting over 300 students with access to computer-
aided courses and modern educational technologies.
TORM continues to evaluate several projects aimed at
helping young girls in and around Mumbai to have a positive
maintaining, and improving rural infrastructure
impact on society.
• Akshayshakti – an organization looking to improve the
lives and welfare of students and abandoned children
TORM ANNUAL REPORT 2023
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44
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Governance
Legal Compliance
For TORM, good corporate governance represents the framework and guideline for
business management. The aim is to ensure that TORM is managed in a proper and
orderly manner consistent with applicable legislation and codes.
Our strong corporate governance complements our
commercial purpose to ensure we meet the high
Data Ethics Policy
TORM’s business model, the One TORM platform, uses
TORM does not collect, store, or handle data in relation to
private customers or consumers. The data which TORM
expectations of our investors, customers, and other
advanced analytics and digital solutions in which large
collects and stores is mainly commercial data, relevant to
stakeholders. Legal compliance is essential to TORM and to
amounts of data are processed. TORM’s Data Ethics Policy
the operation of our owned and chartered vessels. Such
our stakeholders. International transport of refined oil
confirms TORM’s commitment to our defined data ethics
commercial data includes without limitation global trade
products is a highly regulated area, and full compliance with
principles, and it defines how we collect, store, and process
flows, trading patterns, cargo types, weather patterns, port
all applicable rules and regulations at all times is a necessity
data.
for operating successfully in our industry.
data, etc. and may be generated internally or obtained from
external sources.
TORM wants to maintain high ethical standards for the
TORM’s compliance with all applicable sanctions requires
protection of our data, and we want our handling of all data
To ensure that TORM and our employees uphold these high
constant focus, as any violation may have a significant
to be beneficial and value-adding to our customers,
standards, clear instructions are available for how
business impact. The same applies to compliance with
employees, business partners, authorities, and other
employees should handle personal data. To ensure that
applicable rules and regulations in relation to (but not
stakeholders.
limited to) health, safety and environment, anti-bribery and
employees understand and are continuously updated on
TORM’s obligations such as sanctions, they are annually
corruption, competition/anti-trust, as well as employment
Our treatment of data must be robust to prevent any
asked to confirm that they have read and will comply with
and labor. Legal compliance is often closely linked to other
unintended disclosure. TORM’s data security measures
the Business Principles and associated policies.
areas included in the materiality matrix and is also
include a variety of guidelines and defined processes as well
separately included.
as technical and human controls.
Read about cyber security at TORM on page 40
The Governance section describes TORM’s framework and
governance model, designed to ensure TORM’s continued
ability to operate successfully.
Governance section on pages 90 to 142
TORM ANNUAL REPORT 2023
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45
Governance
Human Rights and Business Ethics
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Business Ethics
Transparency and accountability are key to TORM’s way of
It is TORM’s policy to conduct all business in an honest and
In 2023, TORM signed the Anti-Corruption Call-to-Action
ethical manner. TORM has a “zero tolerance” approach to
put forth by the UN Global Compact at the 10th session of
doing business, and these values play a central role in our
bribery and corruption, and TORM is committed to acting
the Conference of the States Parties (COSP) on 12
corporate social responsibility approach. Our approach to
professionally, fairly, and with integrity in all business
December 2023. The Call-to-Action is an appeal by the
responsible behavior is rooted in our TORM Business
dealings and relationships, wherever TORM operates.
private sector to governments, urging them to promote
Principles which have the following five objectives:
TORM will uphold all laws relevant to countering bribery and
anti-corruption measures and to implement related policies
• Maintaining a good and safe workplace
•
•
•
•
Reducing environmental impact
Respecting people
Doing business responsibly
Ensuring transparency
corruption in all the jurisdictions in which TORM operates.
to establish systems of good governance.
TORM has three elements, which we leverage to continue a
whistleblower facility with an independent lawyer as part of
high level of transparency and accountability of our anti-
the internal control system. In 2023, the whistleblower
corruption and anti-bribery policy. One is strict employee
facility received one notification, which was investigated
guidelines and processes to prevent and manage anti-
and closed without any critique or requirements for new
corruption and anti-bribery, the second is specific reporting
measures.
Since 2006, TORM’s Board of Directors has provided a
Anti-Corruption and Anti-Bribery
Corruption and bribery impede global trade and can restrict
non-corrupt companies’ access to markets. In this way,
corruption and bribery have a negative impact on economic
processes, and the third is compulsory e-learning courses.
TORM further complies with SOX regulations, according to
which employees must complete training and confirm
adherence to the policies and guidelines, ensuring 100%
and social development. For TORM, the risk of corruption
compliance.
does not mean increased costs alone. Corruption also
exposes TORM’s seafarers to safety and security risks and
Since 2011, when TORM co-founded the Maritime Anti-
poses a potential risk to TORM’s legal standing and
reputation.
TORM does not accept corrupt business practices, and as
part of our compliance program TORM has a policy on anti-
bribery and anti-corruption, which supports TORM’s
Business Principles.
Corruption Network (MACN), TORM has taken a joint stand
with the industry against the requests for facilitation
payments, which exist in many parts of the world where
TORM conducts business. Best practice is shared between
members of the network, and members align their approach
to minimizing facilitation payments. MACN seeks support
from government bodies and international organizations to
eliminate the root causes of corruption. TORM is
committed to addressing corrupt business practices among
stakeholders by supporting this cross-sector approach.
TORM ANNUAL REPORT 2023
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46
Governance
Human Rights and Business Ethics
Human Rights
With TORM’s Business Principles, our core values, and the
TORM respects employees’ right to associate freely, to join
– or not to join – unions, and to bargain collectively. TORM
commitment to the UN Global Compact, TORM is
offers equal opportunities for its employees as stated in
committed to respecting human rights as outlined in the
TORM’s Business Principles. Zero claims or offenses have
United Nations Guiding Principles on Business and Human
been reported regarding human rights in 2023.
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Rights.
2009
TORM signed the UN Global Compact
TORM recognizes that implementing the necessary policies
and respective processes to be in line with the
requirements of the UN Global Principles is part of an
ongoing effort. Going forward, we will continue to promote
human rights-related policies and processes.
The most material risk for human rights abuses is related to
TORM’s supply chain. TORM complies with the
International Labor Organization’s Maritime Labor
Convention, an international set of standards on labor
conditions at sea, which was ratified by 30 countries in
2012. All vessels under TORM’s technical management are
audited and certified as required under the Maritime Labor
Convention of 2006. To enforce and promote the
importance of human rights on how TORM performs
business at large projects such as newbuildings or yard
stays, TORM has a supervision team consisting of four-six
TORM employees or externals representing TORM to
ensure work is carried out in line with TORM standards.
TORM ANNUAL REPORT 2023
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47
Governance
Responsible Procurement
Responsible behavior is central to our business, management practices, and culture,
as well as how we work with procurement at TORM.
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Our supply chain is important to achieve our goals, and we
TORM is certified according to ISO 14001:2015, and in
As previously reported, the main purpose of these first
must ensure that our quality standards and responsibility
accordance with the requirements of our certifications, we
supplier assessments was to establish a baseline and
efforts are extended and improved throughout it. We
constructed a supplier assessment questionnaire and
understand the status of our suppliers to facilitate a dialog
expect our suppliers to comply with recognized
supporting process in 2021. In 2022, the assessment
with them about how we together can extend and improve
international standards and work to improve human rights,
process was rolled out, and focused on the suppliers with
the quality of sustainability efforts. In some situations,
labor conditions, impact on the environment, safety,
the highest spend. This is to allocate resources to the areas
there may be areas where we will work with a particular
corruption, and quality.
with the largest potential risks and impacts.
supplier to align with TORM requirements.
Transparency and accountability are central parts of
The assessments were carried out in two waves with the
In 2023, TORM has continued to individually follow-up on
TORM’s way of doing business, which means that TORM
second wave completed in 2023. The first wave focused on
each questionnaire response to ensure their completeness.
reports on its social and environmental performance on an
Tier 2, critical suppliers, defined as suppliers with a spend
TORM, when possible, conducts site visits to audit the
annual basis to ensure progress and accountability to
above USD 100,000 and located in high-risk areas, as
categories in the questionnaire or conducts a remote audit.
stakeholders.
defined by TORM based on the CPI (Corruption Perception
This document can also be used as a guide for all TORM
Index). These assessments were prioritized and were
suppliers to self-assess their compatibility with TORM
TORM’s Business Principles ensure alignment between our
completed in 2022. The second wave Tier 1, strategic
standards.
values, and the policies that ensure appropriate behavior,
suppliers, defined as suppliers with a spend above USD
which cannot be deviated from. This relationship applies to
100,000 and located in low-risk areas, was completed in
The questionnaire and process have been further
policies within all operations, including those related to
2023.
sustainability. TORM also applies its Business Principles
developed, and the effort will continue in 2024.
when dealing with subcontractors and suppliers. TORM's
The questionnaire covered areas within Quality
Business Principles emphasize our commitment to
Management, Performance, Training, Human Rights and
Anti-corruption and anti-bribery on page 46
promoting responsible business principles in our supply
Labor, Environment, Health, Safety, and Business Ethics.
chain. Therefore, TORM is compliant with the UK Modern
Slavery Act.
TORM ANNUAL REPORT 2023
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48
SASB Marine Transportation
Industry Standard
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Topic
Accounting metric
Unit
2023
2022
2021
Code
Greenhouse
Gas
Gross global Scope 1 emissions
Metric tons (t) CO₂e
1,558,254
1,363,076
1,081,027
TR-MT-110a.1
Discussion of long-term and short-term strategy or plan to manage Scope 1 emissions,
emissions reduction targets, and an analysis of performance against those targets
1) Total energy consumed
2) Percentage heavy fuel oil
3) Percentage renewable
Average Energy Efficiency Design Index (EEDI) for new vessels
Gigajoules (GJ)
Percentage (%)
Percentage (%)
Grams of CO₂ per ton-
nautical mile
Air quality
Air emissions of the following pollutants:
1) NOₓ (excluding N₂O)
2) SOₓ
3) Particulate matter (PM10)
Ecological
impacts
Shipping duration in marine protected areas or areas of protected conservation status²⁾
Percentage of fleet implementing ballast water: 1) exchange
Percentage of fleet implementing ballast water: 2) treatment
Number of spills and releases to the environment³)
Aggregate volume of spills and releases to the environment⁴)
Metric tons (t)
Metric tons (t)
Metric tons (t)
Number of travel days
Percentage (%)
Percentage (%)
Number
Cubic meters (M3)
See pages
17-19, 24-25,
28-29, 32-37
See pages
15-17, 19,
22-27, 30-33
in AR 22
See pages
22-27, 34, 40
in AR 21
20,791
19,265
17,672
60
0
4
n/a¹⁾
1,322
n/a¹⁾
835
0
100
0
0
53
0
3
n/a¹⁾
1,785
n/a¹⁾
n/a¹⁾
12
88
0
0
50
0
3
n/a¹⁾
1,533
n/a¹⁾
n/a¹⁾
27
73
0
0
TR-MT-110a.2
TR-MT-110a.3
TR-MT-110a.3
TR-MT-110a.3
TR-MT-110a.4
TR-MT-120a.1
TR-MT-120a.1
TR-MT-120a.1
TR-MT-160a.1
TR-MT-160a.2
TR-MT-160a.2
TR-MT-160a.3
TR-MT-160a.3
The emission figures in this report represent TORM’s findings to the best of our knowledge given today’s methodology used by TORM and aligned with current IMO methodology. TORM is continuously
committed to improving the methodology and advancing transparency in reporting as well as to following best industry practices on emissions reporting. In 2021, we allocated the emissions related to T/
C out to gross global Scope 1 emissions as we did not report on Scope 3. In 2022, we reported on Scope 3 and have reallocated the part included in Scope 1 in 2021 to Scope 3 in 2021. So emissions for
2021 have been adjusted slightly due to updates to the methodology.
¹⁾ Data unavailable. Assessment of feasibility of disclosure is ongoing.
²⁾ Our definition of shipping duration in marine protected areas is based on Guidelines on designating a "particularly sensitive sea area" (PSSA) are contained in resolution A.982(24) by IMO.
³⁾ Our definition of spills is based on ITOPF.
⁴⁾ We report total volume of spills as the estimated aggregate volume of all spills as defined above. We do not do netting of the amount of such material that was subsequently recovered, evaporated, or otherwise lost as required by
SASB standard TR-MT-160a.3 -2.1.
TORM ANNUAL REPORT 2023
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49
SASB Marine Transportation
Industry Standard
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Topic
Accounting metric
Unit
2023
2022
2021
Code
Employee
Health &
Safety
Lost Time Incident Rate (LTIR)¹⁾
Per million exposure
hours
0.32
0.42
0.37
TR-MT-320a.1
Business ethics Number of calls at ports in countries that have the 20 lowest rankings in Transparency
International's Corruption Perception Index
Total amount of monetary losses as a result of legal proceedings associated with bribery
or corruption
Accident &
Safety
Management
Number of marine casualties²⁾
Percentage classified as very serious²⁾
Number of Conditions of Class or Recommendations
Number of port state control: 1) deficiencies
Number of port state control: 2) detentions
Activity
metrics
Number of shipboard employees
Total distance travelled by vessels
Operating days
Deadweight tonnage
Number of vessels in total shipping fleet (as of 31 December)
Number of vessel port calls
Twenty-foot equivalent unit (TEU) capacity
Number
USD
Number
Percentage (%)
Number
Ratio³
Ratio³
15
0
1
0
9
0.63
0.00
18
0
1
0
3
0.71
0.01
0
1
0
7
0.55
0.00
Headcount
Nautical miles (nm)
Days
3,271
4,971,501
30,605
3,218
4,568,294
3,420
4,398,088
29,610
28,717
Thousand deadweight
tons
Number
Number
TEU
5,212
82
2,464
n/a
5,034
78
2,428
n/a
4,746
84
2,514
n/a
TR-MT-510a.2
TR-MT-540a.1
TR-MT-540a.1
TR-MT-540a.2
TR-MT-540a.3
TR-MT-540a.3
TR-MT-000.A
TR-MT-000.B
TR-MT-000.C
TR-MT-000.D
TR-MT-000.E
TR-MT-000.F
TR-MT-000.G
13
TR-MT-510a.1
¹⁾ Instead of LTIR, we report on LTAF (LTIF) which is an industry norm based on OCIMF guidelines on injury reporting. The rate per one million man hours is the most common unit in respect of LTAF.
²⁾ Our definition of marine casualty is based on the IMO Casualty Investigation Code Ch 2 -2.9, and very serious marine casualty is based on IMO Casualty Investigation Code Ch 2 -2.22.
³⁾ We report the number of port state control deficiencies and detentions as a ratio instead of a number. It is the industry norm to report port state control performance as a ratio as it provides important context to the metrics. The
ratio is calculated as the number of deficiencies (or detentions) divided by the total number of PSC inspections.
TORM ANNUAL REPORT 2023
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50
Environmental Indicators
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OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Indicator
Greenhouse gas (GHG) emissions
Direct GHG emissions (Scope 1)
Indirect GHG emissions – owned (Scope 2)¹⁾
Indirect GHG emissions – not owned (Scope 3)
Total GHG emissions²⁾
Energy consumption
Heavy fuel
Low-sulfur heavy fuel
Marine gas oil
Office consumption
Electricity consumption
Water consumption
Greenhouse gas (GHG) emissions - Fleet
CO₂ emissions, AER – total fleet
CO₂ emissions, AER – LR2
CO₂ emissions, AER – LR1
CO₂ emissions, AER – MR
CO₂ emissions, AER – Handysize³)
CO₂ emissions, EEOI – total fleet
CO₂ emissions, EEOI – LR2
CO₂ emissions, EEOI – LR1
CO₂ emissions, EEOI – MR
CO₂ emissions, EEOI – Handysize³)
Unit
2023
2022
2021
Metric tons (t) CO₂e
1,558,254
1,363,076
1,081,027
Tons CO₂e
Tons CO₂e
Tons CO₂e
506
923,784
2,482,544
448
607,961
1,971,485
486
1,238,479
2,319,991
Tons
Tons
Tons
kWh
m3
g/dwtxnm
g/dwtxnm
g/dwtxnm
g/dwtxnm
g/dwtxnm
g/cargoxnm
g/cargoxnm
g/cargoxnm
g/cargoxnm
g/cargoxnm
305,016
118,853
83,570
252,012
136,329
84,086
216,610
126,371
88,978
801,393
4,373
659,476
4,062
514,461
3,875
4.93
3.37
4.40
6.14
n/a
10.80
7.94
10.39
12.56
n/a
5.15
3.68
4.73
6.09
8.37
10.88
8.13
9.38
12.69
21.29
5.05
3.72
4.33
5.83
7.23
10.64
8.67
8.95
11.80
15.24
The emission figures in this report represent TORM’s findings to the best of our knowledge given today’s methodology used by TORM aligned with current IMO methodology. TORM is continuously
committed to improving the methodology and advancing transparency in reporting as well as to following best industry practices on emissions reporting. In 2021, we allocated the emissions related to T/
C out to direct GHG emissions (Scope 1) as we did not report on Scope 3. Since 2022, we reported on Scope 3 and have reallocated the part included in Scope 1 to Scope 3 in 2021.
¹⁾ From 2023, common areas for the shared office space in Copenhagen have been included, causing the shown increase. Scope 2 emissions for Marine Exhaust of 309MT CO₂ are not included. ²⁾ The total CO₂ emissions are
significantly lower in 2021 compared to 2022 and 2023 because Scope 3 emissions have not been calculated for 2021. ³)All Handysize vessels are sold in 2023.
TORM ANNUAL REPORT 2023
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Social Indicators
Indicator
Our employees
Total number of seafarers
Total number of employees (shore-based) in TORM
Total number of employees in Marine Exhaust segment
Diversity – shore-based employees
Total women in leadership in TORM
Gender with lowest representation (women)
Total women in leadership in Marine Exhaust segment
Diversity – seafarers
Total women in leadership
Gender with lowest representation (women)
Health & Safety
Fatalities
Lost Time Accident Frequency (LTAF)
Ethics
Sexual Harassment and/or Non-discrimination Policy
Equal and fair opportunity employer
Child and/or Forced Labor Policy
Child and/or Forced Labor Policy covers suppliers and vendors
Human Rights Policy
Human Rights Policy covers suppliers and vendors
Modern Slavery Policy
UN Global Compact Signatory
Recycling and Scrapping Policy
Yes ● / No ●
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ESG DATA TABLES AND POLICIES
Unit
2023
2022
2021
Further information
Headcount
Headcount
Headcount
3,271
370
111
Percentage (%)
Percentage (%)
Percentage (%)
Percentage (%)
Percentage (%)
20
31
0
1
1
Headcount
Per million exposure hours
0
0.32
●
●
●
●
●
●
●
●
●
3,218
355
108
21
35
0
2
1
0
0.42
●
●
●
●
●
●
●
●
●
3,420
348
93
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37
0
1
1
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0.37
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●
●
●
●
●
●
●
●
Business Principles
Business Principles
Business Principles
Business Principles
Business Principles
Business Principles
UK Modern Slavery Act
Responsibility Report
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Governance Indicators
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ESG DATA TABLES AND POLICIES
Indicator
Board of Directors
Members
Gender with lowest representation (women)
Total nationalities
Independence
Senior Management
Members
Gender with lowest representation (women)
Total nationalities
Executive Management has their bonus linked to ESG performance
Whistleblower function
Number of whistleblower notifications received through external system
Number of whistleblower cases reviewed
Ethics
Anti-corruption Policy
Anti-bribery Policy
Whistleblower Policy
Articles of Association
Data Ethics Policy
Code of Conduct Policy (Business Principles)
Yes ● / No ●
Unit
2023
2022
2021
Further information
Number
Percentage (%)
Number
Percentage (%)
Number
Percentage (%)
Percentage (%)
5
20
5
60
4
0
1
●
1
1
●
●
●
●
●
●
5
20
5
60
4
0
1
●
3
3
●
●
●
●
●
●
5
20
5
60
4
0
1
●
1
1
●
●
●
●
●
●
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53
EU Taxonomy Tables
TORM's key performance indicators (KPI) are listed in the tables below. TORM's
activities are considered eligible but not aligned. The non-eligible activity consists of
Marine Exhaust. According to EU Taxonomy definitions, business activities cannot be
considered aligned if the business is dedicated to the transport of fossil fuels.
Proportion of TURNOVER from products or services associated with Taxonomy-aligned economic activities
Financial year 2023
Substantial contribution criteria
DNSH criteria
('Do Not Significant Harm')
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Economic activities (1)
)
m
D
S
U
(
)
3
(
r
e
v
o
n
r
u
T
r
e
v
o
n
r
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T
f
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n
o
i
t
r
o
p
o
r
P
)
4
(
)
2
(
)
s
(
e
d
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C
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m
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l
C
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5
(
n
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6
(
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t
p
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)
8
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n
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i
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l
l
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P
)
7
(
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e
t
a
W
)
9
(
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m
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c
E
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C
l
)
0
1
(
s
m
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t
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y
s
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n
a
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a
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l
C
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1
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g
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n
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e
t
a
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l
C
)
2
1
(
n
o
i
t
a
t
p
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d
a
)
3
1
(
r
e
t
a
W
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4
1
(
n
o
i
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P
)
5
1
(
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m
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n
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r
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v
d
o
B
i
i
d
n
a
y
t
i
s
r
e
v
d
o
B
i
i
)
6
1
(
s
m
e
t
s
y
s
o
c
e
)
.
1
.
A
(
d
e
n
g
i
l
a
-
y
m
o
n
o
x
a
T
f
o
n
o
i
t
r
o
p
o
r
P
)
7
1
(
)
8
1
(
1
-
N
r
a
e
y
,
r
e
v
o
n
r
u
t
g
n
i
l
b
a
n
e
y
r
o
g
e
t
a
C
)
9
1
(
y
t
i
v
i
t
c
a
)
.
2
A
.
l
(
e
b
g
i
i
l
e
-
r
o
s
d
r
a
u
g
e
f
a
s
m
u
m
n
M
i
i
Sea and Coastal Freight Water Transport, Vessels for Port
Operations, and Auxiliary Activities
CCM 6.10
USD
%
EL;
EL;
EL;
EL;
EL;
EL;
N/EL
N/EL
N/EL
N/EL
N/EL
N/EL
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
l
a
n
o
i
t
i
s
n
a
r
t
y
r
o
g
e
t
a
C
)
0
2
(
y
t
i
v
i
t
c
a
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Turnover of environmentally sustainable activities (Taxonomy-
aligned) (A.1)
Of which enabling
Of which transitional
0
0
0
—%
—%
—%
%
%
%
%
%
%
%
%
%
%
%
%
%
A.2 Taxonomy-Eligible but not environmentally sustainable activities (Not Taxonomy-aligned activities) (g)
6.10 Sea and Coastal Freight Water Transport, Vessels for Port
Operations, and Auxiliary Activities
Turnover of Taxonomy-eligible but not environmentally sustainable
A. Turnover of Taxonomy-eligible activities (A.1+A.2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities
TOTAL (A + B)
EL;
N/EL
(f)
EL;
EL;
EL;
EL;
EL;
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
1,491
98%
1,491
N/EL
N/EL
N/EL
N/EL
N/EL
1,491
1,491
98%
98%
29
2%
1,520
100 %
Turnover can be reconciled to Note 3 in the consolidated financial statements.
E
T
%
%
%
%
%
TORM ANNUAL REPORT 2023
OUR RESPONSIBILITY
54
EU Taxonomy Tables
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Proportion of CAPEX from products or services associated with Taxonomy-aligned economic activities
Financial year 2023
Year
Substantial contribution criteria
Economic activities (1)
)
2
(
)
s
(
e
d
o
C
)
3
(
X
E
P
A
C
Sea and Coastal Freight Water Transport, Vessels for Port
Operations, and Auxiliary Activities
CCM 6.10
USD
)
4
(
X
E
P
A
C
f
o
n
o
i
t
r
o
p
o
r
P
%
e
g
n
a
h
c
e
t
a
m
i
l
C
)
5
(
n
o
i
t
a
g
i
t
i
m
EL;
N/EL
(f)
e
g
n
a
h
c
e
t
a
m
i
l
C
)
6
(
n
o
i
t
a
t
p
a
d
a
)
8
(
n
o
i
t
u
l
l
o
P
)
7
(
r
e
t
a
W
)
9
(
y
m
o
n
o
c
E
r
a
u
c
r
i
C
l
d
n
a
y
t
i
s
r
e
v
d
o
B
i
i
DNSH criteria
('Do Not Significant Harm')
)
0
1
(
s
m
e
t
s
y
s
o
c
e
e
g
n
a
h
c
e
t
a
m
i
l
C
)
1
1
(
n
o
i
t
a
g
i
t
i
m
e
g
n
a
h
c
e
t
a
m
i
l
C
)
2
1
(
n
o
i
t
a
t
p
a
d
a
)
3
1
(
r
e
t
a
W
)
4
1
(
n
o
i
t
u
l
l
o
P
)
5
1
(
y
m
o
n
o
c
E
r
a
u
c
r
i
C
l
d
n
a
y
t
i
s
r
e
v
d
o
B
i
i
)
6
1
(
s
m
e
t
s
y
s
o
c
e
)
.
1
.
A
(
d
e
n
g
i
l
a
-
y
m
o
n
o
x
a
T
f
o
n
o
i
t
r
o
p
o
r
P
)
7
1
(
s
d
r
a
u
g
e
f
a
s
m
u
m
n
M
i
i
)
8
1
(
1
-
N
r
a
e
y
,
X
E
P
A
C
g
n
i
l
b
a
n
e
y
r
o
g
e
t
a
C
)
9
1
(
y
t
i
v
i
t
c
a
)
.
2
A
.
l
(
e
b
g
i
i
l
e
-
r
o
EL;
EL;
EL;
EL;
EL;
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
l
a
n
o
i
t
i
s
n
a
r
t
y
r
o
g
e
t
a
C
)
0
2
(
y
t
i
v
i
t
c
a
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
CAPEX of environmentally sustainable activities (Taxonomy-
aligned) (A.1)
Of which enabling
Of which transitional
0
0
0
—%
—%
—%
%
%
%
%
%
%
%
%
%
%
%
%
%
A.2 Taxonomy-Eligible but not environmentally sustainable activities (Not Taxonomy-aligned activities) (g)
6.10 Sea and Coastal Freight Water Transport, Vessels for Port
Operations, and Auxiliary Activities
CAPEX of Taxonomy-eligible but not environmentally sustainable
A. CAPEX of Taxonomy-eligible activities (A.1+A.2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
CAPEX of Taxonomy-non-eligible activities
TOTAL (A + B)
EL;
N/EL
(f)
EL;
EL;
EL;
EL;
EL;
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
602
99%
602
N/EL
N/EL
N/EL
N/EL
N/EL
602
602
99%
99%
6
1%
608
100 %
CAPEX can be reconciled to Note 3 in the consolidated financial statements.
E
T
%
%
%
%
%
TORM ANNUAL REPORT 2023
OUR RESPONSIBILITY
55
EU Taxonomy Tables
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Proportion of OPEX from products or services associated with Taxonomy-aligned economic activities
Financial year 2023
Year
Substantial contribution criteria
Economic activities (1)
)
2
(
)
s
(
e
d
o
C
)
3
(
X
E
P
O
Sea and Coastal Freight Water Transport, Vessels for Port
Operations, and Auxiliary Activities
CCM 6.10
USD
)
4
(
X
E
P
O
f
o
n
o
i
t
r
o
p
o
r
P
%
e
g
n
a
h
c
e
t
a
m
i
l
C
)
5
(
n
o
i
t
a
g
i
t
i
m
e
g
n
a
h
c
e
t
a
m
i
l
C
)
6
(
n
o
i
t
a
t
p
a
d
a
)
8
(
n
o
i
t
u
l
l
o
P
)
7
(
r
e
t
a
W
)
9
(
y
m
o
n
o
c
E
r
a
u
c
r
i
C
l
d
n
a
y
t
i
s
r
e
v
d
o
B
i
i
DNSH criteria
('Do Not Significant Harm')
)
0
1
(
s
m
e
t
s
y
s
o
c
e
e
g
n
a
h
c
e
t
a
m
i
l
C
)
1
1
(
n
o
i
t
a
g
i
t
i
m
e
g
n
a
h
c
e
t
a
m
i
l
C
)
2
1
(
n
o
i
t
a
t
p
a
d
a
)
3
1
(
r
e
t
a
W
)
4
1
(
n
o
i
t
u
l
l
o
P
)
5
1
(
y
m
o
n
o
c
E
r
a
u
c
r
i
C
l
d
n
a
y
t
i
s
r
e
v
d
o
B
i
i
)
6
1
(
s
m
e
t
s
y
s
o
c
e
)
.
1
.
A
(
d
e
n
g
i
l
a
-
y
m
o
n
o
x
a
T
f
o
n
o
i
t
r
o
p
o
r
P
)
7
1
(
s
d
r
a
u
g
e
f
a
s
m
u
m
n
M
i
i
,
X
E
P
O
)
.
2
A
.
l
(
e
b
g
i
i
l
e
-
r
o
g
n
i
l
b
a
n
e
y
r
o
g
e
t
a
C
)
9
1
(
y
t
i
v
i
t
c
a
)
8
1
(
1
-
N
r
a
e
y
Y;N;
Y;N;
Y;N;
Y;N;
Y;N;
Y;N;
N/EL
(b,c)
N/EL
(b,c)
N/EL
(b,c)
N/EL
(b,c)
N/EL
(b,c)
N/EL
(b,c)
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
Y/N
%
E
l
a
n
o
i
t
i
s
n
a
r
t
y
r
o
g
e
t
a
C
)
0
2
(
y
t
i
v
i
t
c
a
T
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
OPEX of environmentally sustainable activities (Taxonomy-
aligned) (A.1)
Of which enabling
Of which transitional
0
0
0
—%
—%
—%
%
%
%
%
%
%
%
%
%
%
%
%
%
A.2 Taxonomy-Eligible but not environmentally sustainable activities (Not Taxonomy-aligned activities) (g)
6.10 Sea and Coastal Freight Water Transport, Vessels for Port
Operations, and Auxiliary Activities
OPEX of Taxonomy-eligible but not environmentally sustainable
A. OPEX of Taxonomy-eligible activities (A.1+A.2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
OPEX of Taxonomy-non-eligible activities
TOTAL (A + B)
64
64
64
30%
30%
30%
152
216
70%
100%
OPEX can be reconciled to Note 3 in the consolidated financial statements.
EL;
N/EL
(f)
EL;
EL;
EL;
EL;
EL;
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
N/EL
(f)
64
N/EL
N/EL
N/EL
N/EL
N/EL
E
T
%
%
%
%
%
TORM ANNUAL REPORT 2023
OUR RESPONSIBILITY
56
Non-Financial and
Sustainability
Information Statement
The following table constitutes our Non-Financial and Sustainability Information
Statement in compliance with sections 414CA and 414CB of the Companies Act
2006. The information listed is incorporated by cross-reference. Additional Non-
Financial Information is also available on our website.
Reporting Requirement
Environmental Matters
Employees
Respect for Human Rights
Social Matters
Policies
TORM's Business Principles
Recycling and Scrapping Policy
Environmental Protection Policy
TORM's Business Principles
Whistleblower Policy
Health, Safety, and Security
TORM's Business Principles
Whistleblower Policy
Modern Slavery Policy
TORM's Business Principles
Anti-Corruption and Anti-Bribery
TORM's Business Principles
TORM's Policy on Anti-Corruption and Anti-Bribery
Description of Principal Risks and Impact of Business Activity
Description of the Business Model
Non-Financial Key Performance Indicators
Climate-Related Financial Disclosures
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Further Information
Environmental Strategy
ESG Targets
EU Taxonomy
Scope 1, 2, 3 CO2 emissions
Environmental Efforts
Governance
Business Ethics
One TORM Platform
Health and safety
People Section
Diversity Data
Governance
Business Ethics
Non-Discrimination Policy
Equal and Fair Opportunity Employer
Sexual Harassment and/or Non-Discrimination Policy
Governance
Business Ethics and Human Rights
Child and/or Forced Labor Policy
People
Community
Legal Compliance
Human Rights and Business Ethics
Responsible Procurement
Legal Compliance
Business Ethics
Anti-Corruption and Anti-Bribery
Governance
Business Ethics
Risk Assessment Process
Description of Top Risks
Business Model
ESG Targets
SASB Index
E, S, G Tables
TCFD Guidelines
Climate-Related Risk and TCFD
Page
17-19
25
26
27-28
32-37
45-48
46
20-21, 34
38
41-43
42-43
45-48
46
52
52
52
45-48
46-47
52
41-43
44
45
46-47
48
45
46
46
45-48
46
82-83
85-86
9-21
25
48-50
51-53
29
87-89
TORM ANNUAL REPORT 2023
OUR RESPONSIBILITY
57
ESG Accounting Policies
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
TORM’s Scope 1, 2 and 3 Accounting Policies
Scope 1
CO2 emissions have been calculated based on the
consumption of heavy fuel oil and marine gas oil according
of data sources for these emission factors where the key
• Capital Goods (CHG #2): CAPEX investments relating
sources are DEFRA, GLEC, Thrust Carbon Methodology,
to purchase of vessels or modifications on vessels.
IMO and Exiobase.
Vessel lightweight methodology is used to extract
emission data for purchase of vessels and Spend-based
to IMO’s conversion factor for emission per ton. Emissions
The ESG report comprises activities in the parent company
approach is used for vessel modification. Industry
are calculated for each single vessel and then consolidated.
and in all subsidiaries except for the Marine Exhaust
specific emission factors are used to calculate
Numbers under the Scope 1 data sheet have been collected
segment. TORM will continue the focus on data collection
emissions.
on board the vessels or at the offices. The collection is
process and quality and include the data in 2024. The
•
Fuel and energy-related activities (GHG #3): This
based on actual usage. The vast majority of TORM’s Scope
accounting policies are applicable for the reporting period
category includes upstream emissions associated with
1 emissions are linked to vessel operations with our fleet.
01 January – 31 December 2023. ESG metrics follow the
the production and distribution of bunker fuel for our
Due to the very limited share of our emissions, emissions
below boundaries unless otherwise specified:
vessels. Specific quantity data is used for consumption
from company cars have not been included.
• Owned vessels (incl. third-party technically managed
of fuel oil and gas oil from own operations (tons)
Please note:
The TC out (voyages time chartered out > 90 days) are
vessels)
•
Employees in offices
• Crew onboard vessels
multiplied with industry specific average emission factor
to calculate emission. Electricity and heating
consumption for own operation is included with location
considered outside our operational control. The TC out
• All TORM offices around the world
based emission factors.
voyages and On-hire days are excluded from the population
and added under scope 3 category 13.
Scope 2
CO2 emissions generated indirectly from operational
activities at the TORM offices are calculated using Danish
Greenhouse Gas Emissions
Scope 3: Indirect upstream and downstream emissions
from third-party activities and operational management
• Business travel (GHG #6): This category includes
emissions from the transportation of employees in
vehicles owned by third parties (such as airfreight, taxi)
and hotel stay. Primary methodology has been used
services. Based on our materiality threshold of 2% following
where detailed air travel data has been received by
the GHG recommendations, TORM includes the following
TORM’s travel partners with average emission factors.
and World Resources Institute emission factors. Offices
Scope 3 GHG categories in our reporting framework:
Spend-based approach has been used for hotel
with less than 10 employees have not been included. An
allocation key based on m2 occupancy is used when no
direct data can be retrieved for shared common areas.
• Purchased goods and services (GHG #1): This category
expenses with industry-specific emission factors used
includes operating expenses, administration, port costs,
to calculate emissions.
and investments related to dry docking and vessel
• Downstream leased assets (GHG #13): This category
Scope 3
CO2 emissions generated from activities not owned or
controlled by TORM, that we indirectly affect in our value
chain. Scope 3 emissions are calculated using a mixed
approach where spend-based data as well as supplier-
specific and/or activity-based data are used, and where the
relevant emission factors are applied. We are using a variety
TORM ANNUAL REPORT 2023
projects. Data has been categorized as either “Primary/
Hybrid” or “Spend-based”. Primary/Hybrid approach is
where we know the actual quantities consumed
combined with industry specific emission factors
converted into emissions. “Spend-based” approach is
used where no primary data was available.
includes emissions that occur during the operation of
time-charters without operational control (TC out > 3
months/ TC in < 3 months). Specific quantity data is
used for fuel oil and gas oil. The IMO Tank-to-Wheel
(TTW) emission factors have been used to calculate
emissions occurring during the operation of time-
charters without operational control.
OUR RESPONSIBILITY
58
ESG Accounting Policies
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
TORM's EU Taxonomy Accounting Policy
In order to align with the EU Taxonomy, a company is
dry-docking’ and ‘prepayment on vessels’. See Note 3 in
2050, we based the work on three climate scenarios, which
the Consolidated Financial Statements.
were all respectively combined with a short, medium, and
required to live up to the following:
For operating expenses, TORM uses an allocation key of
long-term perspective.
1. Contribute to one or more of six environmental
10% for seafarers wages related to repair and maintenance.
objectives. The six environmental objectives outlined in
The allocation key is based on interviews.
the EU Taxonomy are climate change mitigation
(Regulation EU 2020/852 Annex 1), climate change
adaption (Regulation EU 2020/852 Annex 2),
Climate Change Mitigation
According to the technical criteria for substantial
Taking TORM’s full value chain into consideration, we
worked with the scenarios including both upstream and
downstream activities. It was found in the assessment that
the worst-case scenario of impact based on climate-related
sustainable use of water and marine sources, circular
contribution to climate change mitigation, TORM has
risk scenarios would be ‘Higher sea level rise and extreme
economy, pollution prevention, and a healthy
ecosystem (Commission Delegated Regulation EU
assessed the alignment of our activities. Tanker vessels are
temperatures’.
not included in alignment criteria if the vessels are
2023/2486).
2. Do no significant harm (DNSH) to the remaining
objectives.
3. Meet the minimum social safeguards.
dedicated to the transportation of fossil fuels. TORM is not
considered dedicated to transporting fossil fuels as TORM
Water
TORM has worked for years to reduce water pollution by
is not in a locked in position and is able to transport soft
implementing Ballast Water Treatment Systems (BWTS) on
oils. However, this trade is considered immaterial. TORM’s
all our vessels. These systems help avoid the risk of invasive
vessels cannot be considered as having a share of activities
species. In addition to BWTS, we report on oil spills, and
The EU Taxonomy has technical screening criteria that can
that are aligned according to the EEDI criteria and
both form part of our adaption of the SASB Marine
be used to evaluate whether or not a company’s activities
therefore, we have assessed that our operations are not
Transportation reporting standard.
are aligned with ‘Climate change mitigation’ or ‘Climate
considered aligned.
adaption’, whether or not aligned objectives do no
significant harm to other EU Taxonomy objectives, and
whether or not activities are aligned with the minimum
social safeguard criteria.
TORM has assessed whether or not the activities do any
considers the IMO’s water regulation to be sufficient to
harm to the remaining environmental objectives, which
avoid doing harm to the waters in which we sail. TORM’s
determines if they live up to the DNSH criteria. Below is the
operations align with the International Convention for the
review of this assessment of alignment with the remaining
Control and Management of Ships' Ballast Water and
TORM follows the IMO standards for all operations and
TORM’s only activity considered in scope is number 6.10
objectives.
'Sea And Coastal Freight Water Transport, Vessels For Port
Sediments to reduce water pollution using best
management practices and policies.
Operations, and Auxiliary Activities'.
Alignment and Eligibility
In 2023, TORM’s revenue and revenue-generating
activities are generally considered eligible but not
Climate Adaption
TORM’s assessment of climate adaption for the EU
By following these reporting standards, we consider TORM
Taxonomy was based on TCFD. For more information on the
to be in alignment with the water criteria for DNSH.
scenario analysis and the risks and opportunities identified,
please view the section ‘Climate-related risk analysis
Taxonomy-aligned. TORM’s CAPEX and OPEX are also
and TCFD’.
considered eligible but not aligned. TORM’s taxonomy-
In our assessment of the transition and physical climate-
eligible CAPEX in 2023 consists of ‘vessels and capitalized
related risks and opportunities that TORM faces ahead of
TORM ANNUAL REPORT 2023
OUR RESPONSIBILITY
59
ESG Accounting Policies
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Circular Economy
As part of TORM’s strategy, we purchase second-hand
Pollution Prevention
TORM complies with all technical criteria put forth under
Minimum Safeguards
In our assessment, TORM is in compliance with the DNSH
vessels and implement updates on them with new
the objective ‘Pollution prevention’ because these criteria
criteria of the EU Taxonomy. To account for alignment with
equipment and technology. When we do find it necessary to
are considered IMO standards.
the EU Taxonomy, we have reviewed the extent to which
recycle a vessel, TORM follows the Hong Kong Convention
and EU SRR. This requires TORM to have operating
procedures in place for managing waste at a vessel’s end of
life.
TORM uses onboard logbooks and reports to technical
managers to keep track of all waste generated onboard
vessels. TORM is in compliance with MARPOL, Annex V,
which is enforced by the IMO, making it a standard in the
shipping industry. MARPOL, Annex V requires vessels to
have measures in place for preventing accidental loss of
garbage, as well as for having equipment onboard to collect
and store garbage, and finally it requires vessels to have
procedures to dispose of the garbage properly.
Making it a standard in the shipping industry, MARPOL,
Annex V requires vessels to have measures in place for
prevention of Pollution by Garbage from ships, as well as for
having equipment onboard to collect and store garbage.
The regulation requires vessels to have procedures to
dispose garbage properly. In TORM, we have implemented
waste management plans, and we use the best techniques
available to us for reducing the environmental impact of
waste management.
TORM is ISO 14001 certified. We have ensured that
TORM’s vessels comply with Annex VI to the IMO MARPOL
safeguards.
our activities are aligned with the minimum social
Convention.
As such and in reference to the review above, we consider
TORM in alignment with the pollution prevention criteria for
DNSH.
Biodiversity
TORM complies with all technical criteria put forth under
the objective ‘Biodiversity’ because these criteria are
considered IMO standards.
TORM also complies with the provisions of the International
Convention for the Control and Management of Ships
Ballast Water and Sediments. Finally, all TORM vessels
comply with the IMO biofouling guidelines, and we have
measures in place to prevent the introduction of non-
indigenous species by biofouling hulls.
As such and in reference to the review above, we consider
TORM in alignment with the biodiversity criteria for DNSH.
With TORM’s Business Principles and the commitment to
the UN Global Compact since 2009, TORM is committed to
respecting human rights as outlined in the United Nations
Guiding Principles on Business and Human Rights. Please
refer to the ‘Human rights and business ethics’ section of
the Governance section for more information.
TORM has a ‘zero tolerance’ approach to bribery and
corruption. In 2011, TORM co-founded the Maritime Anti-
Corruption Network (MACN). TORM follows OECD
Guidelines covering labor rights, bribery and corruption,
environmental protection, and human rights.
Based on the review above, we consider TORM in alignment
with the minimum safeguards criteria that enable EU
taxonomy aligned activities reporting.
TORM ANNUAL REPORT 2023
OUR RESPONSIBILITY
60
ESG Accounting Policies
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
Other Accounting Policies
CO2 emissions (Equivalent Ton)
The greenhouse gas emissions (GHG) reporting covers
Scope 1 (direct emissions from own production), Scope 2
(indirect emissions from the generation of purchased
energy), and Scope 3 (emissions indirectly affected but not
owned or controlled by TORM) of the Greenhouse Gas
Protocol. The Marine Exhaust is not included in 2023.
AER/Carbon Intensity (g/dwtxnm)
Energy Consumption (GJ)
AER is a measure of efficiency using the total fuel
All fuel burned on board the vessels has been converted
consumption, distance travelled, and deadweight. The
measure is defined as grams CO2 emissions emitted by the
vessels per deadweight-ton-nautical mile. AER includes
emissions from both Scope 1 and Scope 3 Category 13.
into energy based on fuel oil analysis results.
Office Electricity Consumption (kWh)
Electricity consumed indirectly in operating activities at
Deadweight is defined in accordance with the highest
TORM offices excluding sites with less than 10 people
deadweight value available in the maximum load line
employed. These sites are London, Dubai, Delhi, and the
TORM uses the operational control principle as our
organizational boundary when calculating our Scope 1,
Scope 2, and Scope 3 emissions. This has the following
implications:
• Upstream emissions from fuel usage in Scope 1 and
Scope 2 are accounted for in Scope 3.
•
•
Investments with operational control are accounted for
in Scope 1.
In line with our organizational boundary, we consider
vessels that are time-chartered out (T/C-out) for less
than three months as well as vessels which are time-
chartered in (T/C-in) for more than three months as
part of Scope 1.
•
In line with our organizational boundary, we consider
vessels that are time-chartered out for more than three
months as well as vessels which are time-chartered in
for less than three months as part of Scope 3.
certificate cross-referenced with the deadweight of a ship
in water of relative density of 1,025 kg/m3 at summer load
draught. Distance is defined as GPS distance recorded by
the vessel. AER is affected by vessel size, speed, duration
of waiting time, and port stays.
EEOI (g/cargoxnm)
EEOI is a measure of efficiency using the total fuel
consumption, distance travelled, and cargo intake. The
measure is defined as grams CO2 emissions per cargo-ton-
nautical mile. EEOI is affected by vessel size, speed, cargo
availability, duration of ballast voyages, waiting time, and
port stays.
SOx Emissions (ton)
Sulfur emission is calculated as a multiplication of
consumption for each of the different fuel types by the
Sulfur Oxide content, summarized and converted to metric
tons. For vessels that have a scrubber installed, the sulfur
content of HFO is set to a fixed value of 0.025%. For
records where bunkered fuel amount has been submitted
without an associated sulfur content percentage, a
weighted average of sulfur percentage for that fuel type
going a year back is used.
Houston offices. An allocation key based on either FTE or
sqm occupancy is used when no direct data can be
retrieved for shared common areas.
Office Water Consumption (m3)
Water consumed indirectly in operating activities at the
TORM offices excluding the offices in London, Houston,
Mumbai, and New Delhi.
Spills
The definition of spills is based on ITOPF. We report the
total volume of spills as the estimated aggregate volume of
all spills. We do not net the amount of such material that
was subsequently recovered, evaporated, or otherwise lost
as required by SASB standard TR-MT-160a.3 -2.1.
Deadweight Tonnage (Based on SOLAS II-1A-Reg
2-20)
Deadweight tonnage is the difference in tons between the
displacement of a ship in water of a specific gravity of 1.025
at the draught corresponding to the assigned summer
freeboard and the lightweight of the ship.
TORM ANNUAL REPORT 2023
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61
ESG Accounting Policies
OUR RESPONSIBILITY FRAMEWORK
OUR PRIORITIES AND RESULTS
ESG DATA TABLES AND POLICIES
COC (Based on IACS Document Classification
Societies Section B3 Classification Surveys)
The requirement that specific measures, repairs, request
for survey, etc. are to be carried out within a specified time
period in order to retain class.
LTAF or LTIF (Based on OCIMF Marine Injury Reporting
Guidelines Section 4)
The number of Lost Time Injuries per unit exposure hours
for the operating fleet. Unit in respect of LTIF is one million
man hours. Lost Time Injuries are the sum of fatalities,
permanent total disabilities, permanent partial disabilities,
and lost workday cases as based on OCIMF Marine Injury
Reporting Guidelines Section 3.
Marine Casualty (Based on IMO Casualty Investigation
Code Ch 2 -2.9))
A marine casualty means an event, or a sequence of events,
Material Damage to Ship (Based on IMO Casualty
Investigation Code Ch 2 -2.16)
A material damage in relation to a marine casualty means:
that has resulted in any of the following and that has
• Damage that significantly affects the structural
occurred directly in connection with the operation of a ship:
integrity, performance or operational characteristics of
•
•
•
The death of, or serious injury to, a person
marine infrastructure, or a ship.
The loss of a person from a ship
• Damage that requires major repair or replacement of a
The loss, presumed loss, or abandonment of a ship
major component or components.
• Material damage to a ship
• Destruction of the marine infrastructure or ship.
•
The stranding or disabling of a ship or the involvement
of a ship in a collision
• Material damage to marine infrastructure external to a
ship that could seriously endanger the safety of the
ship, another ship, or an individual
• Severe damage to the environment or the potential for
severe damage to the environment, brought about by
the damage of a ship or ships
However, a marine casualty does not include a deliberate
act or omission with the intention to cause harm to the
safety of a ship, an individual, or the environment.
Very Serious Marine Casualty (ased on IMO Casualty
Investigation Code Ch 2 -2.22)
A very serious marine casualty means a marine casualty
involving the total loss of the ship, a death, or severe
damage to the environment.
Permanent Management Positions in Offices (ex.
Directors and Senior Executives)
Total Management other than Directors of the Company
(VPs, GMs, Senior Managers, and Managers with one or
more direct reports). The five Non-Executive Directors are
not included as employees of the Group.
Permanent Seafarer Officers
Defined as officers living in Scandinavia.
TORM ANNUAL REPORT 2023
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62
TORM ANNUAL REPORT 2023
REVIEW AND RISK
63
Market Review
Geopolitical tensions kept product tanker freight rates elevated and volatile in 2023.
The product tanker market was strongly impacted by
During the same period, Russia found new markets for its oil
They made up the so-called shadow fleet. With an
geopolitical events in 2023. The EU/G7 sanctions against
products in Turkey, Africa, Middle East, Latin America, and
increasing share of the Russian trade being round-trips, this
Russian oil products officially took effect on 05 February
Asia. Before the sanctions came into effect, more than 70%
shadow fleet increased inefficiency on the market.
2023, which reinforced the trade recalibration that had
of Russian clean product exports went short-haul, and this
partly started already in 2022. This resulted in a significant
percentage declined to only 40% post-sanctions.
Longer trade distances stemming from trade recalibration
increase in product tanker trading distances and hence
boosted the ton-mile demand for product tankers in 2023,
demand for vessels, and consequently led to a step change
In addition to the EU sanctions, G7 imposed a price cap on
which came in 8% higher than in 2022. This happened
in product tanker freight rates towards a higher average
Russian oil and oil products. This only allowed
despite generally lower European imports amid a worsened
level. However, the recalibration also increased rate
transportation of Russian oil and oil products to third
macroeconomic situation and warmer-than-usual winter
volatility as the product tanker fleet moved closer to the
countries on vessels insured by G7/EU/UK P&I clubs if the
weather.
point of full utilization, where even small changes in
product was sold under the price cap. As a result, a two-tier
underlying demand and supply create high volatility in
tanker market was created, where some vessels - often
Effective 01 March 2022, TORM decided not to enter into
freight rates.
older ones - became 100% dedicated to Russian trade.
any new business involving Russian port calls and Russian
Although to a lesser extent, also restrictions on the Panama
Canal transits resulted in longer sailing patterns.
Towards the end of the year, a military conflict in the Middle
East and subsequent attacks against vessels forced several
vessels to re-route away from the Red Sea, yet the impact
of this was more severely felt first in 2024.
Sanctions against Russia
While the product tanker market reacted immediately to
Russia's invasion of Ukraine on 24 February 2022, the EU/
G7 sanctions against Russia officially came into effect on
05 February 2023 for refined oil products (for crude oil,
sanctions came into effect on 05 December 2022).
As a result, the EU replaced around 1m b/d of lost Russian
oil products (mainly diesel) with supplies from sources
further afield such as the US, Middle East, and Asia. Prior to
the Russian invasion of Ukraine, around 60% of EU/UK oil
product imports came from short-haul sources. Post-
sanctions, 80% of imports came from long-haul sources.
TORM ANNUAL REPORT 2023
Tanker Freight Rates in 2023
SOURCE: CLARKSONS
AVERAGE TCE IN USD/DAY
customers.
Composition of EU/UK-Russia CPP Trade
SOURCE: KPLER
K/B/D
EU/UK imports
Russia exports
REVIEW AND RISK
64
LR2 Ras Tanura - ChibaLR1 Ras Tanura - ChibaMR AverageJanFebMarAprMarJunJulAugSepOctNovDec10,00020,00030,00040,00050,00060,000Short-haulLong-haul202120222023202120222023—5001,0001,5002,0002,500
Market Review
Restrictions on Panama Canal Transits
Historically low water levels at the Panama Canal forced
In 2023, a net of 0.8m b/d of new refining capacity came
online in the Middle East, however several refineries had
canal authorities to restrict the daily number of transits in
issues with ramping-up of runs (including the Jazan refinery
the second half of 2023, also leading to vessel delays and
that was commissioned already in 2021). This meant that
re-routing towards longer trade distances. Consequently,
the impact of these mainly diesel-oriented refineries
the share of global clean petroleum product volumes
remained limited in 2023, with further upside expected in
transiting the Panama Canal fell from 5% in 2022 to 3% in
2024. Furthermore, several export-oriented refineries in
2023. Disruptions at the Panama Canal contributed to the
the Middle East underwent extensive maintenance in the
strength in the product tanker rates in the US Gulf, with MR
fourth quarter of 2023. Despite this fact, the overall
rates in the region assessed at above USD 50,000 per day
strength of product tanker rates illustrated the inherent
throughout the last quarter of the year.
robustness of the product tanker fundamentals.
Global Oil Demand and Changes in the
Refinery Landscape
While geopolitical issues and market disruptions were the
main contributors to the product tanker market strength in
2023, the underlying growth in global oil demand was
supportive as well. In 2023, global oil demand reached and
exceeded pre-COVID-19 levels, averaging an all-time high
Australia/New Zealand Clean
Petroleum Product Imports
SOURCE: KPLER
of 101.7m b/d (source: IEA). This, however, masked regional
KB/D
differences with growth mainly stemming from China while
especially Europe showed signs of weakening demand amid
macroeconomic woes.
Recent changes in the global refinery landscape also
continued to support the strong rate environment, with
clean petroleum product imports into Australia and New
Zealand still growing in 2023 and ending the year at 60%
above the 2019 levels.
Middle East Refinery Capacity Net
Additions and Runs
SOURCE: ENERGY ASPECTS
KB/D
TORM ANNUAL REPORT 2023
REVIEW AND RISK
65
59657468583695320192020202120222023—2505007501,000900140300700Net additionsRuns20232024—2505007501,000 Market Drivers and Outlook
The product tanker market continues to benefit from longer trade distances amid
sanctions against Russia, further supported by recent developments in the refinery
sector and a need to replenish stockpiles. Add to this, a favorable tonnage supply side.
The Red Sea disruption
After a stronger-than-average ton-mile growth of 8% in
The war between Israel and Hamas that broke out in early
October 2023 led to a number of attacks by Houthi rebels
2023, most of the trade recalibration due to sanctions on
targeting vessels travelling in the Red Sea. This led to
Russia has now occurred. Ton-mile growth in the next two-
shipping companies pausing on transits via the Red Sea and
three years will be driven by trends in oil demand, ramp-up
re-routing vessels towards longer trade route around the
of new refineries in the Middle East, and even more
Cape of Good Hope. Dependent on the initial trade route,
importantly, by the developments in the geopolitical
that added 30-70% to the length of the journey and hence
situation in the Middle East.
ton-mile. Taking into account that prior disruption, 12% of
global trade volumes with clean petroleum products
travelled through the Suez Canal, the impact on the product
tanker market is set to be significant, with full magnitude
dependent on how long the disruption will last.
TORM’s financial performance outlook is further
explained on page 68
Tonnage Demand
In the next three years, global oil demand growth is set to
slow down to around 1% per year from 2% in 2023. Despite
slowing growth in oil demand, the recent changes in the
clean petroleum product trade flows towards longer trading
distances will continue to support the product tanker
market as long as the sanctions against Russia remain in
place. Even though the main impact from sanctions has
already occurred, a further upside to sanction-related trade
recalibration is expected from two factors: A potential
recovery in the European oil demand and diesel imports, and
the need to replenish diesel inventories that have been
drained to the second-lowest level since 2013 in the main
shipping hubs in West Europe (Amsterdam-Rotterdam-
Antwerp).
The potential increase in European imports will need to be
supplied by long-haul trade, likely from the Middle East
where new refineries continue to ramp up runs. This new
capacity has been concentrated towards middle distillates.
Additions to refining capacity will slow in the next couple of
years, but the regions will still contribute with higher
refinery runs and subsequent product exports.
On the other hand, the start-up of the large Dangote
refinery in Nigeria is expected to be slow with full utilization
reached by end-2025 at the earliest. As such, the import
needs of West Africa are likely to remain intact for a period
of time.
TORM ANNUAL REPORT 2023
REVIEW AND RISK
66
Market Drivers and Outlook
Tonnage Supply
Following 2% fleet growth in 2023, product tanker fleet net
capacity is expected to grow at around the same pace
during 2024-2026. While scheduled product tanker
deliveries for 2024 are low, higher scheduled deliveries in
2025 and 2026 are partly offset by increasing recycling
potential as a larger share of the fleet turns 25 years old.
In 2023, 72 newbuilt product tankers entered the fleet,
mostly comprising MRs (38 vessels) and LR2s (22 vessels).
The high freight rate environment discouraged recycling
activity, with only nine vessels leaving the market for
scrapyards. Meanwhile, newbuilding ordering activity
picked up in 2023, reaching a 10-year high (241 vessels to
be delivered in 2025-2027). This was a stark contrast to
the year before where only 85 vessels were ordered. While
the majority of newbuilding interest was concentrated in
the LR2 and MR vessel classes, LR1s were ordered for the
first time in five years.
Consequently, the order book for the total product tanker
segment in terms of capacity stood at 12% at the end of
2023 (covering 2024-2027 deliveries). However, this
masked a large difference per size class. While the order
book in the LR2 vessel class comprised 28% of the existing
fleet, the figure was only 6% for LR1s and 9% for MRs.
Furthermore, the large LR2 order book needs to be seen in
combination with the uncoated Aframax order book, which
stood at only 3% (while the vessel class has a large
recycling potential), resulting in a 13% order book for the
combined LR2/Aframax vessel classes. Lastly, the record
high ordering activity in 2023 follows several years of
relatively subdued ordering activity, and will be spread over
more than three years of deliveries.
Given the uncertainty around the requirements for vessel
propulsion systems in the future, TORM expects the
newbuilding ordering activity to come down from 2023
levels and remain relatively limited in the next couple of
years.
Generally, the positive trends on the product tanker
demand side combined with relatively limited tonnage
supply growth, support a positive freight market
development in the next three-year period. However,
market volatility is expected to remain not least due to the
continued geopolitical instability.
Global product tanker fleet and order book
As of 31 December 2023
Fleet
31.12.2022*
Delivered in
2023
Scrapped in
2023
Fleet
31.12.2023*
Order book for
2024-2026
LR2
LR1
MR
Handysize
Total
416
377
1,863
782
3,438
22
0
38
12
72
0
0
6
3
9
438
377
1,896
791
3,502
107
20
163
34
324
2024-2026
Order book
as % of end
2023 fleet
24 %
5 %
9 %
4 %
9 %
TORM ANNUAL REPORT 2023
REVIEW AND RISK
67
Financial Outlook 2024
Financial Outlook
To assess our financial performance at TORM, we include
• Potential difficulties of major business partners
• One-off market-shaping events such as strikes,
the number of covered days, interest-bearing bank debt,
conflicts, embargoes, political instability, weather
the TCE, and EBITDA sensitivity to freight rates in our
conditions, etc.
periodic ongoing reporting.
We have limited visibility on TCE rates that are not yet fixed
The primary driver for our financial performance is the
with our customers. Hence, these rates may be significantly
product tanker market which is highly uncertain and
lower or significantly higher than our current expectations.
therefore expected to be highly volatile. We expect to
maintain a relatively stable OPEX on a per vessel day basis..
For the full-year 2024, TCE earnings are expected to be in
Administrative costs are expected to remain at the 2023
the range of USD 1,000 - USD 1,350m (2023: USD
levels. In 2023, we had an EBITDA break-even TCE rate of
1,084m), and EBITDA is expected to be in the range of USD
approx. USD/day 9,800 excluding profits from sale of
700 – 1,050m (2023: USD 848m) based on the current
vessels.
fleet size, including published acquisitions and divestments
of vessels. Please refer to page 225 for a definition of TCE
Our financial outlook is primarily based on the assumptions
earnings.
described on the preceding pages. The most important
macroeconomic factors affecting our TCE earnings in 2024
As of 04 March 2024, TORM had covered 25% of the 2024
are expected to be:
full-year earning days at USD/day 44,089. Hence, 75% of
the 2024 full-year earning days are subject to change.
• Geopolitical conflicts including the wars between Russia
and Ukraine and Israel and Hamas and the conflicts in
As 23,737 earning days in 2024 are unfixed as of 04 March
the Red Sea
2024, a change in freight rates of USD/day 1,000 will – all
•
The war and sustained and increased conflicts in the
other things being equal – impact the EBITDA by USD
Red Sea and instability in the Middle East region
23.7m.
• Global economic growth or recession, consumption of
refined oil products, and inflationary pressure
Also as of 04 March 2024, 82% of the Q1 2024 earning
•
Location of closing and opening refineries and
days were covered at USD/day 45,036. For the individual
temporary shutdowns due to maintenance
vessel classes, the Q1 2024 coverage was 78% at USD/day
• Oil price development
59,330 for LR2, 77% at USD/day 50,794 for LR1 and 84%
• Oil trading activity and developments in ton-mile
at USD/day 40,413 for MR.
• Bunker price developments
• Global fleet growth and newbuilding ordering activity
Disclaimer on Financial Outlook
The purpose of this Financial Outlook for 2024 is to
comply with reporting requirements for Companies
listed in Denmark. Actual results may vary, and this
information may not be accurate or appropriate for
other purposes. Information about our financial
outlook for 2024, including the various assumptions
underlying it, is forward-looking and should be read in
conjunction with the Safe Harbor Statements on page
142, and the related disclosure and information about
various economic, competitive, and regulatory
assumptions, factors, and risks that may cause our
actual future financial and operating results to differ
materially from what we currently expect.
The information included in this Financial Outlook for
2024 is preliminary, unaudited and based on
estimates and information available to us at this time.
TORM has not finalized its financial statements for the
periods presented. During the course of the financial
statement closing process, TORM may identify items
that would require it to make adjustments, which may
be material to the information provided in this section.
As mentioned above, the provided information
constitutes forward-looking statements and is subject
to risks and uncertainties, including possible
adjustments to the financial outlook for 2024.
TORM ANNUAL REPORT 2023
REVIEW AND RISK
68
Coverage 2024-2026
Total physical and covered days in TORM as of 04 March 2024.
As of 04 March 2024, TORM expects to have 7,703 available earning days for the first
quarter of 2024. For LR2 the corresponding number is 1,487 available days, for LR1 890
The coverage tables below include both FFA contracts and the physical fleet.
Also as of 04 March 2024, the market value of TORM’s FFA and bunker swaps are assessed
available days and for MR 5,326 available days.
at a total of USD -1.0m. TORM has through FFAs covered 120 days of Q1 2024 at USD/day
40,582. All FFAs where made for MR vessels (TC14).
Total earning days
LR2
LR1
MR
Total
Covered days
LR2
LR1
MR
Total
2024
2025
2026
2024
2025
2026
7,009
3,546
20,949
31,504
7,543
3,590
20,955
32,088
7,459
3,626
20,862
31,947
Covered, %
LR2
LR1
MR
Total
Coverage rates, USD/day
2,130
695
4,942
7,767
862
—
—
862
—
—
—
—
LR2
LR1
MR
Total
30 %
20 %
24 %
25 %
11 %
— %
— %
3 %
51,712
43,302
50,785
39,863
—
—
44,089
43,302
— %
— %
— %
— %
—
—
—
—
Actual no. of days can vary from projected no. of days primarily due to vessel sales and delays of vessel
deliveries.Total available earning days are defined as total calendar days less off-hire days.
The coverage figures include FFA positions. The FFA positions are covering two trades, all carrying clean
products. The first is a triangulation route from the European Continent to the US Atlantic Cost (TC2),
followed by a haul from the US Gulf back to the European Continent (TC14) for the MR fleet. The second
is a round trip from the Middle East Gulf to Japan (TC5) and back for the LR1 fleet. Both trades are
representative of their vessel type and the geographical location and are supported by adequate trading
volumes in the futures market.
TORM ANNUAL REPORT 2023
REVIEW AND RISK
69
TORM Fleet Development
Actual and expected development in the fleet of owned and leased vessels as of 07 March 2024
By the end of December 2023, TORM had 82 owned and
In Q2 2023, one LR1 vessel (TORM Sara) was sold and
In Q4 2023, TORM sold and delivered one LR2 vessel
leased vessels in the LR2, LR1, and MR vessel classes. We
delivered to its new owner.
(TORM Marina) and three MR vessels (TORM Kansas,
expect to have 90 vessels by the end of April 2024.
TORM Thyra, and TORM Hardrada).
In connection with TORM's refinancing of facilities, six
The table shows recent and expected developments in
leased MR vessels (TORM Titan, TORM Torino, TORM
Also in Q4 2023, TORM acquired eight 2010-12 built fuel
TORM’s operating fleet. In addition to 58 owned product
Australia, TORM New Zealand, TORM Singapore, and TORM
efficient LR2 vessel, where five were delivered before 07
tankers, as of 31 December 2023, TORM had 24 vessels
Malaysia), were refinanced by debt financing in Q3 2023.
March 2024 (TORM Gwendolyn, TORM Gabriella, TORM
under sale-and-leaseback agreements with options to buy
TORM further sold and delivered one MR vessel (TORM
Gwyneth, TORM Ganga and TORM Gitte) and two are
back the vessels (financially reported as owned vessels in
Freya) to its new owner.
expected to be delivered in March and one in April 2024.
accordance with TORM's accounting policies).
In Q1 2023 and late Q2 2022, TORM purchased seven LR1
and TORM Estrid) that were both delivered to new owners in
Sofia and TORM Signe) as well as one MR vessel (TORM
vessels built in 2011-2013 (TORM Emilie, TORM Eva, TORM
Q4 2023.
Loke) that were all delivered to new owners in the beginning
Also in Q3 2023, TORM sold two LR1 vessels (TORM Ismini
In late December 2023, TORM sold two LR1 vessels (TORM
Integrity, TORM Innovation, TORM Emma, TORM Evelyn
of January 2024.
and TORM Evolve) and three 2013-built MR vessels (TORM
In Q4 2023, TORM acquired four 2015-2016 built fuel-
Betrice, TORM Birgitte and TORM Belis). The vessels were
efficient eco MR vessels. Two were delivered in Q4 2023
Early 2024 TORM acquired one 2011 built LR2 vessel, that
delivered in Q1 and Q2 2023 and financed through sale and
(TORM Diana and TORM Dagmar) and two were delivered in
is expected to be delivered in March 2024.
leaseback.
January 2024 (TORM Denise and TORM Danica).
16 of the acquired vessels made in 2023 and 2024 were
made as partly share-based transactions.
Fleet Development
Owned Vessels
LR2
LR1
MR
Total
Leaseback Vessels
LR2
LR1
MR
Total
Total fleet
TORM ANNUAL REPORT 2023
Changes
Q1 2023
Changes
Q2 2023
Changes
Q3 2023
Changes
Q4 2023
Changes April 2024
—
—
—
—
—
5
—
5
5
7
8
40
55
6
5
17
28
83
—
-1
3
2
—
2
—
2
4
7
7
43
57
6
7
17
30
87
—
—
5
5
—
—
-6
-6
-1
7
7
48
62
6
7
11
24
86
-1
-2
-1
-4
—
—
—
—
-4
6
5
47
58
6
7
11
24
82
9
-2
1
8
—
—
—
—
8
REVIEW AND RISK
15
3
48
66
6
7
11
24
90
70
TORM ANNUAL REPORT 2023
REVIEW AND RISK
71
Financial Review 2023
Financial review for the year ended 31 December 2023
"I am proud that TORM in 2023 for the second year in a row delivered record high results. The TCE of USD 1,084m and an EBITDA of
USD 848m was in line with our estimates from the Q3 2023 outlook. Net profit was USD 648m for the Group. The One TORM platform
made sure, that we successfully acquired and seamlessly integrated 22 vessels and sold 11 vessels since the beginning of 2023. During
2023, we obtained facilities for a total amount of USD 816.6m for financing of vessels and refinancing of existing of facilities, at the
same time extending maturities to 2028 and with an option to extend to 2029. Further, we financed additional secondhand vessels for
USD 345.5m and after year-end, we successfully accessed the Norwegian bond market by issuing a USD 200m bond."
Kim Balle, CFO
Key developments for the Tanker segment
USDm
Income statement
Revenue
Port expenses, bunkers, and commissions
Time charter equivalent (TCE)
Operating expenses
Administrative expenses
Net profit/(loss) for the year
Balance sheet
Vessels, capitalized dry-docking and prepayments on vessels
Total assets
Borrowings, current and non-current
Total liabilities
Key figures
TCE per day (USD)
OPEX per day (USD)
2023
2022
Change
1,491
-408
1,084
-216
-77
649
2,168
2,853
1,054
1,192
1,440
-459
982
-202
-52
563
1,863
2,597
960
1,099
51
51
102
-14
-25
86
305
256
94
93
37,124
7,069
34,154
6,825
2,970
244
TORM ANNUAL REPORT 2023
REVIEW AND RISK
72
Financial Review 2023
Income Statement
TCE
In 2023, we saw a rise in the average TCE rate/day for the
Tanker segment of 8.7% from USD 34,154 in 2022 to USD
Change in Time Charter Equivalent Earnings in the Tanker Fleet
Handysize
3.5
-3.6
—
0.1
—
MR
683.6
-16.6
39.7
1.7
708.4
LR1
99.4
59.6
1.9
0.3
161.2
LR2
195.0
-17.3
36.4
0.1
214.2
Total
981.5
22.1
78.0
2.2
1,083.8
37,124 in 2023. This growth was a result of an increase in
USDm
revenue along with a decrease in port expenses, bunkers,
and commissions for the Tanker segment.
Time charter equivalent earnings 2022
Change in number of earning days
Change in freight rates
Other
Time charter equivalent earnings 2023
Revenue for the Tanker segment for the year 2023
increased by USD 51.0m to USD 1,491.4m compared to
2022, corresponding to a 3.5% increase. The increase in
revenue continued to primarily be driven by a strong
product tanker market supported by the trade recalibration
caused by the sanctions of Russian product exports.
Port expenses, bunkers, and commissions for the Tanker
segment were USD 407.6m in 2023, a decrease of
USD 51.3m compared to USD 458.9m in 2022. The
decrease can primarily be attributed to realized gains of
USD 41.4m and unrealized gains of USD 2.1m on derivative
financial instruments regarding freight and bunkers. The
unrealized gains directly impact the TCE, but not the TCE/
day measure. The fair value of the contracts was positive
with USD 1.5m as of 31 December 2023.
TORM ANNUAL REPORT 2023
REVIEW AND RISK
73
Financial Review 2023
Earnings Data
USDm
LR2 vessels
Available earning days ¹⁾
Spot rates ²⁾
TCE per earning day ³⁾
LR1 vessels
Available earning days ¹⁾
Spot rates ²⁾
TCE per earning day ³⁾
MR vessels
Available earning days ¹⁾
Spot rates ²⁾
TCE per earning day ³⁾
Handysize vessels
Available earning days ¹⁾
Spot rates ²⁾
TCE per earning day ³⁾
Total
Available earning days ¹⁾
Spot rates ²⁾
TCE per earning day ³⁾
1) Total available earning days = Total calendar days less off-hire days
2) Spot rates = Time Charter Equivalent Earnings for all charters with less than six months' duration.
3) TCE = Time Charter Equivalent Earnings. Please refer to the glossary on pages 219 to 225.
2022
Full year
4,926
44,137
39,612
2,690
38,881
36,879
20,862
35,014
32,795
278
12,917
12,995
28,756
36,641
34,154
2023
Q1
Q2
Q3
Q4
Full year
% change
Full year
1,071
65,245
65,551
758
44,141
42,047
4,903
37,058
36,461
1,074
48,775
47,918
1,249
35,060
36,674
5,127
33,336
33,862
1,190
33,374
35,054
1,280
25,997
32,641
5,188
31,730
32,632
1,155
44,524
44,048
1,020
34,038
40,498
5,137
36,793
36,122
6,732
42,476
41,717
7,450
35,875
36,360
7,658
31,013
33,010
7,312
37,505
37,985
4,490
47,860
47,718
4,307
33,553
37,326
20,355
34,583
34,745
—
29,152
36,430
37,124
-9 %
8 %
20 %
60 %
-14 %
1 %
-2 %
-1 %
6 %
n/a
n/a
n/a
1 %
-1 %
9 %
TORM ANNUAL REPORT 2023
REVIEW AND RISK
74
Financial Review 2023
Operation of Vessels
The development in operating expenses (OPEX) for the
Tanker segment is summarized in the table on this page.
The table also summarizes the operating days and the
reconciliation to available earning days for TORM’s fleet
(including both owned vessels and vessels financed via
Change in Operating Expenses
USDm
Operating expenses 2022
Change in operating days
bareboat charters in sale and leaseback arrangements).
Change in operating expenses per day
OPEX for the Tanker segment increased by USD 14.3m to
USD 216.4m in 2023 compared to USD 202.1m in 2022.
This was due to 995 additional operating days compared to
Operating expenses 2023
Change in Operating Days
2022 and increased operating expenses per day of 3.6%
Days
stemming from general price increases combined with
costs related to recently acquired secondhand vessels.
Operating days in 2022
Change in operating days
Operating days in 2023
The total fleet of owned vessels had 1,453 off-hire and dry-
docking days, corresponding to 4.7% of operating days in
Offhire
Dry-docking
2023. This compares to 854 off-hire and dry-docking days
Available earning days 2023
in 2022 or 2.9% of operating days. The increase was
primarily driven by several additional planned dry-dockings
compared to 2022, and secondly, due to newly acquired
Change in Operating Expenses Per Day
vessels entering dry-docking shortly after take-over.
USD/day
Operating expenses per operating day in 2022
Operating expenses per operating day in 2023
Change in the operating expenses per operating day in %
Administrative Expenses
In 2023, administrative expenses for the Tanker segment
increased by USD 24.1m to USD 76.5m compared to 2022.
The primary factor was the issuance of the 2023 long-term
incentive program and the additional extraordinary
retention program granted to the CEO and certain
employees as announced on 29 March 2023. The fair value
of the programs was determined using the Black-Scholes
model and amounts to USD 64.4m of which USD 21.4m
was recognized in administrative expenses in 2023.
Handysize
1.8
-1.8
—
—
Handysize
290
-290
—
—
—
—
MR
144.0
0.9
5.1
150.0
MR
21,216
131
21,347
-171
-822
20,354
LR1
20.4
10.5
1.1
32.0
LR1
3,011
1,540
4,551
-77
-166
4,308
LR2
35.9
-2.7
1.2
34.4
LR2
5,093
-386
4,707
-119
-98
4,490
Total
202.1
6.9
7.4
216.4
Total
29,610
995
30,605
-367
-1,086
29,152
Handysize
6,133
—
-100 %
MR
6,788
7,028
4 %
LR1
6,781
7,021
4 %
LR2
7,045
7,298
4 %
Total
6,825
7,069
4 %
TORM ANNUAL REPORT 2023
REVIEW AND RISK
75
Financial Review 2023
Balance Sheet
Assets
TORM’s total assets for the Group increased by
Assessment of Impairment of Assets
For impairment purposes for the Group, the Management
has followed the usual practice of performing a review of
For the Marine Exhaust CGU, the year-end impairment test
did not identify any impairments.
USD 255.9m to USD 2,870.1m as of 31 December 2023,
impairment indicators for Q1 to Q3 2023 and presented the
Please refer to Note 10 for additional details of the
mainly driven by an increase of the total assets for the
outcome to the Audit Committee. The Audit Committee
impairment assessments.
Tanker segment of USD 256.4m to USD 2,853.4m. The
evaluates the impairment indicator assessment and
growth in the Tanker segment was primarily driven by an
prepares a recommendation to the Board of Directors on
increase in number of vessels and capitalized dry-docking,
whether to conduct an impairment test of the carrying
Equity
In 2023, total equity for the Group increased by
including prepayments on vessels of USD 304.3m as a
value of the fleet. In Q1 to Q3 2023, no indicators of
USD 162.3m to USD 1,666.0m. The growth was primarily
result of increased vessel acquisition activities during
impairment existed, and thus no recommendations to test
driven by an increase in share premium of USD 92.5m due
2023. The development is mainly offset by a decrease in
the value of the fleet were made to the Board of Directors.
to the issuance of new shares in connection with several
trade receivables of USD 49.5m.
As in previous years, the carrying amount at the end of the
partly share-based financed vessel acquisitions during
year was tested using either fair value less cost of disposal
2023. Additionally, the increase was impacted by a net
As of 31 December 2023, the carrying amount of vessels,
or the future discounted net cash flow deriving from the
increase in retained profit of USD 84.4m net of dividends
capitalized dry-docking, and prepayments on vessels in the
Main Fleet CGU. In 2023, the Management based the
paid of USD 586.4m. The development is slightly offset by
Tanker segment amounted to USD 2,167.7m compared to
recoverable amount on the fair value less cost of disposal.
a decrease in hedging reserves.
USD 1,863.4m at end 2022. This increase was due to the
acquisition of 22 vessels and capitalized dry-docking of
When assessing the fair value less cost of disposal, the
USD 520.6m and prepayments of USD 86.0m. 12 of the
Management includes a review of market values calculated
acquired vessels in 2023 were delivered during the year.
as the average of two internationally recognized
The increase was offset by the divestment of 11 older
shipbrokers’ valuations. The shipbrokers’ primary input is
vessels of USD 158.6m and depreciation of USD 143.7m.
deadweight tonnage, yard, and age of the vessel. The fair
Eight of the 11 sold vessels were delivered to new owners in
value is based on the assumption that the vessels are in
2023. For the remaining purchased and not delivered
good and seaworthy condition and with prompt, charter-
second-hand vessels, the committed payments were
free delivery. The fair value less cost of disposal of the
Liabilities
TORM's total liabilities for the Group increased by
USD 93.7m to USD 1,204.2m as of 31 December 2023,
mainly driven by an increase of the total liabilities for the
Tanker segment of USD 93.1m to USD 1,192.1m. The
development is primarily due to an increase in current and
non-current borrowings of USD 93.4m to USD 1,053.7m,
which stem from increased net vessel acquisitions during
USD 190.4m.
vessels is determined to be within level three of the fair
2023.
value hierarchy. Based on this review, the Management
Based on broker valuations, TORM’s fleet on water and
concluded that as of 31 December 2023 assets within the
purchased and not delivered second-hand vessels had a
Main Fleet CGU were not impaired as fair value less cost of
market value of USD 3,560.8m as of 31 December 2023 of
disposal exceeded the carrying amount for the Group by
which vessels held for sale contribute with USD 65.5m.
USD 952.1m.
TORM ANNUAL REPORT 2023
REVIEW AND RISK
76
Financial Review 2023
Liquidity and Cash Flow
The TORM Group liquidity position by the end of 2023 was
USD 638.1m (2022: USD 416.4m) including restricted cash
Cash Flow for the Group
of USD 30.1m (2022: USD 3.3m) and undrawn credit
USDm
facilities of USD 342.5m (2022: USD 92.6m).
During 2023, TORM completed major refinancing of bank
and leasing agreements for USD 528m. As a result of the
transactions, debt maturities have been extended to 2028
and 2029 respectively. Moreover TORM financed newly
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net cash flow from operating, investing and financing activities
acquired vessels for USD 288m. Financings consisted of
Net cash flow from operating activities was USD 805.1m
bilateral facilities by specialized shipping banks, leasing
(2022: USD 501.9m). The increase was primarily driven by
facility and nine banks participated in a syndicated facility
an increase in TCE and reduction of working capital
agreement.
compared to 2022.
As of 31 December 2023, the TORM Group had CAPEX
Net cash flow from investing activities was USD -370.6m
commitments of USD 226.1m primarily related to the
remaining installments on purchased not delivered
secondhand vessels and secondly related to scrubber
(2022: USD 11.3m). The development was primarily a result
of the acquisition of 22 vessels of which 12 were delivered
during 2023, offset by the divestment of 11 older vessels, of
installations and Flettner rotors also known as rotor sails.
which eight were delivered to new owners during 2023.
In January 2024, TORM announced the pricing of USD
Net cash flow from financing activities was USD -489.4m
200m, five-year senior unsecured bonds. The net proceeds
(2022: USD -337.6m). The increase in outflow was
from the bond issue will be used in part to finance the
primarily driven by dividend payments of USD 586.4m
acquisition of five of the eight vessels announced in
(2022: USD 166.7m).
November 2023, including full repayment of a bridge
facility potentially partly drawn in connection with the
acquisition, and for general corporate purposes.
2023
805.1
-370.6
-489.4
-54.9
2022
501.9
11.3
-337.6
175.6
Change
303.2
-381.9
-151.8
-230.5
Distribution
On 7 March 2024, our Board of Directors decided to
recommend to the Annual General Meeting to approve a
dividend of USD 1.36 per share, with a total dividend
payment of approximately USD 126.3m. The distribution is
in line with TORM’s Distribution Policy for 2023 with a cash
position of USD 295.6m, working capital facilities of USD
124.9m, restricted cash of USD 30.1m, earmarked
proceeds of USD 111.7m, and a cash position related to
Marine Exhaust Technology A/S of USD 4.9m. Cash
reservation per vessel is USD 1.8m for 82 vessels, USD
147.6m in total. The dividend payment is expected to be on
24 April 2024, to shareholders on record as of 16 April
2024, with the ex-dividend date on 15 April, 2024. The
dividend payment will not be recognized as a liability and
there are no tax consequences.
TORM ANNUAL REPORT 2023
REVIEW AND RISK
77
Financial Review 2023
Primary Factors Affecting the Results of
Operations
TORM generates revenue by charging customers for the
charter. TORM is neutral as to the charterer’s choice
Available Earning Days
because TORM primarily bases its financial decisions on
expected TCE rates rather than expected revenue. The
transportation of refined oil products and crude oil, using
analysis of revenue is therefore primarily based on
TORM’s tanker vessels. Our focus is on maintaining a high-
developments in TCE earnings.
quality fleet and high tradability, and we actively manage
the deployment of the fleet between spot market voyage
charters, which generally last from several days to several
weeks, and time charters.
TORM believes that the important measures for analyzing
trends in the results of our tanker operations comprise the
Spot Charter Rates
A spot market voyage charter is generally a contract to
carry a specific cargo from a load port to a discharge port
for an agreed freight rate per ton of cargo or a specified
total amount. Under spot market voyage charters, TORM
pays voyage expenses such as port, canal, and bunker
following:
costs.
Available earning days are the total number of days in a
period when a vessel is ready and available to perform a
voyage, meaning that the vessel is not off-hire or in dry-
dock. For the owned vessels, this is calculated by taking
operating days and subtracting off-hire days and days in
dry-dock. For the chartered-in vessels, no such calculation
is required because charter hire is only paid on earning days
and not for off-hire days or days in dry-dock.
Operating Days
Operating days are the total number of available days in a
period with respect to the owned and leased vessels, before
deducting unavailable days due to off-hire days and days in
dry-dock. Operating days is a measurement which is only
applicable to owned vessels, not to the time chartered-in
Time Charter Equivalent (TCE) Earnings
Per Available Earning Day
TCE earnings per available earning day are defined as
Spot charter rates are volatile and fluctuate on a seasonal
and a year-to-year basis. Fluctuations derive from
imbalances in the availability of cargo for shipment and the
vessels.
revenue less voyage expenses divided by the number of
number of vessels available at any given time to transport
available earning days. Voyage expenses primarily consist
these cargos. Vessels operating in the spot market
of port and bunker expenses, which are unique to a
generate revenue which is less predictable but can
particular voyage, and which would otherwise be paid by a
potentially enable TORM to capture increased profit
charterer under a time charter, as well as commissions,
margins during periods of improvements in tanker freight
freight, and bunker derivatives.
rates.
TORM believes that presenting revenue net of voyage
expenses neutralizes the variability created by unique costs
Time Charter Rates
A time charter is generally a contract to charter a vessel for
associated with particular voyages or the deployment of
a fixed period at a set daily or monthly rate. Under time
Operating Expenses Per Operating Day
Operating expenses per operating day are defined as crew
wages and related costs, the costs of spares and
consumable stores, expenses relating to repairs and
maintenance (excluding capitalized dry-docking), the cost
of insurance, and other expenses on a per-operating-day
basis. Operating expenses are only paid for owned vessels.
TORM does not pay such costs for the time chartered-in
vessels, as they are paid by the vessel owner and instead
vessels on the spot market and facilitates comparisons
charters, the charterer pays voyage expenses such as port,
factored into the charter hire cost.
between periods on a consistent basis. Under time charter
canal, and bunker costs. Vessels operating on time charters
contracts, the charterer pays the voyage expenses, while
provide more predictable cash flows but can yield lower
the shipowner pays these expenses under voyage charter
profit margins than vessels operating in the spot market
contracts. A charterer has the choice of entering a time
during periods characterized by favorable market
charter (which may be a one-trip time charter) or a voyage
conditions.
TORM ANNUAL REPORT 2023
REVIEW AND RISK
78
Financial Review 2023
Going Concern
As of 31 December 2023, TORM’s available liquidity
including undrawn and committed facilities was
those conflicts. In the base case, TORM has sufficient
Accordingly, TORM continues to adopt the going concern
liquidity and headroom for all the covenant limits.
basis in preparing our financial statements.
USD 638m, including a total cash position of USD 296m
TORM performs sensitivity calculations to reflect downside
(including cash held for dividend payment). TORM’s net
scenarios including, but not limited to, future freight rates
interest-bearing debt was USD 773m, and the net debt
and vessel valuations, in order to identify risks to future
loan-to-value ratio was 27.6% (Tanker segment only and
liquidity and covenant compliance and to enable the
before dividend payment related to Q4 2023). Further
Management to take corrective actions, if required.
information on TORM’s objectives and policies for
Long-Term Viability Statement
In accordance with provision 31 of the UK Corporate
Governance Code, the Board of Directors confirms that
they have a reasonable expectation that TORM will
continue in operation and meet our liabilities as they fall due
for the three-year period ending 31 December 2026. This
managing our capital, our financial risk management
The downside scenarios cover the principal risks and
period has been selected for the following reasons:
objectives, and our exposure to credit and liquidity risk can
uncertainties facing TORM and include different distressed
be found in Note 24 to the financial statements.
outlooks for the product tanker market. In a low case
•
The general volatility and uncertainty in the product
TORM monitors our funding position throughout the year to
lowest rolling four-quarter average since 2000 on a per
degree of judgement and uncertainty beyond a three-
ensure that we have access to sufficient funds to meet the
vessel class basis and a decline in vessel values. In such a
year period.
forecasted cash requirements, including newbuilding and
scenario, TORM maintains sufficient headroom for liquidity
•
Three years are generally in line with the forecast
scenario, the Management has stressed freight rates to the
tanker market leads to a significant increase in the
loan commitments, and to monitor compliance with the
and covenants.
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
and the associated effects on the product tanker market.
The changed geopolitical situation has so far been positive
for the product tanker market, and TORM’s base case
assumes that this positive sentiment related to freight
The principal risks and uncertainties facing TORM
are set out on pages 82 to 86
horizon for external equity analysts covering the
shipping sector.
•
•
TORM will not have any outstanding CAPEX
commitments related to currently known projects.
TORM will have passed the first CO₂ reduction target
milestone covering a 40% emission intensity reduction
The Board of Directors has considered TORM’s cash flow
in 2025 compared to the 2008 level.
forecasts and the expected compliance with TORM’s
financial covenants for the period until 31 March 2025.
TORM’s cash flow forecast and expected covenant
compliance are based on the Business Plan approved by the
rates and vessel values will continue throughout 2024.
Board of Directors. Based on this review, the Board of
TORM monitors the general development in the geopolitical
Directors has a reasonable expectation that taking
situation with current focus on the development of the
reasonably possible changes in trading performance and
conflict between Hamas and Israel, the Red Sea conflict,
vessel valuations into account, TORM will be able to
and potential effects on the product tanker market from
continue the operational existence and comply with our
financial covenants for the period until 31 March 2025.
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79
Financial Review 2023
The assessment of the Board of Directors has been made
four-quarter average since 2000 on a per vessel class basis
regulations, technological disruption, current geopolitical
with reference to TORM’s current financial position and
and a related decline in vessel values, TORM maintains
situation, and general changes in the utilization of energy
prospects. The assessment of financial performance and
sufficient headroom on liquidity and covenants throughout
sources into consideration. Based on this assessment and
cash flows is primarily dependent on the expectations for:
the viability period. TORM’s freight rate assumptions as per
taking the current capital structure and TORM’s operational
• Demand-supply picture in the product tanker sector
viability period and have further sensitized the vessel values
TORM is well positioned both to respond to these risks and
including expected vessel values and freight rates
downward over the period to reflect a continued downturn.
to take advantage of any positive market developments for
achieved by TORM, which additionally cover the outlook
Should the product tanker market (in terms of either freight
a period beyond the three-year forecast horizon.
the going concern assessment continue throughout the
platform into account, the Board of Directors believes that
related to the geopolitical situations and climate change
rates or vessel values) materialize significantly below
developments
• Development of the fleet
TORM’s expectations for a prolonged period, there is a risk
of a covenant breach after the going concern period, which
On behalf of TORM plc
• Operating and administrative expenses
would require mitigating actions, including cost savings,
• Capital expenditures covering vessel purchases and
sale of vessels, or increased leverage which are considered
Kim Balle
maintenance of the existing fleet including installation
within the Management’s control and achievable. In such a
Chief Financial Officer
of scrubbers and fuel efficiency equipment
scenario, the Management would also consider obtaining
TORM A/S
• Changes in interest rates
appropriate waivers and although they would be confident
07 March 2024
of obtaining them, these are not within the Management’s
The expected financial performance and cash flows are
control.
based on the same underlying assumptions as used in
TORM’s general financial planning. The operating and
The Board of Directors monitors if TORM is moving towards
administrative cost levels are on similar levels as TORM’s
a covenant breach in order to incorporate any mitigating
historical performance, and freight rates are assumed to
actions in due course on an ongoing basis. Based on the
remain at strong and profitable levels, however, with a
sensitivity analysis, the Board of Directors does not
decreasing trend from 2025 onwards. Vessel values used in
currently expect that TORM will breach its financial
forecasting compliance with financial covenants are based
covenants or experience a liquidity shortfall over the three-
on the latest market valuations from two independent,
year forecast period.
recognized shipbrokers. The expected outlook has then
been subject to a stress test and a sensitivity analysis over
The Board of Directors has also considered the long-term
the three-year period, using a conservative outlook for the
prospects of TORM beyond the three-year forecast viability
product tanker sector with sensitivities including freight
horizon. In doing so, the Board of Directors has taken the
rates and vessel values. The Management has conducted
long-term risks and opportunities for TORM discussed
low case scenarios to assess the long-term viability. In a
elsewhere in the strategic report and the potential impact
low case with freight rates slightly above the lowest rolling
of economic volatility, climate change agenda, new
TORM ANNUAL REPORT 2023
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“
As a global company, we must adapt to the
changing environment, mitigate risks, and seize
opportunities.
TORM ANNUAL REPORT 2023
81
Risk Management
As a global company, we must adapt to the changing environment, mitigate risks, and
seize opportunities. Systematically managing risks is key to creating and protecting
value over the short, medium, and long terms to maintain a competitive advantage.
Risk Management Framework
We acknowledge that TORM faces a range of risks in doing
TORM’s risk management framework acknowledges that
unforeseen or “black swan events” occur in the maritime
TORM’s Risk Appetite and Main Risk Exposure
The Senior Management Team and the Risk Committee
business and that our success depends on identifying and
industry. Therefore, TORM accepts this type of risks and
discuss and decide on TORM’s risk appetite and risk
balancing these risks, as well as deciding on how best to
will have a plan or will diligently develop a plan in case such
tolerance to principal and emerging risk exposures. TORM’s
manage and mitigate them. We believe that a strong risk
events materialize. The ability to react to and navigate an
risk appetite and inherited exposure risks are divided into
management framework is vital to protect TORM.
unpredictable future is managed in close collaboration
five main categories and emerging risks:
On an annual basis, TORM conducts an Enterprise Risk
agreed predefined accepted risk tolerance levels, which are
• Operational risks
Management (ERM) process, during which the critical risks
reported on at regular meetings or, if needed,
• Compliance and IT risks
between the Management and the Risk Committee via
•
Industry and market risks
facing TORM are identified, assessed, and discussed by the
extraordinarily.
Senior Management Team at TORM and subsequently
approved by the Risk Committee.
Risk Assessment Process
TORM’s risk identification process stipulates that the risk
The objective for TORM and our shareholders is to be
department conducts risk interviews with heads of
adequately rewarded for any desired risk tolerance level,
departments and senior management on an annual basis to
and that the governance structure tailored to oversee the
identify principal and emerging risks. Identified risks are
risk management activities is in place, so that risks are
prioritized, challenged, and approved by the Senior
mitigated to the extent desired.
Governance
TORM’s risk management approach emphasizes the
accountability and oversight of management. Identified risk
Management Team as risk owners. This also includes the
assessment of availability and effectiveness of mitigating
actions taken to avoid or reduce the impact or occurrence
of the underlying risks.
responsibility is assigned to the Senior Management Team
The risks are reassessed on a quarterly basis, and if specific
member most suited to manage the risk. This person is
events occur, they may require a reassessment. The
required to continually monitor the risk, implement and
identified risks in TORM are divided into top risks and risks
maintain mitigating actions, evaluate, and report.
on TORM’s watch list.
•
•
Financial risks
Emerging risks
TORM’s General Risk Appetite Per Group of Risk
Categories:
Industry and Market Risks
TORM accepts taking risks, where the expected return
outweighs the evaluated risk exposure.
Operational, Compliance, and IT Risks
TORM is risk adverse regarding operational, compliance,
and IT risks. In essence, TORM will seek to mitigate any
such risks to a meaningful minimum level.
If the consequence of a risk exceeds the agreed risk
tolerance, the Management is required to assess if
implementation of additional mitigating controls is possible
and necessary until the desired risk level is achieved.
TORM ANNUAL REPORT 2023
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Risk Management
Financial Risks
TORM is risk adverse regarding financial risks. In essence,
TORM will seek to mitigate any such risks to a meaningful
minimum level.
Emerging Risks
Emerging risks are described in detail in our TCFD
section on page 87
TORM’s top risks measured on likelihood and consequence
are listed below and displayed on the heat map.
Development Compared to Last Year
The Risk Committee and the Senior Management Team
have carried out a robust assessment, under the Corporate
Governance Code, of the principal and emerging risks which
TORM faces, including those that would threaten our
business model, future performance, solvency or liquidity,
and reputation.
A detailed description of each of the top risks is
available on pages 85-86
Below, we focus on the development of these risks.
Industry and Market Risks
TORM’s market risk exposure remains high, and we are
exposed to potentially adverse market conditions on
freight, bunkers, and vessel values. The residual risk level,
post mitigations, is considered manageable due to a strong
capital structure and our liquidity readiness while
continually assessing the market fundamentals and
mitigating factors.
The risks are at a level similar to last year due to similar
underlying factors. The volatility has been high during 2023
and is expected to continue at a high level in 2024,
however, the average freight rate level is expected to be
strong.
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Risk Management
Operational Risks
Oil major approval risk is considered to be at a low level due
to continuous focus and efficient controls.
TORM is currently preparing internal processes and
governance to comply with The EU Cybersecurity Act and
SEC Regulation Cybersecurity Maturity Model Review
Read more about mandates and sensitivity analysis
of the various risks in Note 24 on page 186
In the event that TORM becomes involved in an
(CSMR), which establish baseline cybersecurity
requirements for organizations in the EU and US,
TORM’s Risk Appetite
The Senior Management Team and the Risk Committee
decide TORM’s risk appetite and risk tolerance to principal
environmental disaster, this would damage our reputation
respectively.
and be detrimental to our pledge to the environment,
humans, and biodiversity. It is considered highly unlikely
Cyber risks include the risk of system unavailability and data
risk exposures.
that a vessel accident with severe oil pollution would not be
loss due to cyber attacks. Oil and gas and associated
covered by insurance.
Events such as piracy and terrorism could result in
infrastructure industries are expected to be targeted by
actors including Russia. TORM assesses that the risk of
cyber activism has increased from “possible” to “likely”,
kidnapping or injury to seafarers or vessel damage. Recent
which is in line with the Danish Centre for Cyber Security’s
attacks by Houthi rebels on vessels in the Bab-el-Mandeb
increase of the risk level related to cyber activism from low
Strait, a narrow passage connecting the Red Sea to the
to medium in 2022 and subsequently from medium to high
Risk Appetite Conclusion
In TORM’s 2023 risk assessment, it was concluded that
there is alignment between risk appetite and net severity
for TORM’s top risks. Severe vessel accidents are deemed
outside the risk appetite; however, this is the same
methodology used in previous years’ enterprise risk
Arabian Sea, have caused significant disruptions to
shipping traffic. The Red Sea is a crucial trade route for
in early 2023. The likelihood of Russian cyber attacks is
management evaluation. TORM accepts that some risks
increasing as the Ukraine conflict evolves into an extended
cannot be fully mitigated due to the nature of risks.
global commerce, connecting Asia and Africa with Europe.
war of attrition. Critical government and private sector
TORM decided to temporarily put a halt to transit of the
networks as well as infrastructure across the globe are
strait of Bab-el-Mandeb in Red Sea. As a consequence,
vulnerable to hacking and spying.
TORM has increased likelihood of risk of maritime safety
threats. Risk has reduced in other risk areas and The East
African region has been removed as an “area of unrest” by
Financial Risks
TORM’s financial gearing, liquidity buffer, and break-even
BIMCO, OCIMF, and other shipping bodies.
levels have been maintained the liquidity risk at an
Compliance and Cyber Risks
Due to the Russian invasion of Ukraine, sanctions have
increased. The likelihood of violating sanctions is deemed
acceptable level. Considering the high value generation and
current mitigation activities, the breach of covenants is
considered unlikely.
minor and manageable due to TORM not trading Russian
TORM has removed inflationary pressure as a top risk, due
customers along with mitigating activities, which involve
to low likelihood of substantial additional cost “shock”.
training of personnel as well as digital and automized
TORM is still subject to inflation risk, but at more
sanction screening systems.
normalized levels, which can be passed on to customers.
More details on risks, mitigations, and strategies in
our TCFD disclosure: www.torm.com/investors/
reports-and-presentations/financial-reports/
TORM ANNUAL REPORT 2023
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Risk Management
Description of Top Risks
A
Tanker
Freight Rates
Sustained low tanker
freight rates or inability to
predict and respond
timely and accurately to
freight rate
developments.
TORM’s profitability
would be negatively
impacted in case of a
distressed product tanker
market.
Industry and Market Risks
Operational Risks
B
Bunker Price
C
Asset Management
D
Oil Major Approval
E
Severe
Vessel Accident
F
Maritime
Safety Threats
Unexpected bunker price
increases not covered by
corresponding freight rate
increases.
Unexpected value
depreciation of vessels.
The most exposed vessels
are older vessels due to
new legislation driven by
the climate change
agenda.
A sudden and unexpected
breach in quality
requirements of a single
vessel or continuous
decrease in quality across
the fleet.
A severe vessel accident
such as an environmental
disaster or material
damage or personal injury.
A maritime venture has
inherent hazards. Events
such as piracy and
terrorism are considered
main security risks.
Vulnerability to a
sustained increase in the
bunker price and pass-
through to charterers may
not have an immediate
effect, meaning that
TORM may temporarily
bear the full effect of
price increases.
A decline in TORM’s net
asset value, which could
lead to a requirement
from banks to provide
additional security. TORM
would also be exposed to
cyclical asset prices and
assets contracted at too
high prices.
The risk of a partial ban of
the TORM tanker fleet by
one or more oil majors.
TORM’s involvement in an
environmental disaster
would damage TORM’s
reputation and impair its
tradability with oil majors.
Events such as piracy and
terrorism could result in
kidnapping of or injury to
seafarers or vessel damage.
TORM’s spot-oriented
strategy limits possible
mitigation. Unleveraging
is considered when terms
and pricing are deemed
attractive hereunder with
time charter-outs and
FFA coverage.
In general, TORM does
not hedge future bunker
expenses. In the case
that freight income is
fixed, TORM does hedge
future bunker exposures.
With a conservative
capital structure, focus
on conservative loan-to-
value and a close view of
the market, TORM
maintains flexibility and
an ability to act in the
asset market.
TORM’s integrated
platform with in-house
safety and technical and
operational staff secures
continued focus on
quality and high vetting
standards.
Disaster recovery plans
for emergency situations
are in place as well as an
ongoing safety resilience
program to enhance
safety culture, including
officers being trained as
“safety ambassadors”.
TORM’s internal Trading
Restrictions Committee
has oversight of security
threats and decides how
best to avoid and mitigate
the risk. TORM follows all
industry best practices and
has procedures in place in
case of an incident.
Risk
Potential
Impact
Mitigating
Activities
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Risk Management
Description of Top Risks
Compliance and IT Security Risks
Financial Risks
G
Legal Compliance
H
Cyber Security
I
Liquidity Risk
Legal or policy non-compliance or ethical misconduct.
The risk consists of competition law, corruption,
fraud, and sanctions.
System unavailability and data loss due to cyber
attacks caused by increasing interconnectivity and
severe external threat of cyber crime are driving
higher frequency and severity of incidents.
Liquidity risk is driven by financial gearing, liquidity
reserve, distribution policy, maintenance
requirements, fleet employment strategy, and
required vessel investments.
TORM’s inability to comply with rules and regulations
could lead to penalties, reputational damage, or the
inability to operate in key markets.
Business interruption and disruption to trading
resulting in loss of business or theft of money.
Sustained low freight rates or another unforeseen
adverse development could jeopardize liquidity, lead
to covenant breaches, and hence inflict costs and
lack of operational maneuverability.
Compliance and awareness training is mandatory for
all employees. In connection with sanctions, a know-
your-customer screening system has been
implemented.
Business continuity plans have been implemented
covering the entire group. The plans include
assessment and contingency of critical systems in
case of business interruption. Implementation of
group-wide IT security policy and IT risk management
policy. The policy ensures continuous focus on
capacity to detect and react to cyber attacks.
Conservative financial leverage guided by short and
long-term cash flow forecasting with stress-testing of
critical assumptions. Constantly maintaining
sufficient cash buffers and a tangible catalog of
available liquidity-enhancing initiatives in alignment
with our Distribution Policy.
Risk
Potential
Impact
Mitigating
Activities
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Climate-Related Risk Analysis and TCFD
Climate change is likely to have consequences for TORM in the long term and will
impact several areas of core business activities. TORM’s emerging risks are essentially
viewed as directly related to climate change.
In 2023, TORM revisited and conducted a climate-related
TORM's Senior Management Team has the overall
collaborations supporting this journey. These collaborations
scenario analysis using the Task Force on Climate-related
management responsibility for climate-related risks and
are important, as the ambitious target cannot be met by
Financial Disclosures (TCFD) guidelines to assess transition
opportunities in TORM.
single entities alone. These targets require joint efforts
and physical risks and opportunities, and how they might
impact the resilience of our company strategy.
To complete our TCFD analysis, we developed three
bespoke climate scenarios. The scenarios were based on
publicly available scenarios published in 2023 by the
International Energy Agency, the Network for Greening the
Financial System, and the IPCC Sixth Assessment Report.
The scenarios were supplemented by data and insights
relevant to the transport of refined oil products. The
scenarios are:
•
•
1.5 C Net Zero 2050
2.0 C Delayed Transition
• 3-4 C Hot House World
Governance
The Risk Committee has oversight of climate-related risks
and opportunities through its responsibility for the
governance of TORM’s enterprise risks, which include
climate-related risks and opportunities.
We are committed to achieving zero CO2 emissions by
2050. TORM is actively involved in various industry
across the shipping industry.
Climate-Related Risk Scenarios
1.5°C Net Zero 2050
Orderly Transition
An ambitious scenario that limits
global warming to 1.5°C through
stringent climate policies and innovation,
reaching net zero CO₂ emissions around
2050
Assumes that ambitious climate policies
are introduced immediately with low
policy variation between regions and
strong international cooperation to
achieve net zero CO₂ emissions
worldwide
Net Zero means a major decline in the
use of oil and other fossil fuels. Oil
demand peaks in 2023 and falls from
around 100 million barrels per day (mb/d)
in 2023 to 24 mb/d in 2050.
Governments work to ensure an orderly
transition across the energy sector
2.0°C Delayed Transition
Disorderly Transition
The world continues with “business as
usual”, and emissions rise until 2030
By 2030, governments and societies
finally take action to avoid catastrophic
global warming. But at this point,
aggressive climate action is required to
limit global warming to around 2.0°C
Demand for oil and other fossil fuels grows
to 2030 and then falls rapidly. Oil demand
peaks at 102 mb/d in 2030 and falls rapidly
to 63 mb/d in 2040 and to 24 mb/d in
2050.
This results in a disorderly transition in
which the transition to a low-carbon
economy occurs in an unexpected and
chaotic way
3-4°C Hot House World
Worst Case Scenario
This scenario relies only on government
policies that have already been
introduced or announced, such as the
EU’s Fit for 55
Emissions grow until 2080, leading to
about 3°C of warming and severe
physical risks
This includes irreversible changes such
as higher sea level rise and extreme
temperatures.
Oil demand peaks at around 102 mb/d in
2030, and declines very slightly
thereafter
Conflict and humanitarian crises are
exacerbated, and some areas of the
world become uninhabitable zones
High and immediate transition risk
Relatively low physical risk
Delayed and very high transition risk
Medium physical risk
Low transition risk
High physical risk
TORM ANNUAL REPORT 2023
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Climate-Related Risk Analysis and TCFD
Process
The process of undertaking the scenario analysis included a
The findings from the scenario analysis were presented to
based on three climate scenarios, which were combined
TORM’s Senior Management Team and the Risk
with short,medium, and long terms designated as 2025,
workshop with senior TORM representatives from Finance,
Committee. The climate-related risks identified through the
2030, and 2050, respectively.
Investor Relations, Risk, Strategy, Market Research, and
scenario analysis exercise will be incorporated into TORM’s
the Operations and Technical departments to consider the
annual Enterprise Risk Management setup going forward.
In the scenarios, we took TORM’s full value chain into
three scenarios and identify climate-related risks and
opportunities. The risks and opportunities were then
assessed for financial materiality and their potential impact
Risks and Opportunities
TORM undertook an assessment of the transition and
consideration, including upstream oil and gas production,
refining, and downstream customer demand. We also
examined production and demand for renewable energy
on TORM’s business model and strategy. This process aims
physical climate-related risks and opportunities, which we
fuels and technologies, including biofuels, hydrogen,
at improving the resilience of TORM’s corporate strategy.
face as a company ahead of 2050. The assessment was
ammonia, and carbon capture utilization and storage.
Climate-Related Risks
All potential financially material climate-related risks are transition risks, none are physical risks.
Risk Severity in Scenarios
Main Impact(s)
Decreased demand/revenue
1.5 °C
High
1.8 °C
High
(delayed)
3-4 °C
None
Strategic Actions to Mitigate Risks
✓ Revenue diversification into transport of renewable fuel types (see opportunity 1)
(specific metrics added)
#
Type
Climate-Related Risks
Risk 1
Market Risk
Declining Demand for Oil and Gas
Demand for oil products would decline significantly in the
Net Zero 2050 scenario (98 mb/d in 2023 to 24 mb/d in
2050) with peak oil demand in 2023, and in 2030 in the
Delayed Transition scenario, mainly due to the
electrification of transport.
Decreased
asset value
✓ Seafarer competencies improved to handle CDI requirements
✓ Monitoring of a number of “disruption indicators”
✓ Strong opportunity for higher asset utilization due to vessel supply shortage (see
opportunity 3)
✓ Apply modest financial gearing and operate in a lease structure to remove asset value
risk
✓ Revenue diversification into transport of renewable fuel types (see opportunity 1)
✓ Maintaining a conservative capital structure profile and have access to multiple
funding sources
✓ Decarbonizing fleet faster than required by IMO by 2030 to remain investable as
transition company
Risk 2
Reputation
Higher Cost of Capital and Reduced Access to Capital
Withdrawal of banks from the sector and a more limited pool
of investors over time, resulting in more expensive debt/
equity financing.
Reduced access to and
higher cost of capital
High
High
(delayed)
None
Inability to grow the
business or maintain the
current average fleet age
Risk 3
Emerging
Regulation
Risk 4
Technology
Carbon Price Regulations
IMO has announced that a global carbon tax will be ready in
2025 and start to be implemented in 2027. Tax level is
currently unknown. Poseidon Principles also follows this
new IMO approach.
Decarbonization of Vessels
In the Net Zero 2050 and the Delayed Transition scenarios,
decarbonization of TORM’s fleet would be required to meet
customer and regulatory requirements.
The diversity of alternative fuels and technologies increases
the risk of selecting the wrong technology.
Increased operating cost
(bunker and carbon tax)
High
High
(delayed)
None
✓ Decarbonizing fleet faster than required by IMO by 2030 to ensure competitiveness
in a declining market
Decreased asset value (if
not decarbonized)
✓ Carbon tax will be incorporated into the market rate and thus exposure only if
emissions from TORM vessels are higher than the “average vessel” of competitors
Increased CAPEX to
decarbonize the fleet
High
High
(delayed)
None
✓ Decarbonizing fleet faster than required by IMO by 2030 to ensure competitiveness
in a declining market
Stranded assets due to
selecting the wrong
technology
Increased operating cost
(alternative fuels)
✓ Focus on using known solutions to decarbonize fleet and delaying investments until
fuel technologies are de-risked and adopted at industry level
✓ Participating in industry decarbonization groups, such as the MMM Center for Zero
Carbon Shipping
TORM ANNUAL REPORT 2023
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Climate-Related Risk Analysis and TCFD
The scenario analysis identified four financially material
The scenario analysis also identified three financially
A detailed description can be found in the table below.
climate-related risks:
material climate-related opportunities:
We have decided not to include financial materiality or
• Risk 1: Declining demand for oil and gas
• Opportunity 1: Diversification into transport of low-
• Risk 2: Higher cost of capital and reduced access to
carbon and renewable fuels
• Opportunity 2: Market volatility due to weather and
refinery consolidation
• Opportunity 3: Higher asset utilization due to vessel
supply shortage
metrics as this is deemed too uncertain.
More details on the risks, mitigations, and
strategies in our TCFD disclosure: www.torm.com/
investors/reports-and-presentations/financial-
reports/
capital
• Risk 3: Carbon price regulations
• Risk 4: Decarbonization of vessels
Climate-Related Opportunities
Opportunity in Scenarios
Type
#
Main Impact(s)
Main Impact(s)
1.5 °C
1.8 °C
3-4 °C
Strategic Actions to Mitigate Risks
1
Market
2
Market
3
Market
Diversification into Low-Carbon Fuels
Demand for transport of low-carbon fuels would increase
under the Net Zero 2050 and the Delayed Transition
scenarios. This includes biofuels, green methanol, liquid
hydrogen, and hydrogen-based fuels such as ammonia
There are significant similarities between the business
model, customer segments, and vessel operations for
transporting these new products and TORM’s existing
business
Opportunity to diversify
revenue into these new and
growing markets
In particular, 71% of TORM’s
fleet is already able to carry
biofuels
Market Volatility Due to Extreme Weather
Across all three scenarios, the frequency and intensity of
extreme weather such as tropical cyclones and storm
surges will increase as compared to a world without climate
change
This will lead to more frequent disruption to refinery
production, resulting in a higher frequency of market
volatility
Opportunity to improve
TORM’s forecasting of
these events and position
our vessels to take
advantage of the supply and
demand imbalances that
occur during periods of
market volatility
Higher Utilization Due to Supply Shortage
Across all three scenarios, it is expected that investments
in newbuildings will be limited due to reduced access to
capital, uncertainty relating to the transition of shipping to
new fuel types, and uncertainty relating to future demand
for oil products
Opportunity for higher asset
utilization of the existing
fleet due to supply/demand
imbalance in the short to
medium term
Except for the 1.5C Net Zero 2050 scenario, it is, however,
expected that the demand for oil products will remain high
in the medium term
X
X
(X)
✓ Pursuing opportunities within the biofuel market to build a market position with the
existing assets and capabilities
✓ Upgrading a number of the current vessels to carry methanol, which will make us a
large player in the segment
✓ Investigating the opportunity to enter into the hydrogen and ammonia segments (this
would require new and different types of assets)
✓ Monitoring of a number of “disruption indicators"
X
X
X
✓ Investing in vessel positioning tools, voyage optimization, and BI setup
✓ Predictive analytics and AI to better forecast these extreme events and have our
vessels positioned to take advantage of this
(X)
X
X
✓ Monitoring of a number of “disruption indicators” to assess the likelihood of the
opportunity materializing
✓ Remaining exposed to the oil and liquids segment in the medium term to capture the
opportunity whilst diversifying revenue in the longer term
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Governance
Governance Introduction
Governance at TORM
Chairman’s Introduction
Governance Structure
TORM’s Governance Structure
Board of Directors
Board and Committee Meeting Attendance
Board Activities
Committee Reports
Audit Committee Report
Risk Committee Report
Nomination Committee Report
Remuneration Committee Report
Other
Investor Information
Engagement and Decision Making
Directors’ Report
Statement of Directors’ Responsibilities
Safe Harbor Statement
91
92
95
96
97
99
100
106
108
111
131
134
137
140
142
TORM ANNUAL REPORT 2023
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90
Governance at TORM
With respect to the year ended 31 December 2023, TORM plc was subject to the 2018
UK Corporate Governance Code (available at www.frc.org.uk).
TORM has considered the individual provisions and is
Meldgaard. This includes TORM’s operational development
compliant with 39 out of 41 provisions. The non-compliance
and responsibility for implementing the strategy and overall
Board Leadership and Company Purpose
Long-Term Value and Sustainability Culture
with provisions 18 and 32 is a result of business decisions
decisions approved by the Board of Directors. The
Shareholder Engagement
made after careful consideration by the Board of Directors.
Executive Director also serves as Chief Executive Officer of
Other Stakeholder Engagement
No plan is currently in place to attain compliance with the
the Group’s largest subsidiary, TORM A/S.
Conflicts of Interest
below recommendations.
Transactions of an unusual nature or of major importance
The Board is aware that two of our Non-executive
may only be executed by the Executive Director based on a
Directors, Christopher Boehringer and Göran Trapp were
special authorization granted by the Board of Directors. If
appointed in 2015 and as a result will be approaching their
certain transactions cannot await approval by the Board of
ninth anniversary in 2024. It is the intention of the Board of
Directors due to their urgency, the Executive Director must,
Directors to review this within 2024 and report to its
taking into consideration TORM’s interests to the extent
shareholders once a decision has been reached.
possible, obtain the approval of the Chairman and ensure
In depth details on the compliance can be found on
pages 108 and 111
that the Board of Directors is subsequently informed. Any
transaction must always be subject to the authorizations
stated in TORM’s Articles of Association, including any
approvals required by the Minority Director. The Executive
Director is assisted by the Senior Management Team in the
Divisions of Responsibilities
Role of the Chairman
Divisions of Responsibilities
Non-Executive Directors
Independence
Composition, Succession, and Evaluation
Appointments and Succession Planning
Skills, Experience, and Knowledge
Length of Service
Evaluation
Diversity
Non-Compliance
This section constitutes the statutory reporting on
corporate governance.
day-to-day management of the business. The Senior
Audit, Risk, and Internal Control
Management Team members are individually responsible for
Committee
During 2024, TORM will also take the opportunity to
review, and where necessary update TORM's compliance
with the revised UK Corporate Governance Code published
in January 2024.
Management Structure and Delegation
of Authority
TORM’s Board of Directors approves our strategy and
ensures that the Management operates the business in
accordance with this strategy. Details of the strategy and
purpose are set out in the strategic report on pages 9-21.
The Board of Directors has delegated the day-to-day
management of the business to Executive Director Jacob
further delegation of authority in the organization. TORM
maintains an overview of mandates and authorities for
different levels in the organization.
Integrity of Financial Statements
Fair, Balanced, and Understandable
Internal Controls and Risk Management
Internal Audit
Principal and Emerging Risks
Remuneration
Independent Judgement and Discretion
Non-Compliance
Alignment with Purpose, Values, and Long-Term
24
134
134
108
95
91
95
53
108
96
96
109
109
91
100
210
210
103
103
106
110
111
115
TORM ANNUAL REPORT 2023
GOVERNANCE
91
Chairman’s Introduction
Read more about TORM’s Board and Committees
Key deliverables
on page 97
Board Evaluation
This year’s evaluation was undertaken internally. It involved
a review of the Board and its principal Committees,
covering a wide range of topics. It is a well-established
Fleet Growth
TORM grew the fleet by acquiring 23 vessels since the
beginning of 2023 and divesting 11 older vessels
supporting modernization of the fleet.
process and an important opportunity to test that the Board
is well suited to provide constructive challenges to the
Board Deep Dives Requested in 2023
As a result of the 2023 Board evaluation, deep dives
Management. As a result of this review, the Board
were conducted into cyber security and the use of AI in
requested further deep dives on cyber security and a deeper
TORM. In addition but separate from the evaluation,
understanding of AI.
Chairman’s Statement
On behalf of the Board, I am pleased to introduce the
Changes to the Board
In 2023, there were no changes to the Board of Directors.
The membership of the Board is drawn from a diverse mix of
corporate governance report for 2023. This continues to be
the Board’s principal method of reporting to shareholders in
nationalities, gender, and backgrounds, ensuring the
relevant skills and knowledge to provide a positive
relation to corporate governance.
contribution to the Board.
Strong governance is essential for
the effective delivery of our
strategy
Good corporate governance creates value for our
stakeholders as well as for the ongoing development and
sustainability of our business.
Throughout the year, the Board met in person and online,
and was able to deliver on strategic commitments. The
Board met 16 times this year with seven ad hoc meetings in
addition to the Board’s nine scheduled meetings.
Board Leadership
To ensure that TORM meets the many new reporting
requirements within the ESG area, TORM added new roles
focusing on ESG reporting. Further additional focus will be
made on cyber security risk, to follow the fast development
within this area. For several years TORM has monitored the
peak oil expectation of several relevant organizations, this
continued in 2023.
the Board requested further training on the
requirements surrounding ESG. More details can be
found within the ESG section on page 26.
Geopolitical Risk
The Board of Directors continued to focus on
geopolitical risks in 2023. Development in the
geopolitical landscape make it crucial to stay up to date
on the risks.
Employee Engagement Survey
The biannual engagement survey showed a 96%
response rate resulting in an engagement score of 8.6
out of 10, positioning TORM in the in the top five
percent of companies using the same platform for
employee engagement surveys. Further details can be
found within the People section on page 41.
TORM ANNUAL REPORT 2023
CHAIRMAN'S INTRODUCTION
92
Chairman’s Introduction
Shareholders
In continuation of the quarterly Distribution Policy
introduced during 2022, TORM expects to pay out
Community
For TORM, education is a cornerstone of development. Our
As an additional governance measure, TORM has for
several years incorporated financial mechanisms to drive
commitment ensures a strong pipeline for the industry as a
ESG efforts whereby senior management and the rest of
quarterly dividends to our shareholders totaling USD
result of our support of maritime educational programs.
the organization’s KPIs are directly linked to ESG targets to
497.2m related to 2023.
With general educational support, we are also able to
ensure that TORM continues to prioritize sustainable
Employees
At TORM, we believe in psychological safety, and our Senior
Management Team along with the People team decided
that this philosophy is a part of the foundation in TORM. We
believe that teams with a high level of psychological safety
are high performing teams.
Read more about TORM's people on page 41
Customers
The relationship with our customers continues to be strong.
We believe that our integrated business model creates a
unique customer offering as it provides our customers with
high accountability and insight into safety and vessel
performance.
Suppliers
We expect our suppliers to comply with recognized
international standards and work to improve human rights,
labor conditions, impact on the environment, safety,
corruption, and quality. TORM applies its Business
Principles when dealing with subcontractors and suppliers.
contribute to society as a whole. This helps strengthen the
actions.
culture of teamwork at TORM, resulting in higher retention
and positive brand recognition.
Read more about TORM's sustainability efforts on
page 17
Read more about TORM's connection to the
surrounding communities on page 44
Sustainability
To empower the TORM organization to reduce emissions
and achieve our ambitious environmental goals, we
continue to focus on efforts in Environment, Social, and
Governance (ESG) categories. In 2023, we also continued
to expand our department of experts focusing on
accelerating our green efforts. In 2023, TORM created a
new team dedicated to ESG reporting, which operates as an
integrated partner to all existing teams across the
organization. The reporting governance is anchored in our
Audit Committee, and our risk management of ESG efforts
is anchored in our Risk Committee.
Read more about TORM's ESG reporting on page
26
TORM ANNUAL REPORT 2023
CHAIRMAN'S INTRODUCTION
93
Chairman’s Introduction
The Year Ahead
2024 was marked by an an increasing geopolitical risk
picture, with attacks on vessels in the Red Sea and
New reporting requirements related to cyber security are
As always the Board of Directors will be engaged in
already in place from late 2023 and more will come in
strategically important decision including overall fleet
2024. This means increased requirements related to
composition, market exposure and how we share our
continued conflicts in both Gaza and Ukraine. TORM will
disclosure of policies and on actual cyber security incidents
earnings with the shareholders.
monitor the risk picture together with our external
that may have occurred. At the same time, requirements
geopolitical advisors. Further monitoring these risks have
related to the competencies of the Board of Directors and
Read more about TORM's forward focus on page 17
become an increasing embedded part of our daily operation.
the Management are increasing. This is in line with the
We expect this topic to remain high on the agenda of the
Board's plan to keep a high focus on the topic for 2024 and
Board of Directors meetings.
improve the Board's qualifications and oversight.
The One TORM platform has a proven track record for
In 2024 TORM will be subject to CSRD and will report with
delivering strong shareholder returns through maximizing
limited assurance from our auditors. Through the Audit
the tradability of our fleet towards our customers, while
Committee the Board will follow the preparations that will
optimizing vessel positioning through advanced data
ensure an accurate and transparent reporting of TORM's
models and people competences. The Board of Directors
activities. The Double Materiality Assessment should help
will keep the focus on being best in class by delivering on
our investors' understand the impact TORM has on the
value creation, safety, and green transition to keep relevant
surroundings, and the impact the surroundings have on
and attractive for customers and investors. To obtain this,
TORM.
TORM has KPIs on, amongst others, Return on Invested
Capital, Safety, and CO2 emission reduction .
We look forward to connecting with you at our Annual
General Meeting in April 2024 and updating you at that
time on our progress. Thank you for your continued support.
Christopher H. Boehringer
Chairman of the Board
TORM ANNUAL REPORT 2023
CHAIRMAN'S INTRODUCTION
94
TORM’s Governance Structure
The Board of Directors
Chaired by Christopher H. Boehringer
The Board of Directors holds nine prescheduled meetings on an annual basis in addition to several ad hoc meetings. The duties of the Board of Directors include establishing policies for strategy, accounting,
organization, finance, and the appointment of executive officers. The Board of Directors governs TORM in accordance with the limits prescribed by the Articles of Association or by any special resolution of the
shareholders.
Chairman
Leads the Board of Directors, sets the
agenda, and promotes a culture of
open debate between Executive and
Non-Executive Directors.
Meets regularly with the Chief
Executive Officer, the other Executive
Directors, and other senior
management executives to stay
informed.
Senior Independent Director
Ensures that the views of each Non-
Executive Director are given due
consideration.
Non-Executive Directors
Committed to contributing
constructively to challenge and help
develop proposals on strategy.
Available to both Non-Executive
Directors and shareholders if they have
concerns.
Meets with each Non-Executive
Director on an annual basis to appraise
the performance of the Chairman.
Executive Director
Responsible for the day-to-day
management of TORM and for TORM’s
operational development, results, and
internal development.
Implements the strategies and overall
decisions approved by the Board of
Directors.
Board Observers
Three types. Employee-elected
Observers, providing a communication
platform between the employees and
the Board of Directors, Minority Board
Observer appointed by the B-
shareholder, and Board member-
elected Observers until 31 March
2023. All Observers are entitled to
attend and speak at Board meetings.
Audit Committee
Chaired by Göran Trapp.
Risk Committee
Chaired by Göran Trapp.
Nomination Committee
Chaired by Christopher H. Boehringer.
Remuneration Committee
Chaired by Christopher H. Boehringer.
Meets a minimum of four times a year.
Meets a minimum of three times a year.
Meets a minimum of twice a year.
Meets a minimum of twice a year.
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.
Responsible for supervisory oversight and
monitors responsibilities with respect to internal
controls and risk management.
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.
Considers succession planning for Directors, the
Chief Executive Officer, and others.
Assists the Board of Directors in reviewing the
Management’s performance and remuneration as
well as TORM’s general remuneration policies.
Read more about the role and activities of
the Audit Committee on page 100
Read more about the role and activities
of the Risk Committee on page 107
Read more about the role and activities of
the Nomination Committee on page 108
Read more about the role and activities
of the Remuneration Committee on page
111
Senior Management Team
Consists of the following employees of TORM A/S (in addition to the Executive Director, Jacob Meldgaard): Kim Balle (Chief Financial Officer – CFO), Lars Christensen (Senior Vice President and Head of Projects),
and Jesper S. Jensen (Senior Vice President and Head of Technical Division). The Senior Management Team holds weekly meetings and assists the Executive Director in the day-to-day management of the
business.
TORM ANNUAL REPORT 2023
GOVERNANCE STRUCTURE
95
Board of Directors
Christopher H. Boehringer
Non-Executive Director and Chairman of
TORM’s Board of Directors
David N. Weinstein
Senior Independent Director and Deputy
Chairman of TORM’s Board of Directors
Göran Trapp
Non-Executive Director
Annette Malm Justad
Non-Executive Director
Nationality: Norwegian
First elected: 2020
Jacob Meldgaard
Executive Director and
Chief Executive Officer
Nationality: Danish
First elected: 2015
Nationality: Canadian
First elected: 2015
Employment: Managing Director and
Head of Europe, Oaktree Capital
Management (International) Limited
Skills and Experience: Shipping, strategy,
capital investment, M&A. Goldman
Sachs, FI Travel Corporation, Warburg
Dillon Read/SG Warburg, and LTU GmbH
& Co
External Appointments: Utmost Group,
Marco Capital Holdings Limited and
Oaktree Capital Management
(International) Limited
Nationality: American
Appointed: 2015, continues until
removed by the B-shareholder
Employment: Senior Investment Banking,
Governance, and Reorganization
Specialist
Nationality: Swedish
First elected: 2015
Employment: Board member
Employment: Board member
Employment: Chief Executive Officer of
TORM since 01 April 2010
Skills and Experience: Strategy, capital
markets and finance, risk management
and oversight, extensive public company
and corporate governance experience,
global business, US Listings (i.e. Seadrill
Limited, Stone Energy Corp, and Deep
Ocean Group) and as Managing Director
of Calyon Securities Inc, BNP Paribas,
Bank of Boston and Chase Securities Inc.
Skills and Experience: Shipping, strategy,
customers, capital, finance. Morgan
Stanley crude oil trader, Head of Oil
Products Trading Europe & Asia, Global
Head of Oil Trading and Head of
Commodities EMEA. Business
development and oil trading at Equinor.
Founding director of energy advisory
boutique Energex
External Appointments: N/A
External Appointments: N/A
Skills and Experience: Shipping, strategy,
customers, capital, finance. More than
25 years of executive experience from
shipping and industry including CEO of
Oslo-listed Eitzen Maritime Services ASA
from 2006-2010. The last 10 years as
independent consultant and Non-
Executive Board member
Skills and Experience: Shipping,
customers, strategy, capital, M&A, US
listing. Previously served as Executive
Vice President of Dampskibsselskabet
NORDEN A/S and held a number of
management positions in J. Lauritzen A/S
and A.P. Moller - Maersk
External Appointments: Partner at Recore
Norway AS. Chair of the Board of
Directors of Store Norske Spitsbergen
Kulkompani AS, ANSC ASA, Småkraft AS
and Ocean Distillery AS. Board member
of Awilco LNG ASA and PowerCell
Sweden AB
External Appointments: Board member of
Danish Shipping, International Chamber
of Shipping, Danish Ship Finance,
SYFOGLOMAD Ltd, and the TORM
Foundation
Committees:
Committees:
Committees:
Committees:
Committees: None
Audit:
Risk:
Nomination:
Remuneration:
Chairman:
TORM ANNUAL REPORT 2023
GOVERNANCE STRUCTURE
96
Board and Committee Meeting Attendance
Meetings Held in 2023
Chairman of the Board
Christopher H. Boehringer
Senior Independent Non-Executive Director
David N. Weinstein
Executive Director
Jacob Meldgaard
Non-Executive Independent Directors
Annette Malm Justad
Göran Trapp
Board Observers
Christian Gorrissen
Jeffrey S. Stein - Resigned 31 March 2023
Rasmus J. Skaun Hoffmann
Board of Directors:
Audit:
Risk:
Nomination:
Remuneration:
Chairman:
Board
Audit
Committee
Risk
Committee
Nomination
Committee
Remuneration
Committee
5
5
5
5
3
3
3
3
2
2
2
2
4
4
4
4
16
15
16
16
15
16
15
0
16
TORM ANNUAL REPORT 2023
GOVERNANCE STRUCTURE
97
Leadership, Governance, and Engagement
Board Evaluation
According to the recommendations of the UK
Corporate Governance Code 2018, the Board is to
review and assess its performance annually. While the
Committee keeps the composition of the Board under
regular review, the annual review of Board effectiveness
provides an opportunity for reflection on how we can
continue to enhance the profile of the Board.
As TORM is not a company listed in the UK, we are not
required to have an external evaluation under the 2018 UK
Corporate Governance Code. Instead, TORM has
undertaken an internal evaluation involving a detailed and
thorough review of the Board and its principal Committees,
covering a wide range of topics. Following the evaluation
this year, the Board requested to increase their knowledge
of cyber security and TORM’s use of AI. This will be followed
up in 2024 with further deep dives. In addition but separate
from the evaluation, the Board requested more training on
the requirements surrounding the ESG oversight
responsibilities.
The Board's activities in 2023 are described on
page 99
Tenure
Independence
Gender Diversity
Ethnicity
TORM ANNUAL REPORT 2023
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98
5WhiteEthnically diverseOther140-3 Years4-6 Years7-10 Years311IndependentExecutiveNon-Independent41MaleFemaleOther Board Activities 2023
In 2023, TORM’s Board of Directors dedicated focus to
strategically important areas with particular focus on risks
Fleet Expansion and Optimization
Developments in global supply and demand continue to
vessels in the right basin based on advanced in-house
business intelligence and proprietary algorithms.
and opportunities in the short and long terms. The
offer interesting opportunities for selective fleet
governance structure is set for this and is continuously
replenishment and growth, which has been an important
developed to remain up to date. Below are some of the
topic for the Board in 2023. A strong market for
Cyber Security
As shipping companies in general and TORM’s business
most important strategic areas that were on the Board of
secondhand product tankers has been used to dispose of
model in particular are becoming more digital, it is
Directors’ agenda during 2023. It is important for the Board
the oldest vessels in the fleet and acquire newer eco
important for TORM to have implemented defenses to
to follow developments and make sure the competences
within the Board are in place as risks and opportunities
develop.
vessels. The share of long-haul vessels has also been
prevent, detect, and respond to cyber attacks as well as to
increased to better match evolving trading patterns caused
have appropriate contingency plans in place. TORM
by changes in the global refinery landscape.
continually strengthens the company's defenses by
TORM’s governance structure is described on page
95
Sustainability
Transportation of refined oil is expected to decline in the
future based on further electrification of vehicles and
implementing more security controls and procedures, as
well as strengthening the setup for crisis management and
business continuity.
Learn more about the activities of the Committees
on pages 100 to 121
Strategy Update
TORM runs a strategic update on a yearly basis. The topics
below reflect a certain extent of the work, which the Board
of Directors conducted prior to the strategic efforts. The
result of the strategic development is presented in the
strategic report of this Annual Report.
Geopolitical Updates
During the course of the year the Board of Directors have
received a number of geopolitical updates from a macro
advisory firm. The focus has mainly been on the Russian
was against Ukraine and important geopolitical topics
related to the USA, China and the Middle East.
increased application of alternative fuels in general. The
In 2023, new legislation on cyber security was passed by
Board is deeply engaged in the industry’s decarbonization
the SEC (Cybersecurity Risk Management, Strategy,
challenges. This entails monitoring the development in the
Governance, and Incident Disclosure) and the EU (Cyber
availability of green fuels and the transition to zero-
Resilience Act), taking effect from December 2023 and
emission vessels. The focus at TORM is on how to best
October 2024 respectively. Among other things, there will
support and manage this long-term transition. This includes
be greater requirements for Board oversight of cyber
engaging in industry partnerships and embracing a gradual
security risks. To increase knowledge about cyber risk, the
transformation of the fleet to more eco efficient vessels.
threat landscape, and the threat actors, the Board has held
The short-term focus is on operational initiatives and
investments to reduce carbon emissions and further
two deep-dive sessions on cyber security, also touching
upon topics such as cyber insurance and the Board's role in
enhance protection of the environment.
crisis management.
AI and Machine Learning
The One TORM platform offers opportunities to create
significant value for TORM through the use of AI and
analytics. For this reason, AI and Machine Learning were
the topics of deep dives for the Board in 2023. The One
TORM platform enables TORM to take advantage of the
most attractive regional freight markets by positioning
TORM ANNUAL REPORT 2023
GOVERNANCE STRUCTURE
99
Audit Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Chairman’s Statement
This report provides an overview of how the Audit
Committee operates, an insight into the Audit Committee’s
bringing recent financial experience to the Audit
Committee.
activities and its role in monitoring and reviewing the
The Audit Committee also has access to the financial
integrity and quality of TORM’s financial statements, the
expertise in TORM and its independent auditors and can
effectiveness of internal controls, and related processes.
seek further professional advice at TORM’s expense, if
The Role of the Audit Committee
required.
At a Glance
Chairman
Göran Trapp
Members
Annette Malm Justad
David N. Weinstein
Read more about the Audit Committee’s area of
responsibility on page 95
Meetings
The Audit Committee meets at least four times a year. The
Chief Financial Officer of TORM A/S, the Head of Group
Financial Controlling and Internal Controls, and senior
representatives of TORM’s independent auditors are invited
Terms of Reference for the Audit Committee are
to attend all or some of the meetings by invitation as
available at www.torm.com/investor/governance/
appropriate.
governance-documents-and-policies/
Composition
The Audit Committee is composed solely of Independent
Non-Executive Directors.
Meetings
The Audit Committee held five scheduled meetings in
2023. The members’ attendance at the Committee
meetings can be seen on page 97.
Audit Committee Members
The Board is satisfied that the Audit Committee meets the
independence requirements and any applicable laws,
regulations, and listing requirements, including the UK
Corporate Governance Code.
The Audit Committee has deep knowledge of and
significant business experience in financial reporting, risk
management, internal control, and strategic management.
This combined knowledge and experience enables the Audit
Committee to perform its duties properly. In addition, the
Board of Directors believes that the members of the Audit
Committee have the relevant shipping sector knowledge. In
the opinion of the Board of Directors, the Chairman of the
Audit Committee, Göran Trapp, meets the requirement of
Updates Related to Financial Reporting
• Quarterly overview of the product tanker market
2023 Highlights
• Quarterly assessment of the impairment indicator test
conditions and their impact on the quarterly results
of the vessels in the fleet
• Going concern assessment and viability statement
•
Implementation of the EU Taxonomy
• Net investment of 11 vessels
•
Financing the investment of vessels through share
issuance
• Major refinancing of bank and leasing agreements for
USD 528m
• Disclosures related to the IAS 12 amendments on the
International Tax Reform - Pillar Two Model Rules
•
Implementation of the EU Taxonomy and preparation for
the CSRD in 2024
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
100
Audit Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Principal Activities in Focus
Financial and ESG Reporting
• Key elements of the Quarterly Reports and the Annual
Risk and Compliance
• Reports from Group Legal on the status of significant
External Audit
• Monitoring the effectiveness and quality of the external
litigation, claims, and investigations from tax authorities
audit process through examination and review of the
Report as well as the estimates and judgements
• Compliance review of the UK Corporate Governance
coverage provided by the external auditor’s audit plan
included in TORM’s financial disclosures
Code recommendations
• Reviewing reports from the external auditor on key audit
•
The appropriateness of the Management’s analysis and
•
The appropriateness of the Enterprise Risk
and accounting matters, business processes, internal
conclusions on judgmental accounting matters
Management Report representing critical risk factors,
controls, and IT systems
• An assessment of whether the Annual Report, taken as
ownership and governance, and alignment with the Risk
• Agreeing the audit and non-audit fees of the external
a whole, is fair, balanced, and comprehensible, and
Committee
auditor during the year, including the objectivity and
whether our US annual report on Form 20-F complies
• Concerns raised through the whistleblower function
independence of the external auditor
with relevant US regulations with focus on clarity of
process and their remediation
disclosures, compliance with relevant legal and financial
reporting standards, and application of appropriate
accounting policies and judgements
•
The going concern assessment and adoption of the
going concern basis in preparing the Annual Report and
financial statements
•
The external auditor’s reports on its audit of the
financial statements, and reports from the Management
and the external auditor on the effectiveness of our
system of internal controls and our internal control over
financial reporting
• Compliance with applicable provisions of the Sarbanes-
Oxley Act (SOX)
• A quarterly assessment of the impairment indicator test
of the vessels in the fleet
• Reviewing the Management’s assumptions applied in
the determination of eligible and aligned activities under
the EU Taxonomy, hereunder the ‘do no significant
harm’ and ‘minimum safeguard’ criteria
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
101
Audit Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Significant Reporting Issues
In the financial statements, there are several areas
Impairment Test of Vessels
The impairment of TORM’s vessels is a key recurring risk
requiring the exercise of judgement by the Management.
due to its significance in the context of TORM’s net asset
Depreciation Policy and Residual Value of
Vessels
The Management prepared an analysis of the potential
The Audit Committee’s role is to assess whether the
value. The Audit Committee received and considered a
impact of climate change and how different drivers might
judgements made by the Management are reasonable and
paper from the Management covering the impairment
have implications on the useful life of vessels. Among the
appropriate. To assist in this evaluation, the CFO presents
testing of the carrying amount of TORM’s vessels in the
drivers were TORM’s short and long-term climate targets,
an accounting paper to the Audit Committee once a year,
fleet within the cash-generating unit (CGU) comprised of
the IMO’s revised Green House Gas Strategy, and other
setting out the key financial reporting judgements. The
the Main Fleet of LR2, LR1, and MR vessels.
main areas of judgement considered by the Audit
new regulations and policies with increased focus on carbon
reduction in the short and long terms. Together with the
Committee in the preparation of the financial statements
The carrying amount was tested using the fair value less
Management, the Audit Committee discussed the different
are as follows:
cost of disposal for the CGU, and is based on the market
drivers and their impact on the current useful life of vessels,
approach, which considers the valuations from two
but concluded, that the current accounting policy of
Going Concern
The Audit Committee reviewed the Management’s
internationally acknowledged shipbrokers with appropriate
depreciating vessels over 25 years is still appropriate and
qualifications and recent experience in the valuation of
still in line with TORM’s peers. The Audit Committee will
assessment of the basis for preparing TORM’s financial
vessels. Supported by the fair value less cost of disposal,
continue to monitor the development closely.
statements on a going concern basis. This included
the Audit Committee concluded that no impairment of the
reviewing and challenging the Management’s forecast and
CGU was required as the fair value less cost of disposal
The residual value of vessels is calculated based on two
the underlying base and low case sensitivity calculations
showed a significant headroom of 52% compared to the
elements: Scrap values reviewed on a yearly basis and cost
along with its assumptions. The Audit Committee also
carrying amount. Please refer to Note 10 to the financial
of voyage to the scrapping location. In 2021, the Audit
considered TORM’s available liquidity, including undrawn
statements.
and committed facilities along with any liquidity-enhancing
projects and projections for the financial covenants within
TORM’s borrowing facilities.
Revenue Recognition
The Revenue Recognition Policy was discussed and it was
prices in the calculation of residual values by applying an
equal weighted average of green recycling and conventional
agreed to make no changes. Revenue is recognized upon
recycling prices, while still using a three-year average to
Committee agreed to the recommendation from the
Management to gradually phase in the green recycling
Based on this, the Audit Committee confirmed that the
delivery of services in accordance with the terms and
limit volatility in the residual values. In 2023, the Audit
application of the going concern basis for the preparation of
conditions of the charter parties and is made based on
Committee discussed with the Management the potential
the quarterly reports and year-end financial statements
“load to discharge”, and demurrage is recognized with up to
immediate increase to 100% weight on green recycling
continued to be appropriate, with no material uncertainties.
95% until actual realization. Accordingly, no revenue is
prices, but agreed to continue to monitor the development
Please refer to Note 1 to the financial statements.
recognized for the days incurred during a vessel’s
of the maturity of the green recycling market, and as in
The going concern statement is set out in the
Financial Review page 79
positioning voyage to a load port.
2022, only increase the weight of green recycling prices by
10%-points, from 60% to 70%, compared to conventional
recycling prices with effect from 01 January 2024.
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Audit Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Effectiveness of the Audit Committee
In 2023, the Audit Committee carried out a detailed self-
Internal Controls and Risk Management
The Audit Committee has the primary responsibility for the
To ensure TORM meets its target of SOX compliance, the
Audit Committee continuously monitors the status of the
assessment using a questionnaire and discussions
oversight of TORM’s system of internal control, including
ICFR. This oversight by the Audit Committee includes
facilitated by the Head of Group Financial Controlling and
the risk management framework, the compliance
recurring reporting, including management oversight, the
Internal Controls. Based on the self-assessment, no
framework, and the work of the Group Internal Control
outcome of management testing, and the status of auditor
material concerns arose.
function. The Audit Committee regularly discusses the
testing. The Audit Committee makes sure that the
principles for risk assessment and risk management related
Management sufficiently addresses deficiencies when they
Internal Audit
The Audit Committee assesses the need for an internal
audit function on an annual basis and makes a
recommendation to the Board of Directors. The Audit
Committee was satisfied that based on TORM’s current
size, complexity, and internal control environment, TORM
can continue to defer the establishment of an internal audit
function. The decision must be revisited annually, next time
in 2024.
In the absence of an internal audit function, internal
assurance is achieved through the work of the Group
Internal Control function and PwC’s testing of the entire
Internal Control over Financial Reporting framework (ICFR).
The Audit Committee is satisfied that the internal audit
arrangements continue to provide effective assurance of
TORM’s risk and controls environment. Throughout the
year, the Audit Committee monitored the effectiveness of
TORM’s risk management and internal control systems,
including material financial, operational, and compliance
controls.
to financial reporting, and the committee reviews TORM’s
emerge.
significant risks, including fraud, and their impact on
financial reporting, including stress testing when relevant.
2023 was the second year that TORM was required to have
controls audited by its external auditor to comply with
Section 404(b) of SOX.
Having monitored TORM’s ICFR, the Audit Committee has
not identified any material weaknesses in TORM’s ICFR
through either management testing or external audit.
Read more about principal risks and uncertainties
on pages 82 to 86
The Board of Directors fulfills its responsibility regarding the
effectiveness of the risk management and the ICFR through
the Audit Committee. Since the US listing on Nasdaq in
New York in 2017, TORM has been required to comply with
the Sarbanes-Oxley Act (SOX) resulting in increased
regulatory requirements.
The ICFR to support TORM’s SOX compliance is based on
the Internal Control – Integrated Framework 2013 issued by
the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), which enables best
practices and a strong control environment.
TORM ANNUAL REPORT 2023
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103
Audit Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
ESG
The Audit Committee has throughout 2023 increased
External Auditor
The Audit Committee has primary responsibility for
independence, and quality of the external audit were
satisfactory.
focus on ESG reporting. ESG related topics are now
overseeing the relationship with the external auditor, Ernst
recurring agenda items at all Audit Committee meetings.
& Young LLP (‘EY’).
That decision is a result of the governance structure and
Based on these reviews, the Audit Committee concluded
that there had been appropriate focus and challenge by EY
responsibility assigned to the Audit Committee by the
This includes making the recommendation on the
on the primary areas of the audit, and that EY had applied
Board of Directors.
appointment, reappointment, or removal of the external
robust challenge and skepticism throughout the audit.
auditor, assessing their independence on an ongoing basis,
In 2023, TORM reported on the EU Taxonomy for the first
approving the statutory audit fee, the scope of the
time as the 500 employee threshold was exceeded. The
statutory audit, and the appointment of the lead audit
Management presented an analysis to the Audit Committee
engagement partner. Lloyd Brown has held this role since
concluding that TORM’s activities related to the Main Fleet
the appointment of EY in 2020.
comprising of LR2, LR1, and MR vessels is considered
eligible but not aligned with the EU Taxonomy for the
During the year, EY reported to the Audit Committee on
activity 6.10 Sea and Coastal Freight Water Transport,
their independence from TORM. The Audit Committee and
Auditor Independence and Objectivity
In its assessment of the independence of the auditor, and in
accordance with the standard on independence, the Audit
Committee received details of all relationships between
TORM and EY, which may have a bearing on their
independence, and received confirmation from EY that it is
independent of TORM in accordance with applicable laws
Vessels for Port Operations, and Auxiliary Activities.
the Board of Directors are satisfied that EY has adequate
and regulations.
Activities related to the Marine Exhaust segment are not
policies and safeguards in place to ensure that auditor
considered eligible.
objectivity and independence are maintained. The Audit
Committee has recommended to the Board of Directors the
As the requirement to report on the Corporate
reappointment of the external auditors for the 2024
Sustainability Reporting Directive (CSRD) from 2024 in
financial year, and the Board of Directors will be proposing
2025 is approaching, the Audit Committee requested the
the reappointment of EY at the upcoming AGM.
The Audit Committee maintains a policy and has
procedures in place for the pre-approval of all audit
services, audit-related services, and other services
undertaken by the external auditor. The principal purpose of
this policy is to ensure that the independence and the
objectivity of the external auditor are not impaired. The
Management for an additional deep dive into the CSRD
during 2024 to further understand how it can actively play
a role in strategy and decision making, but also to challenge
the assumptions applied and decisions made, for example in
relation to the Double Materiality Assessment.
Effectiveness of the External Audit Process
The Audit Committee reviewed the quality of the external
policies include restrictions on the types of services which
the independent auditor can provide, in line with the Ethical
audit throughout the year and considered the performance
Standard published by the UK Financial Reporting Council
of EY by undertaking an annual review of the performance
(FRC). Details of the services which the independent
of the independent auditor in a combination of discussions
auditors cannot be engaged to perform were provided to
with the Management, reviewing the quality of written
the Audit Committee at the November 2023 Audit
deliverables to the Audit Committee, and reviewing the
Committee meeting. A copy of the policy can be made
quality of dialog and insights provided during Audit
available on request.
Committee meetings. The findings were considered by the
Audit Committee, and it was agreed that the audit process,
TORM ANNUAL REPORT 2023
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Audit Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Audit and Non-Audit Fees
Full disclosure of the audit and non-audit fees paid during
Whistleblower
TORM’s Whistleblower Policy, which supports the group-
Approval
On behalf of the Audit Committee
2023 can be found in Note 6 to the financial statements.
wide Business Principles, is monitored by the Audit
Göran Trapp
Chairman of the Audit Committee
07 March 2024
Audit fees:
Non-audit fees:
USD 1.3m
USD 0.2m
The independent auditor may be contracted to perform
certain non-audit activities. The Audit Committee believes
that this can be performed without compromising the
auditor’s independence and objectivity. The Audit
Committee will allocate the non-audit work after
considering TORM’s policy on the provision of non-audit
services by TORM’s auditors. A copy of the pre-approval
procedures can be made available on request.
Fees relating to the provision of non-audit services by EY
amounted to USD 0.2m corresponding to 15% of the total
audit fees. The Audit Committee considered that the
services provided were most efficiently provided by the
external auditor. To maintain the external auditor’s
independence and objectivity, the external auditor did not
make any decisions on behalf of the Management.
Committee.
Read more about TORM’s Whistleblower Policy
here: www.torm.com/investor/governance/
whistleblower/
The Audit Committee received reports providing details of
matters reported through TORM’s international,
confidential telephone reporting lines and secure e-mail
reporting facility, which is operated by an independent third
party, Holst Advokater. All matters reported are
investigated by Holst Advokater and reported to the Board
of Directors as well as to the Audit Committee together
with details of any corrective actions taken. The Audit
Committee also received reports at each Audit Committee
meeting providing details of any fraud losses during the
quarter.
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105
Risk Committee
Report
Chairman’s Statement
This report provides an overview of how the Risk Committee
internal mandates, such as FFA derivatives level, refinance
At a Glance
risk, interest rate hedge level, credit risk, and time charter
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
operates, an insight into the Risk Committee’s activities,
position. Further, a liquidity forecast is presented at each
and its role in monitoring and reviewing the integrity and
Risk Committee meeting.
quality of TORM’s company-wide risk management.
The Role of the Risk Committee
Read more about the Risk Committee’s area of
responsibility on page 95
Terms of Reference for the Risk Committee are
available at www.torm.com/investors/governance
Risk Committee Members
The Risk Committee must at any time consist of at least
two independent members of the Board of Directors, each
of whom must meet the independence requirements and
have sufficient qualifications within risk management and
capital market knowledge to be able to make an
independent assessment of the appropriateness of TORM’s
risk management and control environment as well as the
planning and execution of the risk management policies and
funding activities.
Meetings
The Risk Committee meets at least three times a year.
Cyber Security
Cyber security is a recurring agenda item at each meeting,
and the Risk Committee reviews TORM’s cyber security
preparedness. During 2023, the Risk Committee approved
two new polices within cyber security and two new IT-
related security polices, as well as an updated IT Security
Policy. The updated policy defines IT security governance,
risk appetite, monitoring, and controls. TORM furthermore
implemented an IT Risk Management Policy establishing a
structured approach to risk identification, handling, and
reporting. This is based on disclosure requirements from
SEC and EU.
Customer Credit Risk
During 2023, the Risk Committee reviewed TORM's
Customer Credit Risk Policy. TORM has a well-functioning
customer credit approval process, where all customers are
reviewed prior to commercial charters. Due to a strong
tanker market, TORM has seen an increase in net working
capital. For this reason, the Risk Committee focused on
ensuring that our outstanding freight and demurrage
payments were effectively managed.
•
•
•
•
Chairman
Göran Trapp
Members
Annette Malm Justad
David N. Weinstein
Composition
The Risk Committee is composed solely of Independent
Non-Executive Directors.
Meetings
The Risk Committee had three scheduled meetings in 2023.
The members’ attendance at the Committee meetings can be
seen on page 97.
2023 Highlights
•
Risk management review of TORM’s policies on insurance,
IT, financial instruments, and its Financial Policy
Intensified focus on IT security risk
Approval of Task Force on Climate-Related Financial
Disclosures (TCFD)
Implementation of EU ETS
Review and approval of the Enterprise Risk Management
report
Activities During the Year
At each meeting, the Risk Committee follows up on key risk
Capital Structure Risks
The Risk Committee reviewed risk considerations related to
TORM’s capital structure, including liquidity position, loan-
indicators to ensure alignment of risk tolerance and actual
to-value, TORM’s Distribution Policy, off-balance sheet
risk level. These measures include the risks described on
liabilities, terms and sources of funding vessel investments,
pages 82-89 and monitoring of the compliance with
and fleet employment strategy.
TORM ANNUAL REPORT 2023
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Risk Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
SOFR Amendment to Loan and Derivative Contracts
During 2023, the Risk Committee oversaw TORM's
amendment of all existing interest rate swaps and floating-
rate-based leasing and loan agreements to replace US
LIBOR interest rates with SOFR interest rates.
Maritime Safety Threats
Enterprise Risk Management
The Risk Committee reviewed the measures taken by TORM
The Risk Committee reviewed the key risks faced by TORM
to assess, manage, and mitigate future safety threats.
and the underlying drivers of these exposures. The
Review Policies
The Risk Committee reviewed TORM’s IT Policy, Financial
alignment of actual risk and desired risk was discussed, and
the Risk Committee approved TORM’s risk profile based on
these discussions. Further, the Risk Committee reviewed
Liquidity Governance
The Risk Committee oversaw TORM’s liquidity risk. TORM
works with break-even levels to ensure sufficient liquidity is
Policy, FFA and Bunker Policy, Insurance Policy, and Credit
the assigned management accountability, which highlights
Risk Policy. These policies outline core activities and risks,
current and planned risk-mitigating activities.
and the measures which TORM has taken to mitigate these
available. Furthermore, TORM ensures that financial
gearing related to loan agreements can manage periods of
risks.
ESG Reporting/TFCD
TORM conducted a climate-related scenario analysis using
the Task Force on Climate-related Financial Disclosures
(TCFD) guidelines to assess transition and physical risks
and opportunities and how they might impact the resilience
of TORM’s strategy. The findings from the scenario analysis
were presented and discussed with the Risk Committee.
The climate-related risks identified through the scenario
analysis exercise have been incorporated into TORM’s
annual Enterprise Risk Management process and will
become part of the recurring items discussed at the Risk
Committee meetings.
low profitability and declining vessel values.
Forward Freight Agreements (FFAs) and Liquidity Risk
At end 2022 and in early 2023, TORM hedged part of its
future earning days using FFAs. These FFAs matured in
2023 and Q1 2024. The Risk Committee reviewed overall
structure and found that associated risk was acceptable.
Geopolitical Risk
The Risk Committee has reviewed key geopolitical downside
risks on the product tanker market and an assessment of
effective mitigations. TORM continuously liaises with
external advisors to maintain an updated understanding
related to geopolitical risks.
EU ETS
The Risk Committee was informed of TORM's approach to
handle required EU legislation, with effect in 2024, for
delivery of carbon credits for sailing within, into, and out of
EU.
TORM’s annual Enterprise Risk Management Report was
approved at the Board of Directors meeting in Q1 2024.
Read more about TORM's annual risk assessment
on pages 81 to 86
Approval
On behalf of the Risk Committee
Göran Trapp
Chairman of the Risk Committee
07 March 2024
TORM ANNUAL REPORT 2023
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107
Nomination Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Chairman’s Statement
In 2023, no changes were made to the Nomination
The Nomination Committee reviewed the independence of
At a Glance
all Non-Executive Directors pursuant to the UK Corporate
Committee, and the key focus areas of the Nomination
Governance Code. Except for the Chairman, the
Committee were governance, succession planning, and
employee engagement.
Nomination Committee is composed solely of Independent
Non-Executive Directors, and they continue to make
independent contributions to and effectively challenge the
The Role of the Nomination Committee
Management.
Chairman
Christopher H. Boehringer
Members
Annette Malm Justad
David N. Weinstein
Read more about the Nomination Committee’s
area of responsibility on page 95
The Executive Directors’ service contracts and the Non-
Executive Directors’ terms and conditions of appointment
are available for inspection at our registered office and will
be available on display at the 2024 Annual General
Terms of Reference for the Nomination Committee
Meeting.
at www.torm.com/investors/governance
Composition
Except for the Chairman, the Nomination Committee is
composed solely of Independent Non-Executive Directors.
Meetings
The Nomination Committee had two scheduled meetings in
2023.The members’ attendance at committee meetings can
be seen on page 97.
Compliance with the Code
The Nomination Committee complies with the 2018 UK
Corporate Governance Code except for provision 18. This
provision states that all directors should be subject to
annual re-election, however, TORM’s B-Director is not
appointed for a specified term and will continue until
removed by the B-shareholder. TORM believes that
continuity in the B-Director role is important as this
Director serves as a representative of the minority
Evolution of the Board
In 2023, Mr. Jeffery Stein stepped down as a TORM Board
Observer. Jeffery Stein had been with TORM since 2016.
Focus Area
Effectiveness
During the year, the Nomination Committee reviewed the
independence, time commitment, and potential conflicts of
interests of the Non-Executive Directors and concluded
that they each continued to challenge, to demonstrate
independent judgement, and to devote sufficient time to
shareholders. The B-shareholder, who represents the
discharging their duties.
minority shareholders, can replace the B-Director at any
time.
In line with TORM’s Articles of Association on the annual
re-election of the remaining Directors, all TORM’s Non-
Executive Directors will submit themselves for re-election
at the 2024 AGM.
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17%17%67%Succession planningEmployee populationGovernance
Nomination Committee
Report
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RISK COMMITTEE REPORT
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REMUNERATION COMMITTEE REPORT
Board Evaluation
In accordance with the UK Corporate Governance Code,
Since 2020, the Board of Directors has fulfilled its target of
departure of key individuals, as well as promoting diversity
20% female Board members. A new target has been set for
and inclusion.
TORM conducts an annual internal evaluation of the Board.
the Board of Directors of 40% women by the end of 2035.
The outcome of this review led to the Board requesting
further deep dives on cyber security and TORM’s use of AI.
In addition but separate from the evaluation, the Board
requested further training on the requirements surrounding
ESG.
Read more about the Board's activities this year
on pages 99
Employee Engagement
Throughout the year, the Nomination Committee received
Board diversity matrix
Country of principle
Executive Offices
Foreign private issuer
Disclosure prohibited
under home law
Total number of
Directors
updates on key elements of the people strategy, which
Gender identity
provides insight into a variety of areas, including culture,
diversity and inclusion, succession planning, future
capabilities, and colleague engagement.
Read about TORM’s people from page 41
Diversity
The Nomination Committee continued to review TORM’s
progress against its gender diversity targets for both female
Board members and women in leadership positions in the
office-based workforce. At the end of 2023, women in
leadership positions constituted 20%. TORM has a target
for 2030 of 35% women in leadership positions.
Directors
Underrepresented
individual in home
country jurisdiction
LGBTQ+
Did not disclose
demographic
background
Within 2024, the Nomination Committee will take the
opportunity under provision 19 of the UK Corporate
Governance Code to assess the nominations, in respect of
United Kingdom
two of our Non-executive Directors, Christopher Boehringer
Yes
No
5
Female
Male
1
4
Non-
Binary
—
Not
disclosed
—
None
and Göran Trapp who were appointed in October 2015 and
will therefore be approaching their ninth anniversary in
2024.
Retention Rate
At the end of 2023, the retention rate for all office-based
employees was 91%, which is still at a satisfactory level. In
2022 and 2021, the retention rate was 90% and 88%,
respectively.
Read more about our employee health and
well-being on page 38
Not
known
5
Approval
On behalf of the Nomination Committee
Christopher H. Boehringer
Chairman of the Nomination Committee
07 March 2024
Succession Planning
Succession planning continues to be a priority for the
Nomination Committee. Throughout the year, the
Nomination Committee focused on the succession pipeline
Read about TORM’s diversity targets in
for Senior Management, which is essential to ensure a
management from page 43
continuous level of quality in management. It further aids
TORM in avoiding instability by mitigating the risks which
may be associated with unforeseen events, such as the
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
109
Total Remuneration 2023 of
the CEO
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Annual Performance Bonus KPI outcomes
For 2023, the Remuneration Committee established a KPI bonus scorecard across six
areas. These areas were: ROIC, TCE, CO2 reduction, Safety and Quality, OPEX, and
Administrative Cost to a maximum bonus potential of 70% against which 64.17% was
attained.
Annual Performance Bonus Discretionary
The Remuneration Committee reviews the CEO incentive award prior to
payment using judgement to ensure that the final assessment of performance
is fair and appropriate. If circumstances warrant it, the Remuneration
Committee may adjust the final payment.
The performance metrics of discretionary bonus are specified at the start of
the performance period and are commercially sensitive.
2023 Annual Bonus
64%
50%
114%
Formulaic outcome
percentage of maximum 70%
Committee
discretion maximum 50%
Final outcome percentage of
maximum 120%
Total Remuneration 2023
Long-Term Incentive Plan
Awarded in 2023
Restricted Share Units
255,200 / 300,000
Exercise price per share
DKK 220.60 / USD 0.01
Vesting over three years
2024 - 2026 and 2026
Grant value
USD 2.47m and USD 10.7m
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Base Salary, 47%Annual performance bonus, 51%Benefits, 2%92%100%One TORM KPIs (70%)Committee discretion (50%) Remuneration Committee
Report
Chairman's Statement
The Remuneration Committee report describes the
The parts of the annual report on remuneration subject to
At a Glance
audit are indicated in the report. The statement
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
activities of the Remuneration Committee for the period 01
by the Chairman of the Remuneration Committee is not
January 2023 to 31 December 2023. It sets out
subject to audit.
remuneration details for the Executive and Non-Executive
Directors in TORM. It has been prepared in accordance with
The Role of the Remuneration Committee
Chairman
Christopher H. Boehringer
Members
Annette Malm Justad
David N. Weinstein
Schedule 8 of the Large and Medium-Sized Companies and
Groups (Accounts and Reports) Regulations 2008 as
amended (the "Regulations").
The report is split into three main areas:
• Chairman’s Statement
• Annual Report on Remuneration
• Remuneration Policy
The Remuneration Policy, approved by the shareholders at
the Annual General Meeting (AGM) on 14 April 2021, took
effect from the date of that meeting. As of the date of this
Annual Report, TORM plc is in compliance with the
requirements of this Remuneration Policy. During 2023,
the Committee undertook a further review of the
Remuneration Policy.
Find TORM’s Remuneration Policy at
www.torm.com/investors/governance
The annual report on remuneration provides details on
remuneration in the period and additional information
required by regulations. The UK Companies Act 2006
requires that the auditors report to shareholders on certain
parts of the Directors' Remuneration Report and state
whether, in their opinion, those parts of the report have
been properly prepared in accordance with the regulations.
TORM ANNUAL REPORT 2023
Read more about the Remuneration Committee’s
area of responsibility on page 95
Find the Terms of Reference for the Remuneration
Committee at www.torm.com/investors/
governance
Compliance with the Code
The Remuneration Committee is in full compliance with the
Composition
Except for the Chairman, the Remuneration Committee is
composed solely of Independent Non-Executive Directors.
Meetings
The Remuneration Committee had four scheduled
meetings in 2023. The members’ attendance at
committee meetings can be seen on page 97.
2018 UK Corporate Governance Code except for provision
Focus Area
32. This provision states that the Board of Directors shall
establish a Remuneration Committee of Independent Non-
Executive Directors, with a minimum membership of three.
In addition, the Chairman of the Board of Directors can only
be a member if he is independent on appointment, and he
cannot chair the Remuneration Committee. TORM's
Chairman of the Board of Directors, Christopher H.
Boehringer, has been appointed as chairman of TORM’s
Remuneration Committee. However, given his association
with the controlling shareholder and the alignment of
interest regarding remuneration, the Board of Directors
considers it appropriate for Christopher H. Boehringer to
chair the Remuneration Committee.
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43%3%16%28%8%4%One TORM KPIsCEO remunerationLTIPEmployee remunerationGovernanceBoard remuneration
Remuneration Committee
Report
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REMUNERATION COMMITTEE REPORT
Meetings
The Chairman and the Executive Director attend the
meetings of the Remuneration Committee except for
Additional Bonus
In November, the Remuneration Committee unanimously
At this point, there is no intention to revise the
Remuneration Policy more often than every third year,
agreed that an additional general bonus should be paid out
unless required due to changes to regulations or legislation.
Approval
On behalf of the Remuneration Committee
Christopher H. Boehringer
Chairman of the Remuneration Committee
07 March 2024
matters relating to their own remuneration. The Head of
People attended some meetings, and other members of the
Management may attend when necessary.
to our employees in light of the strong financial results for
TORM. Senior Management and executives who are part of
the long-term incentive program prior to 2023 were
excluded from the payment
Activities During 2023
KPIs
In accordance with the UK Corporate Governance Code,
Succession and the Broader Workforce
In addition, the Remuneration Committee engaged in
the Remuneration Committee throughout the year
discussions surrounding the broader workforce
consistently reviewed the agreed 2023 KPI status providing
remuneration and incentives to ensure that, as a company,
valuable feedback. In addition, the Remuneration
TORM creates an environment where our most talented
Committee reviewed and agreed the KPIs for 2024.
employees are recognized and given greater
In order to further strengthen the One TORM focus across
the organization, the Remuneration Committee agreed that
for 2024, all employees will be measured against the same
Annual Remuneration Policy Review
The Committee reviewed the Remuneration policy. Their
responsibilities.
KPIs.
Additional Retention Program
In March, the Remuneration Committee agreed that a new
retention program is to be set up. The aim, to ensure that
TORM's dedicated team continues to be the leader and
reference company in the product tanker industry, servicing
our customers via our integrated business model, and
creating further retention incentive of selected key
employees. The additional retention program is based on
the same principles as the current RSU program, however,
the vesting period will be three years, with RSUs vesting on
01 March 2026.
conclusion was that it is appropriate to propose some
amendments to the Company’s Remuneration Policy. The
proposed changes include :
The removal of paid fees for Board Observers. During 2023,
the Nomination Committee noted that there was only an
obligation to reimburse for reasonable travel, hotel, and
incidental expenses of the Board Observer incurred in
attending and returning from meetings. It was therefore
decided that the payment of fees should be removed as
they had previously been removed from the TORM-elected
Board Observers.
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
112
Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Remuneration at a Glance
Executive Director’s and Chief Executive Officer’s Remuneration
Fixed Pay
Base Salary
Effective 01 January 2023
Chief Executive DKK 7.72m
Executive Director Salary
EUR 70,000
Effective 01 January 2024
Chief Executive DKK 7.91m
EUR 70,000
Benefits
Pension
DKK 276,000, covering the running and maintenance expenses associated with a
private vehicle
Not entitled to any pension
DKK 276,000, covering the running and maintenance expenses associated with a
private vehicle
Not entitled to any pension
Annual Bonus
Short-Term Incentive
Long-Term Incentive
Long-Term Incentive
Opportunity (% of salary):
Maximum: 120% of the base salary in the financial year 2023
Opportunity (% of salary):
Maximum: 120% of the base salary in the financial year 2024
Granted a total of 255,200 RSUs vesting over a three-year period, with one third of
the grant amount vesting at each anniversary during the three-year period starting
on 01 January 2024. The exercise price for each RSU is DKK 220.6. In addition,
300,000 RSUs on similar terms, with the exceptions that the strike price for these
RSUs is set to one US cent and that all the RSUs will vest on 01 March 2026
Not be known at time of publication
Statement of Voting at the AGM
Shareholder voting on the resolutions to approve the annual Remuneration Report put to the 2023 AGM and the Directors’ Remuneration Policy put to the 2021 AGM were as follows:
Annual remuneration report
Directors' remuneration policy
Votes for
% Votes against
%
Total Votes
Abstentions
53,814,784
48,123,828
64.9
63.9
9,140,247
3,018,434
11.0 62,955,031
4.0
51,142,262
26,710
952
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
113
Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Executive Director’s and Chief Executive
Officer’s Remuneration
Single Total Figure of Remuneration
The table to the right sets out the 2022-23 remuneration
for Jacob Meldgaard in his roles as Executive Director of
Taxable Benefits
TORM can place a car costing no more than DKK 1m at the
Other benefits provided directly include two trade
periodicals, a mobile phone, which may be used for both
CEO’s disposal. However, the CEO has instead accepted an
business and private purposes, a PC at the CEO’s disposal
amount of DKK 23,000 per month, covering the running
at his home address, which may be used for both business
and maintenance expenses associated with a private
vehicle. For 2023, the amount of DKK 276,000 (USD
and private purposes, including internet access and call
charges. No changes in allowances and benefits are
TORM plc and Chief Executive Officer (CEO) of TORM A/S,
39,989 ) was included in the single figure amount.
expected for 2024.
a subsidiary of TORM plc.
Base Salary
The base salary is discussed and agreed with the Chairman
of the Board of Directors and the Remuneration Committee
once a year. Base salary as of 01 January 2023: DKK
7.72m (USD 1,119m). In addition, the CEO receives EUR
70,000 (USD 77,000) for his role as Executive Director.
The CEO’s base salary was reviewed on 06 February 2024
to determine the appropriate salary for 2024. The base
Total Remuneration for the Financial Year 2023
salary as of 01 January 2024 was determined at DKK 7,91m,
Base Salary
and the adjustment of the salary will take effect as of 01
Taxable Benefits
January 2024.
Pension
Total Fixed Remuneration
Variable Pay (USD'000)
Annual Performance Bonus
Total Variable Pay
Single Total Figure of Remuneration (USD'000)
Change in Remuneration of Colleagues and Directors
Employee Entire Group
Chief Executive Officer
2023
Fixed pay
(USD'000)
1,195.4
40.0
—
1,235.4
1,277.4
1,277.4
2,512.8
2022
Fixed pay
(USD'000)
1,112.0
38.8
—
1,150.8
592.8
592.8
1,743.8
% change from 2022 to 2023
Salary
5.7 %
7.5 %
Benefits
0.0 %
2.9 %
Bonus
-15.2 %
115.5 %
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
114
Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Performance Bonus 2023
The Remuneration Committee has provided the CEO with a
performance cash bonus for the financial year 2023 in the
following range and based on the following parameters:
•
The fulfillment of specific performance metrics set by
TORM (up to 70% of the CEO’s base salary). These
include but are not limited to ROIC, cost structure,
highest safety standards, and environmental footprint
• Up to 50% of the CEO’s base salary based on the sole
discretion of TORM’s Board of Directors
The table below shows the achievement against each of the
performance metrics in our annual bonus and the resulting
total annual bonus payout for the year ended 31 December
2023.
Payout at
Maximum
Perfor-
mance %
Actual
Payout
% of
Salary
Actual
Payout
% of
Overall
Bonus
70.0
64.2
56.2
Key One TORM KPIs
Parameter 1
Highest Safety and quality
standard
CO2 reduction towards 2025
target
Outperform peers on RoIC
Outperform peers on TCE
Maintain effective OPEX cost base
Maintain effective Admin cost base
Parameter 2
Commercially sensitive
Total
In aggregate, the maximum achievable cash bonus for the
exercise price for each RSU was DKK 58, corresponding to
financial year 2023 for the CEO is equal to 120% of the
the average price of TORM shares in the 90 calendar days
CEO’s base salary in the financial year 2023. The specific
preceding the publication of TORM plc’s Q4 2021 release
metrics and calculation methodology for each of the
parameters have been determined by the Board of
Directors. Based on the aforesaid methodology, the CEO’s
performance cash bonus for 2023 was determined to be a
total of 114.2% (64.2% on parameter 1 and 50.0% on
parameter 2) of the 2023 fixed annual salary of DKK 7.72m,
resulting in an amount of DKK 8.82m (USD 1.28m).
Long-Term Incentive Program – Restricted Share
Units Granted to the CEO
In accordance with TORM’s Remuneration Policy, the Board
of Directors has as part of the Long-Term Incentive
Program (LTIP) granted Restricted Share Units (RSUs) in
the form of restricted stock options to certain employees.
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 TORM’s shareholders. Each RSU granted under the
LTIP entitles its holder to acquire one Class A common
share, subject to vesting.
The single figure remuneration table for the CEO does not
include any amounts in relation to the RSU awards since
2016, and there are no performance conditions associated
with the grant of RSUs.
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 29 March
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 can be exercised from 01 January 2024. The
exercise price for each RSU was DKK 220.6, corresponding
to the average of 90 calendar days preceding the
publication of TORM plc’s 2022 Annual Report plus a 15%
premium and adjusted for the dividend payment related to
TORM’s the fourth quarter 2022 results.
In addition, Executive Director Jacob Meldgaard will be
granted a total of 300,000 RSUs on similar terms as
outlined above, with the exceptions that the strike price for
these RSUs is set to one US cent and that all the RSUs will
vest on 01 March 2026.Vested RSUs may be exercised for
a period of 360 days from each vesting date.
2023
29 March 2023
LTIP Element of Jacob Meldgaard’s Remuneration Package
2023
Award
Awarded on
Vesting period
1st vesting date
Original exercise price
Grant value assuming
100% vesting
2023
29 March 2023
01 January 2024
01 March 2026
DKK 220.6
three years
three years
USD 10.7m
USD 2.5m
USD 0.01
50.0
120.0
50.0
114.2
43.8
100.0
As detailed in announcement no. 9 issued on 23 March
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 can be exercised from 01 January 2023. The
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
115
Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Long-Term Incentive Program – Restricted Share Units Granted
Year
2023 Additional
2023
2022
2021
2020
Grant of RSUs excluding the Executive Director
Grant of RSUs to the Executive Director
Vesting period in years
Vesting period in years to the Executive Director
Beginning
Exercise period from vesting
1,333,224
300,000
3
1,248,155
255,200
3
1,137,770
255,200
3
1,099,921
255,200
3
1,047,389
—
3
01-Mar-26
01-Jan-24
01-Jan-23
01-Jan-22
01-Jan-21
Three Years after
each vesting date
360 days after
each vesting date
360 days after
each vesting date
360 days after
each vesting date
360 days after
each vesting date
Black-Scholes model, theoretical market value
USD 58.2m
USD 14.6m
USD 2.7m
USD 3.0m
220.60
58.00
53.50
Exercise Price (DKK)
Exercise Price (USD)
Reduced due to dividend payment (DKK)
Total RSU's expired un-exercised
RSUs exercised within 2019
RSUs exercised within 2020
RSUs exercised within 2021
RSUs exercised within 2022
RSUs exercised within 2023
Total RSU's exercised by grant year
RSUs outstanding as of 31 December 2023
-
0.01
-
-
-
-
-
-
-
-
-
-
-
-
-
-
74,449
124,063
-
-
-
-
435,952
435,952
882,569
-
-
-
433,979
398,539
832,518
398,540
1,633,224
1,503,355
USD 1.3m
69.90
64.30
409,350
-
-
-
334,961
303,078
638,039
—
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
116
Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
End of Service Gratuity
TORM can terminate the CEO’s Service Agreement giving
12 months’ notice to expire on the last day of a month. The
CEO can terminate the Service Agreement giving six
months’ written notice to expire on the last day of a month.
LTIP or STIP, based on the erroneous financial data that
exceeds the amount of incentive-based compensation the
Outside Appointments
The Executive Director is entitled to retain the fees earned
executive would have received based on the restatement.
from non-executive appointments outside TORM. Jacob
Total Pension Entitlements
The Directors of TORM plc are not entitled to any pension
Meldgaard was appointed Non-Executive Director of Danish
Ship Finance A/S for which he received DKK 350,000 and
Non-Executive Director of SYFOGLOMAD Limited for which
Post-Service Salary
If the CEO dies during his employment, TORM will pay to the
contributions from TORM. In addition, Denmark-based
he received EUR 5,000 for his services.
Executive Director Jacob Meldgaard, in his role as CEO of
widow or any of his children below the age of 18 the fixed
TORM A/S, is not entitled to any pension contribution.
Annual Bonuses and LTIPs
TORM’s Remuneration Policy stipulates that the Non-
salary including non-salary benefits for the current month
and a post-service salary for three months equal to the
fixed salary. However, such post-service salary will only be
Taxable Benefits
In general, members of the Board of Directors of TORM plc
Executive Directors’ remuneration cannot include
participation in share or warrant programs. The Non-
paid until the date on which the employment would have
do not receive any additional benefits.
terminated because of termination of the Service
Agreement.
Claw Back Policy
TORM’s policy regarding the recovery of erroneously
awarded compensation (“Clawback Policy”) is made in
accordance with the applicable rules of the Danish
Companies Act, 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 has published 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 limited time period
preceding the date on which an accounting restatement is
required, received incentive compensation, through the
TORM ANNUAL REPORT 2023
Payments for Loss of Office
No payments for loss of office have been made in 2023.
The Company does not consider making payments for loss
of office to Non-Executive Directors. For Executive
Directors, a termination notice cannot exceed 24 months.
Termination by the Executive Director must be subject to a
minimum of six months’ written notice. Any severance pay
cannot exceed an amount corresponding to the
remuneration paid for the preceding two years. The
Remuneration Committee will maintain a discretionary
approach to the treatment of leavers given that the facts
and circumstances of each case are unique. In an exit
situation, the Remuneration Committee will consider the
individual circumstances, any mitigating factors that may
be relevant, the appropriate statutory and contractual
position, and the requirements of the business for speed of
change.
Executive Directors of TORM plc do not receive any part of
their remuneration from TORM in shares or warrants. The
remuneration for the Non-Executive Directors is
determined by the Board of Directors subject to limits in
TORM’s Articles of Association. During 2023, none of the
Non-Executive Directors received any part of their
remuneration in shares or warrants.
COMMITTEE REPORTS
117
Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
The Executive Director’s Interests in the
Shares of TORM
The table to the right summarizes the total interests of the
Executive Director in shares of TORM plc as of 31
December 2023. During the period 01 January to 31
December 2023, the Executive Director sold 510,610 A-
shares in TORM plc for a total value of approximately DKK
110 million. The following changes took place between 31
December 2023 and 07 March 2024. Of the 810,401
unvested portion of the Executive Director’s interests
255,200 Restricted Share Options vested on 01 January
2024.
The Directors’ Interest in the Shares of TORM
The table to the right summarizes the total interests of the
Directors in shares of TORM plc as of 31 December 2023.
No changes took place in the Directors’ interests between
31 December 2023 and 07 March 2024.
Remuneration for Non-Executive Directors
The table to the right summarizes the remuneration paid to
the Non-Executive Directors of TORM in 2023. The fees
payable can be found in the Remuneration Policy and are
paid in EUR. The decrease in fees in USD is in relation to
exchange rates. The fees in EUR remain unchanged year on
year. The fees shown include any additional fees paid in
respect of chairmanships of committees or other roles such
as Senior Independent Director. Board Observer fees are no
longer payable.
Executive Director’s Interests in the Shares of the Company (Audited)
Jacob Meldgaard's Restricted Share Units
At 31/12/22
Granted – 29/03/23
Granted – 29/03/23
Exercised within 2023
At 31/12/23
Awarded
Vested Not
Exercised
Agreed not
to Exercise
2,553,160
1,021,380
766,035
255,200
300,000
—
3,108,360
—
—
—
—
—
—
1,021,380
766,035
Exercised
340,411
—
—
170,133
510,544
Unvested
425,334
680,534
980,534
810,401
810,401
2023 Statement of Directors' Shareholding and Share Interests
Director
Christopher H. Boehringer
David N. Weinstein
Göran Trapp
Annette Malm Justad
Jacob Meldgaard
The above table shows the total number of share interests of each Director.
Ordinary
shares as of
01 Jan 2023
21,204
Ordinary
shares as of
31 Dec
2023
21,204
5,000
12,820
2,700
340,477
5,000
12,820
2,700
—
Changes
from 31 Dec
2023 to 7
Mar 2024
Ordinary
shares as of
7 Mar 2024
—
—
—
—
—
21,204
5,000
12,820
2,700
—
2023 Remuneration Table Non-Executive Directors
USD '000
Base Fee
Committee Fee
Total
Director
Christopher H. Boehringer
David N. Weinstein
Göran Trapp
Annette Malm Justad
2023 2022 2021 2023 2022 2021 2023 2022 2021
161
109
55
55
157
104
52
52
176
117
59
59
54
109
109
109
52
104
104
104
60
116
117
117
214
219
164
164
210
207
155
155
235
234
176
176
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
118
Remuneration Committee
Report
Information provided in the following part of the Annual Report on remuneration is not
subject to audit.
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
8-Year Historical Performance. TORM plc vs Peers and the OMX Index
Assessing Pay and Performance
In the table to the right, we summarize the Chief Executive
Officer’s single figure remuneration over the past six years,
and how our variable pay plans have paid out in relation to
the maximum opportunity. This can be compared to
TORM’s performance since the listing of TORM plc,
measured by total shareholder return, compared to the
average of a selection of TORM’s main peers in the industry
and with the performance of the Danish stock index OMX.
The OMX index is a market cap weighted index of all stocks
listed on Nasdaq in Copenhagen. The total shareholder
return is calculated in USD.
Financial year remuneration for the Chief Executive Officer
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
119
67%60%45%117%100%100%57%114%1,4731,6261,5312,2082,3072,4491,7442,513Annual bonus (% earned of base salary)Total remuneration USD '0002016201720182019202020212022202305001,0001,5002,0002,5003,000—%20%40%60%80%100%120%140%72715162565812921896106108112134177176199Peer averageTORMOMX201620172018201920202021202220230100200300 Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Annual Percentage Change in Directors’
Remuneration
The table to the right shows the percentage change over
the year ended 31 December 2022 to the year ended 31
December 2023 in respect of the Directors’ remuneration
and average employee remuneration. As required by
legislation, the Directors’ remuneration is compared to the
employees of TORM plc on a full-time equivalent basis.
Relative Importance of Spend on Pay
The table to the right shows the actual expenditure of
TORM on employee pay and distributions to shareholders
compared to the retained earnings of TORM.
Change in Remuneration of Colleagues and Directors
Salary or Fees % Change
Benefits % Change
Bonus % Change
2022 to
2023
2021 to
2022
2020 to
2021
2022 to
2023
2021 to
2022
2020 to
2021
2022 to
2023
2021 to
2022
2020 to
2021
Chief Executive Officer
Christopher H. Boehringer
David N. Weinstein
Göran Trapp
Annette Malm Justad
Colleagues entire group
7.5 %
2.2 %
5.8 %
5.8 %
5.8 %
5.7 %
-10.6 %
-10.9 %
-11.4 %
-11.7 %
-11.7 %
4.6 %
10.1 %
-8.1 %
16.8 %
2.9 %
26.5 %
3.5 %
2.9 %
-11.8 %
7.4 %
115.5 %
-49.0 %
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.0 %
0.0 %
0.0 %
-15.2 %
N/A
N/A
N/A
N/A
1.9 %
2.1 %
N/A
N/A
N/A
N/A
1.5 %
The comparative figures used to determine the % change take into consideration the CEO's salary and benefits.
Other benefits provided relate directly to company car benefit.
% change in DKK for salary and Executive Director’s fees is 4.5%, taxable benefits is 0% and annual bonus is 109.3%.
% change in Euro for Non-Executive Director fees is 0%. Fees have remained unchanged.
Relative Importance of Spend on Pay
Expenditure USDm
Dividends paid
Purchase of outstanding treasury shares in TORM A/S
Purchase/disposals of treasury shares
Executive Director’s remuneration
Total
Staff costs
Retained earnings
2023
586.4
—
—
2.5
588.9
77.9
2022
166.7
—
—
1.7
168.4
49.7
2021
—
—
—
2.4
2.4
52.1
2020
70.6
—
1.3
2.3
74.2
50.7
1,382.2
1,290.4
899.5
939.2
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
120
Remuneration Committee
Report
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Remuneration Policy
The TORM plc Remuneration Policy approved at the 20
2024 Remuneration Policy
The Remuneration Policy approved at the 14 April 2021
Approval
On behalf of the Remuneration Committee
April 2021 AGM remained unchanged during 2023. In
AGM took effect from the date of that meeting. As of the
accordance with the UK Corporate Governance Code,
date of this Annual Report, TORM plc is in compliance with
Christopher H. Boehringer
TORM’s Remuneration Policy and practices are designed to
the requirements of this Remuneration Policy. For 2024,
Chairman of the Remuneration Committee
support the business strategy and promote TORM’s long-
term sustainable success. The Remuneration Committee
will continue to consider the appropriateness of the
Remuneration Policy annually to ensure that it continues to
align with the business strategy. At this point, there is no
intention to revise the Remuneration Policy more often than
the Board of Directors has adopted the revised
07 March 2024
Remuneration Policy as detailed in the Chairman’s
statement and included within this Annual Report. The
revised policy will be put before the shareholders for
approval at the AGM on 11 April 2024
every third year, unless required due to changes to
Read TORM's revised Remuneration policy on
regulations or legislation.
pages 122- 130
Find TORM’s Remuneration Policy at
www.torm.com/investors/governance/
Adaptation and Publication
The Board of Directors must review the Remuneration
Policy at least once a year. Any changes to the
Remuneration Policy must be adopted by the Board of
Directors and approved by the shareholders at an AGM.
TORM’s Remuneration report will be included in TORM’s
Annual Reports for all financial years and will contain
information on remuneration paid to the Board of Directors
and Executive Management.
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
121
Remuneration Policy
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
Our current remuneration policy was approved by
The Committee’s review of the remuneration policy sought
We propose that the policy remains broadly unchanged in
shareholders at the 2021 AGM, with a vote of 94.1% in
to ensure that it continues to:
2024, apart from:
favor of those that voted. During the year, the policy
operated as intended in terms of Company performance
• Apply pay principles which are applicable to all
and quantum. It is intended that the updated policy for
colleagues across the TORM Group and, in particular,
•
•
The removal of paid fees for Board Observers
This Remuneration Policy has previously been prepared
TORM’s Executive and Non-executive Directors will operate
the principle that the reward package should support
in both a Danish and an English version. It has now been
for a period of three years from the date of approval at the
the delivery of TORM’s purpose of being committed to
decided to prepare in English only
AGM on 11 April 2024.
protecting our employees, our assets, our environment,
As in previous Remuneration reports, our annual bonus is
• Be aligned with, and incentivize the delivery of, the
commercially sensitive and therefore, we will only disclose
Group’s strategy
our targets in the Remuneration report following the
•
Foster performances in line with the Group’s culture,
completion of the financial year.
values and behaviors
and our society
• Be aligned with wider workforce pay policies and
emerging best practice
• Motivate executive talent; and
• Drive the success of the Company for the benefit of key
stakeholders
TORM ANNUAL REPORT 2023
COMMITTEE REPORTS
122
Remuneration Policy
AUDIT COMMITTEE REPORT
RISK COMMITTEE REPORT
NOMINATION COMMITTEE REPORT
REMUNERATION COMMITTEE REPORT
1. Introduction
In this forward-looking section, we describe our
Remuneration Policy for the Board. We will be seeking
shareholder approval for our Remuneration Policy at the
2024 AGM, and we intend to implement it at that point.
The following pages set out the Remuneration Policy for the
Directors of TORM plc agreed at the Annual General
Meeting on 11 April 2024, and will take effect from 01
January 2024.
The Board of Directors (the “Board of Directors”) of TORM
plc (“TORM” or the “Company”), has adopted this
Remuneration Policy (the “Remuneration Policy”), including
the overall guidelines on incentive pay.
This Remuneration Policy provides the framework for
remuneration paid to Non-Executive members of the Board
of Directors and certain specified members of the
Company’s Executive Management (the “Executive
Management;” the Board of Directors and the Executive
Management jointly referred to as “Management”).
2. Background and General Objectives
The growth and future success of the Company depend on
the efforts of the members of the Management. Therefore,
it is the overall objective of this Remuneration Policy to
attract, motivate and retain qualified Management
members.
The remuneration of members of the Management,
including the size and composition of the Board of
Directors, will be determined with a view to promoting value
creation in the Company, to implementing its short-term as
well as long-term strategic goals, and to creating common
interests between members of the Management and TORM
shareholders.
3. Remuneration of the Board of Directors
Members of the Board of Directors receive a fixed annual
fee in line with the amounts set out in Table 1 on the
2.1. Consideration When Determining our
Remuneration Policy
The Company does not specifically consult with employees
following page. The level of the fixed annual fee is proposed
by the Board of Directors at the Annual General Meeting
after comparison with other companies within the same
market capitalization range. In line with the UK Corporate
in relation to this Policy and no direct comparison metrics
Governance Code, all Non-executive Directors submit
are applied between employees and the remuneration levels
themselves for re-election by shareholders every year at
for the Executive Director(s). However, this Remuneration
the Annual General Meeting. Shareholders can view Non-
Policy seeks to ensure that the combined remuneration
executive Directors’ letters of appointment at the
paid to members of the Management for work performed in
Company’s registered office.
and for the Company is market competitive, not only in
comparison with other industry groups, but also in
Members of the Board of Directors are not offered
comparison with peer companies in the global shipping
participation in any incentive schemes. However, the
industry. When considering salary increases for the
Executive Director participates in an incentive scheme of
Executive Director(s), the Company will seek to ensure
TORM plc’s subsidiary, TORM A/S, in his role as CEO of
comparison with other companies within the same market
that Company. The Chairman and the Deputy Chairman of
capitalization range.
2.2. Statement of Consideration of Shareholder Views
The Chairman of the Annual General Meeting of the
Company will inform the shareholders of any proposal made
by the Board of Directors in relation to the level of the
Management remuneration. The Committee is strongly
committed to an open and transparent dialogue with
shareholders on remuneration matters, and the Chairman
will invite comments from the shareholders before any level
is agreed on.
the Board of Directors, as well as the Chairman and
members of the committees established by the Board of
Directors, may receive additional fees in line with the
amounts set out in Table 1 below.
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Table 1
Board Fees
Chairman
Deputy Chairman
Minority Board Observer
Executive Director
Director
Board observer
Committee Fees
Chairman of the Audit Committee
Other Audit Committee members
Chairman of the Risk Committee
Other Risk Committee members
Chairman of the Nomination
Committee*
Other Nomination Committee
members*
Chairman of the Remuneration
Committee
Other Remuneration Committee
members
Fee Per Annum (EUR)
150,000
100,000
Unpaid
70,000
50,000
Unpaid
Fee Per Annum (EUR)
50,000
25,000
50,000
25,000
25,000
25,000
25,000
25,000
out the details of all payments made to the Board of
When considering the appropriate remuneration for a new
Directors in the preceding financial year.
Executive Director, the Remuneration Committee will
consider the level of the fixed annual fee proposed by the
The Remuneration Policy will be subject to a binding
Board of Directors and adopted at the Annual General
shareholder vote at least once every three years.
Meeting as detailed in Table 2 below. The aim is to provide a
remuneration package which is sufficient to attract, retain
TORM may reimburse relevant reasonable expenses, such
and motivate key talents, while at all times ensuring that
as travel and accommodation, in connection with
the Company pays no more than necessary with due regard
attendance at meetings of the Board of Directors (or duly
to the best interests of the Company and our shareholders.
appointed committees of the Board of Directors).
The Remuneration Committee will provide full details of the
recruitment package for any new Executive Director in the
The remuneration principles applicable to members of the
next annual report on remuneration and will provide
Board of Directors also apply to any Board Observer
shareholders with the rationale for any decisions taken.
appointed in accordance with article 74 or 76 of the Articles
of Association of the Company.
Any fees payable to the members of the Board of Directors
and any Board Observer may be paid in cash or as share-
based payments.
3.2. Service Contracts
In accordance with the UK Companies Act 2006, Chapter
5, Section 228 (1) b, the Company has chosen to issue a
written memorandum setting out the terms of the Non-
Executive and Executive Directors’ contracts. The
memorandum is available for viewing at the Company’s
registered office on request. Under the Company’s Articles
of Association, each Director must retire at the end of the
second Annual General Meeting after his appointment or
last reappointment, unless he has been reappointed at that
Annual General Meeting.
* Only payable in the year in which the actual meetings are
Fees paid to tax advisors for the preparation of UK tax
held.
returns
If a member of the Board of Directors is instructed to take
on a specific ad hoc task that falls outside the scope of that
member’s ordinary duties, such member may be offered an
additional fee for the work carried out in relation to such a
task, subject to the approval of the Board of Directors.
Under the UK Companies Act 2006, the Company will be
required to prepare a Remuneration Report for each
financial year, which is made available to the shareholders
as part of the Company’s Annual Report, and which will set
TORM plc Directors whose UK income is above the
threshold of GBP 100,000 per annum can, if required, use
the services of the Company’s external tax advisors to
prepare their personal UK tax return. The fees incurred by
the Company for the service offered will be deducted from
the Director’s net board fees.
3.1. Approach to the Remuneration of the Executive
Director
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Table 2
Fixed Pay
Directors’ Fees
Purpose and Link to Strategy
To attract and retain high-caliber Executive
Operation
The level of the fixed annual fee is proposed by the
Performance Metrics
There are no performance measures associated with
Directors by offering market competitive fees.
Board of Directors at the Annual General Meeting
the Director’s fees.
Base Salary
To recruit and retain high-caliber Executive(s)
after comparison with other companies within the
same market capitalization range.
The salary will be discussed and agreed with the
There are no performance measures associated with
Benefits
competitive market rate.
To provide market competitive benefits to aid
February and take effect from 01 January that year.
Executive Directors receive a competitive benefits
There are no performance measures associated with
providing base level remuneration at a
Chairman of the Board of Directors once a year in
the base salary.
retention and remain competitive in the
package, which may include a company car,
this benefit.
marketplace.
Short Term Incentive Plan
Annual Bonus
Purpose and Link to Strategy
To encourage and reward delivery of the
newspapers, a mobile phone, PC, ASDL and call
charges. Other benefits may be introduced from
time to time to ensure that the benefits package is
appropriately competitive and reflects the
circumstances of the individual Director.
Operation and Opportunity
Up to 120% of the base salary in the financial year.
Performance Metrics
The fulfillment of specific performance metrics set by
Company’s strategic priorities. To provide a
Performance is assessed over a financial year. The
the Company (up to 70% of the CEO’s base salary).
variable level of remuneration based on short-
Committee determines the level of bonus, taking
The performance metrics are specified at the start of
term performance against the annual plan.
performance against targets and the underlying
the performance period; and up to 50% of the CEO’s
performance of the business into account. The
base salary is based on the sole discretion of the
Committee may apply judgement in making
Company’s Board of Directors.
Purpose and Link to Strategy
To reward achievement of TORM's long term
appropriate adjustments to bonus outcomes to
ensure they reflect underlying business
performance. Malus and clawback provisions apply.
Operation
Incentives granted under the LTIP are subject to
Performance Metrics
Each type of award, including all relevant performance
strategy, creating shareholder value that aligns
minimum vesting requirements of three years.
measures, is discussed in greater detail in 4.2 "Types
the economic interests of Executive Director and
of Incentives”.
shareholders.
Long Term Incentive Plan
Share Options, Restricted
Share Units and Other
Share-Based Awards
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termination notice cannot exceed 24 months. Resignation
by the Executive Director must be subject to at least six
months’ written notice. Any severance pay cannot exceed
an amount corresponding to the remuneration paid for the
preceding two years.
In addition, the Executive Director may be offered to
participate in management incentive plan(s) (“Plan(s)”) or
be offered extraordinary bonuses as well as ordinary
benefits, such as a company car, telephone, internet
access, and newspaper subscriptions.
Indicative Executive Director Total
Remuneration at Different Levels
USDm
Remuneration Policy
3.3. Payments for Loss of Office
Non-Executive Directors – the Company does not consider
making payments for loss of office to Non-Executive
Directors.
Executive Directors – a termination notice cannot exceed
24 months. Termination by the Executive Director must be
subject to a minimum of six months' written notice. Any
severance pay cannot exceed an amount corresponding to
the remuneration paid for the preceding two years. The
Remuneration Committee will maintain a discretionary
approach to the treatment of leavers given that the facts
and circumstances of each case are unique. In an exit
situation, the Remuneration Committee will consider the
individual circumstances, any mitigating factors that may be
relevant, the appropriate statutory and contractual position,
and the requirements of the business for speed of change.
The Company can terminate the CEO’s Service Agreement
giving at least 12 months’ notice to expire on the last day of
a month. The CEO can terminate his Service Agreement
giving six months’ written notice to expire on the last day of
a month.
4. Remuneration of the Executive Director
4.1. Performance scenarios
The performance scenarios in the Table 3 below show the
estimated remuneration that could be received by the
Executive Director, both in absolute terms and as a
proportion of the total package under different
performance scenarios:
Table 3
INDICATIVE EXECUTIVE DIRECTOR TOTAL
REMUNERATION LEVELS
Minimum
On Target
Fixed pay and benefits only
Per Minimum + 50% of maximum
annual bonus
Maximum
Per Minimum + 100% of maximum
annual bonus
The following chart gives an illustrative value of the
remuneration package that the Executive Director could
receive under three different performance scenarios, in
accordance with this Remuneration Policy.
The annual bonus maximum is 120% of the CEO’s base
salary in the financial year.
Fixed pay is based on current values at the time of writing.
As it is a fixed figure, there is no minimum or maximum
figure.
The Executive Director receives a fixed annual base salary
based on an assessment of the overall objectives of the
Remuneration Policy, market practice, scope and nature of
the work performed, qualifications required, and the
performance of each member.
When the Executive Director is also the CEO of the
Company's subsidiary TORM A/S, his or her remuneration
will include compensation from TORM A/S subject to the
framework of this Remuneration policy.
The Executive Director’s terms of employment with the
TORM Group, including salary, pension, and resignation
terms, are determined by the Board of Directors. A
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0.080.080.081.121.121.120.651.84Directors feesFixed payShort term incentiveMinimumOn TargetMaximum00.511.522.533.5 Remuneration Policy
4.2. TORM's Management Incentive Plans
The Plans are established by the Board of Directors
•
Limitations on grants to the Executive Management and
individual participants in a given calendar year
determining the terms and conditions of each Plan within
• Awards under the Plans are administered by the
the framework of this Remuneration Policy.
Remuneration Committee, an independent committee
of the Board of Directors
When determining the composition of a Plan, including the
elements of incentive pay as well as the ratio between fixed
Estimated Present Value: The estimated present value of
salary and incentive pay under the Plan, due consideration
the Plans will be disclosed in TORM’s Annual Report.
must be given to the overall objectives of this Remuneration
Policy to avoid undesirable incentives. The Plan should
combine an effective means of attracting and retaining
Terms of Plans
Administration: Based on the recommendations of the
qualified candidates with a long-term focus on maximizing
Remuneration Committee, the Board of Directors will
shareholder value.
Purpose of Plans
A Plan may comprise a short-term incentive plan (“STIP”)
and/or a long-term incentive plan (“LTIP”), both as
described below.
generally administer a Plan and has the authority to grant
incentives under any Plan and to set the terms of the
awards, amend any outstanding incentives or accelerate
the time at which any outstanding incentives may vest,
correct any defect in the Plans or any incentive as it deems
necessary, and establish rules or regulations relating to the
administration of the Plans. See paragraph 4.4
TORM believes that providing the members of the Executive
“Adjustments” below. All provisions of the Plans and any
Management with a proprietary interest in the growth and
actions taken in this respect will be subject to applicable
performance of TORM will stimulate the individual
law.
performance and enhance shareholder value. TORM also
believes that a significant portion of a named Executive's
compensation should be directly linked to TORM's
performance.
Principle Conditions for Granting Incentive Pay
The attainment of performance targets based on TORM's
strategic and operational initiatives, such as total
shareholder return and cash flow metrics, may be used to
This Remuneration Policy has several provisions designed
determine allocations under the Plans in addition to
to protect shareholder interests and promote effective
discretionary allocations.
corporate governance in respect of the Plans, including the
following:
Eligibility
Members of the Executive Management will be eligible to
receive incentives under a Plan when designated as
participants.
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Requirements
The Board of Directors has discretion to determine the
times at which such incentives are to be made, the size of
such incentives, the form of payment and all other
conditions of such incentives, including any restrictions,
deferral periods or performance requirements.
Amendments or Discontinuations
The General Meeting must approve any amendments to or
discontinuation of this Remuneration Policy, which provides
the framework for the Plans. No amendment to nor
discontinuation of this Remuneration Policy may materially
impair any previously granted award under the Plans
without the consent of the recipient.
Term
No incentives may be granted under a Plan more than ten
years after the date on which this Remuneration Policy was
initially approved by the General Meeting.
Incentive Agreements
Grants of incentives will be subject to the terms and
conditions of the Plans and may also be subject to individual
restrictions imposed by the Board of Directors and detailed
in an incentive agreement between TORM and the relevant
participant.
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Remuneration Policy
STIP
The STIP primarily supports the fulfillment of short-term
Types of Incentive
Each type of award that may be granted under the LTIP is
objectives and goals. Based on the recommendations of the
described below.
Remuneration Committee, the Board of Directors can
decide to award annual cash bonuses to members of the
Executive Management in order to meet the overall
objectives of this Remuneration Policy. Such bonuses may
be subject to the attainment of certain performance or
other targets.
LTIP
Incentives under the LTIP may be granted in any one or a
combination of the following forms:
• Share options
• Restricted share units and
• Other share-based awards
Each type of award is discussed in greater detail under
“Types of Incentives” below.
The LTIP primarily supports the fulfillment of long-term
objectives and goals.
Maximum Threshold
The maximum threshold for the share based LTIP grants
Share Options
A share option is a right to subscribe for A-shares in TORM.
The Board of Directors will determine the number and
exercise price of the options and when the options become
exercisable. The term of an option may not exceed ten
years. The Board of Directors may not decrease the
exercise price for any outstanding options after the date of
grant other than as provided for in the Plans or in
accordance with the adjustment principles set out in
paragraph 4.4 below. In addition, an outstanding option
may not, as of any date that the option has a per share
exercise price that is greater than the then current fair
market value of a share, be surrendered to TORM as
consideration for the grant of a new option with a lower
exercise price, another award, a cash payment or A-shares,
unless provided for in the Plans or in accordance with the
adjustment principles set out in paragraph 4.4 below. The
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date from TORM. Subject to the restrictions provided in the
applicable incentive agreement and the LTIP, a participant
receiving RSUs has no rights as a shareholder to such units,
until the RSUs vest and A-shares are issued to the
participant. RSUs may be granted with dividend equivalent
rights; however, unless determined by the Board of
Directors to be paid currently, TORM must establish a
bookkeeping account for the participant and reflect in that
account any securities, cash or other property comprising
any dividend or property distribution with respect to each
share underlying each RSU.
Other Share-Based Units
The LTIP also permits the Board of Directors to grant
eligible participants awards of A-shares and other awards
that are denominated or payable in, valued in whole or in
part by reference to, or are otherwise based on or related to
A-shares, or the appreciation in value of A-shares.
Termination of Employment or Service
Each incentive agreement may, subject to applicable law,
option exercise price may be paid in cash, by check, in A-
include provisions requiring the forfeiture of outstanding
shares, through a “cashless” exercise arrangement,
incentives in the event of the participant's termination of
through a net exercise procedure (if approved by the Board
employment, if such participant is considered a voluntary
of Directors) or in any other manner authorized by the Board
leaver (as defined by the Board of Directors in the individual
applicable to the Executive Management as a group is
of Directors. TORM intends to make A-shares available
agreement) or, in the case of performance-based grants, if
expected to be approximately 7% of the Company's share
upon exercise of any share options by way of a fresh
applicable goals or targets are not met.
capital from time to time.
Minimum Vesting Requirements
Incentives granted under the LTIP are subject to minimum
vesting requirements of three years for members of the
Executive Management (with incremental vesting permitted
over the vesting period).
TORM ANNUAL REPORT 2023
issuance of A-shares out of capital and currently has
allotment authorities in place in order to allow any such
share issuances to be made by the Company.
Restricted Share Units
A Restricted Share Unit, or RSU, represents the right to
receive one share on a respective vesting or settlement
Clawback Provisions
RSUs issued under the LTIP are subject to clawback in the
event of material misstatement of the Company’s financial
results, gross misconduct, or material error in the
calculation of performance conditions.
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Remuneration Policy
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Change of Control
If determined by the Board of Directors and if so, provided
Transfer of Incentives
The Board of Directors may determine that the incentives
in the incentive agreement, a change of control of TORM
granted under the LTIP may not be transferred except (a) by
(as defined by the Board of Directors in the individual
will, (b) by the laws of descent and distribution, (c) pursuant
agreement) may require that:
to any court order in connection with separation of
1. All outstanding incentives will become fully vested and
domestic property or (d) as to options only, if permitted by
exercisable.
the Board of Directors and so provided in the applicable
2. All restrictions or limitations on any outstanding
incentive agreement, to immediate family members or to a
incentives will lapse.
3. All performance criteria and other conditions relating to
partnership, limited liability company or trust for which the
sole owners, members or beneficiaries are the participant or
In exceptional cases or in extraordinary circumstances,
TORM may reclaim, in full or in part, incentive payments
made to Executive Officer(s) (clawback), e.g., in the event
of manifest errors in the accounting figures or other basis
for award or vesting. There is no specific provision on
clawback in the CEO Service Agreement. Under Danish law,
the principle of “condictio indebiti” may apply to payments
made in error. Also, under the Danish Companies Act, a
CEO may be held liable for damages to his employer, in case
of negligence or willful misconduct.
the payment of incentives will be deemed to have been
immediate family members.
achieved or waived by TORM.
4. All outstanding options are required to be exercised by a
certain date.
5. The surrender to TORM of some or all outstanding
options in exchange for a share or cash payment for
each option equal in value to the per share change of
control value, calculated as described in the LTIP, over
the exercise price.
6. Any equitable adjustment will be made to outstanding
Awards to be Granted
Grants of incentives to members of the Executive
Management will be made by the Board of Directors as
deemed necessary or appropriate considering the overall
objectives of this Remuneration Policy.
4.3. Extraordinary Bonus
The Board of Directors may in individual cases grant a one-
off bonus or other extraordinary incentive-based pay, such
incentives as deemed necessary to reflect TORM's
as retention bonus, severance payment, sign-on bonus, or
corporate changes; and/or
other schemes in connection with the appointment,
7. An option will become an option relating to the number
provided that it is deemed necessary by the Board of
of A-shares or other securities or property (including
Directors in order to meet the overall objectives of this
cash) to which the participant would have been entitled
Remuneration Policy. A grant of extraordinary bonus may
in connection with the change of control transaction if
consist of cash and/or be share-based and may be subject
the participant had been a shareholder.
to the attainment of certain performance targets.
See paragraph 4.4 “Adjustments” below.
4.4. Adjustments
For the various types of incentive-based pay, the Board of
Directors may lay down specific terms governing the lapse
of the scheme or repayment of the incentive-based pay.
Furthermore, the Board of Directors may lay down
provisions on accelerated vesting or exercise and
adjustment of the incentive-based pay, exercise price,
performance targets, etc., in the event of changes to the
capital structure or other material events, which would
otherwise adversely influence the value or effect of the
incentive-based pay in contravention to the general
objectives of this Remuneration Policy.
In respect of the share limitations provided in the LTIP,
including the number of A-shares subject to the LTIP,
proportionate adjustments may be made by the Board of
Directors in the event of any recapitalization,
reclassification, share dividend, share split, combination of
A-shares or other similar change in the A-shares. In
addition, the exercise price of any outstanding options and
any performance goals will be adjusted downwards for
dividends and will also be subject to other adjustments if
necessary to provide participants with the same relative
rights before and after the occurrence of any such event.
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Adoption and Publication
The Board of Directors must review this Remuneration
Policy at least once a year. Any changes to this
Remuneration Policy will be adopted by the Board of
Directors and approved by the shareholders at a General
Meeting.
TORM's Remuneration Report will be included in the
Company’s Annual Report for all financial years and will
contain information on remuneration paid to the Board of
Directors and the Executive Management.
This Remuneration Policy is available on TORM's website,
TORM - Governance Documents & policies
This Remuneration Policy has been adopted by the Board of
Directors.
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TORM’s non-Oaktree shareholders. The B-share and the C-
07 November 2024
First nine months 2024 results
Investor Information
Dual Listing in Copenhagen and New York
As of 31 December 2023, TORM’s treasury shares
TORM’s A-shares are listed on Nasdaq Copenhagen under
the ticker TRMD-A and on Nasdaq New York under the
ticker TRMD. TORM’s A-shares can move freely between
the two Nasdaq exchanges.TORM’s Transfer Agent is
Computershare Inc, P.O. Box 43006, Providence RI,
02940-3078, USA.
Shareholders
represented approximately 0.6% of the total share capital.
The C-share is held by Oaktree, and the B-share is held by
the Minority Trustee, SFM Trustees Limited, on behalf of
share have certain voting rights.
At the end of 2023, the members of the Board of Directors
held a total of 41,724 shares, equivalent to a total market
capitalization of DKK 8.3m or USD 1.2m. The Board of
As of 31 December 2023, TORM had approximately 17,280
Directors and certain employees are limited to trading
registered shareholders representing approximately 83% of
shares during a 45-day period after the publication of
the share capital.
financial reports.
TORM is subject to the EU’s Prospectus Regulation and
Transparency Directive which implies that shareholders
have an ownership notification requirement if the
ownership reaches, exceeds or falls below the thresholds 5,
10, 15, 20, 25, 50, or 90 percent, or 1/3, or 2/3.
Based on notifications received during 2023 and 2024 to
date, OCM Njord Holdings S.à r.l. (Oaktree) is the only
shareholder with more than 5% of the share capital, holding
59% of the share capital at the end of 2023.
Share Price Performance
In 2023, TORM had an average of 84,123,420 A-shares
outstanding. The average daily trading volume on Nasdaq in
Copenhagen has been approximately 248,000 shares and
approximately 425,000 shares on Nasdaq in New York.
During 2023, the share price increased from DKK 198.4 to
DKK 204.2 on Nasdaq in Copenhagen and from USD 29.2
to USD 30.4 on Nasdaq in New York. As of 02 January
2023, TORM became part of the Large Cap segment on
Nasdaq in Copenhagen.
Share Information
Exchanges
ISIN (CPH)
CUSIP (NY)
Tickers
Nasdaq CPH and NY
GB00BZ3CNK81
G89479102
TRMD A and TRMD
Number of A-shares (end 2023)
86,225,684
Number of treasury shares
493,371
The 2023 share price development is available at
www.torm.com/investors/share
Financial Calendar 2024
11 April 2024
Annual General Meeting
08 May 2024
First quarter 2024 results
15 August 2024
First six months 2024 results
Investor Relations
TORM pursues a transparent and consistent dialog with
investors to ensure efficient and fair pricing of our shares.
The TORM share is currently covered by eight analysts,
predominantly from shipping-oriented investment banks.
TORM observes a three-week silent period prior to the
publication of financial reports.
Financial reports, investor presentations,
and announcements, are available at
www.torm.com/investor
Share Capital
As of 31 December 2023, TORM’s share capital amounted
to USD 862,256.86 divided into 86,225,684 A-shares of
USD 0.01 each, one B-share of USD 0.01 and one C-share
of USD 0.01. A total of 86,225,684 votes are attached to
the A-shares. Only the A-shares are admitted to trading
and official listing on Nasdaq in Copenhagen and Nasdaq in
New York. As of 31 December 2023, TORM holds 493,371
as treasury shares.
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131
Investor Information
During 2023, TORM increased our share capital by
debt, and general equity with the issue being at fair
3,914,385 A-shares as a result of the issuance of
value as determined by the Board of Directors, of which
Restricted Share Units
As of 31 December 2023, 4,417,688, Restricted Share
2,776,816 new shares in connection with the delivery of
USD 87,447 was issued from 01 January 2020 to 31
Units (RSUs) were outstanding with 1,137,569 being
acquired vessels and the exercise of 1,137,569 Restricted
December 2023, leaving a current authority to issue up
exercised during 2023.
Share Units.
to 238,957,871 A-shares
• Up to an aggregate nominal amount of USD 777,625 to
In accordance with TORM’s Remuneration Policy, the Board
Share Pre-Emption Grant
Pursuant to TORM’s Articles of Association and authorities
Directors, officers, or employees of TORM or any of its
of Directors has as part of the Long-Term Incentive
subsidiaries of which USD 27,203 was issued from 01
Program (LTIP) granted certain employees RSUs in the form
granted at TORM plc’s AGM on 15 March 2016 (2016 AGM)
January 2020 to 31 December 2023, and the Company
of restricted stock options. The RSUs aim at retaining and
and updated authorities granted at TORM plc’s AGM on 14
has granted share options over a further 44,177, leaving
incentivizing the employees to seek to improve the
April 2020, the Board of Directors was granted authority to
a current authority to issue up to 70,624,510 A-shares
performance of TORM and thereby the TORM share price
allot shares or rights relating to shares for cash free from
pre-emption up to an aggregate nominal amount of USD
5,073,293, of which the following authorizations are still
Share Repurchase Grant
The Board of Directors received authorization at the 2020
shareholders. Each RSU granted under the LTIP entitles its
holder to acquire one Class A common share, subject to
for the mutual benefit of themselves and TORM’s
active:
AGM to make market purchases up to a maximum of
vesting.
• Up to an aggregate nominal amount of USD 1,372,283
7,476,065 A-shares within a certain price range. All the
which can be offered in connection with any proposed
above authorities to issue and purchase shares expire on 14
initial public offering of equity securities on certain US
April 2025. Details of TORM’s CEO’s share scheme and any
stock exchanges, of which none were issued from 01
rights attached to the shares under this scheme is set out
January 2020 to 31 December 2023, leaving a current
in the Directors’ Remuneration Report.
authority to issue up to 137,228,300 A-shares
Share Pre-Emption Grant
Directors, officers, and employees
Granted
Utilized
Shares issued since 2020
AGM authority
Utilized Grant of remaining options
Remaining
Dates
Values
April 14, 2020
USD 777,625
USD 27,203
USD 44,177
USD 706,245
• Up to an aggregate nominal amount of USD 2,477,026
in general equity issues including warrants, convertible
TORM ANNUAL REPORT 2023
Share Pre-Emption Grant
General equity issues - acquisition of vessels
Granted
Utilized
Utilized
Remaining
Dates
April 14, 2020
2021
2023
Values
2,477,026
59,679
27,768
2,389,579
The U.K. Takeover Code, issued and administered by the
Remaining
U.K. Takeover Panel, applies to TORM.
The specific terms for the remuneration are
described on pages 111-121
Share Repurchase Grant
Authority
Granted
Date
April 14, 2020
Value
7,476,065
Repurchase
Accumulated
180,500
Approx. 8% of
TORM's share
capital excluding
treasury shares
7,295,565
OTHER
132
Investor Information
Distribution Policy
On 07 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.
In line with the previous distribution policy applicable for
2023, the Board of Directors has decided to recommend
for the Annual General Meeting to approve a distribution of
USD 126m for the fourth quarter of 2023. The total
declared and proposed distribution related to 2023
amounted to USD 497.2m. TORM's distribution policy for
2023 can be found on TORM's website and in the 2022
Annual Report.
Voting Rights
Each A-share carries one vote on all resolutions proposed at
the General Meetings of TORM except for the election or
removal of the B-Director. Until the Threshold Date (the
first time at which OCM Njord Holdings S.à r.l. (“Oaktree”)
and its affiliates cease to beneficially own at least one third
of the issued shares), the sole B-share has one vote at the
General Meetings and special administrative rights,
including the right to appoint the Deputy Chairman of the
Board of Directors. After the Threshold Date, all Directors
can be appointed or removed by passing an ordinary
resolution. The B-shareholder has the right to appoint one
Board Observer. Pursuant to the Articles of Association, no
more than one B-share can be issued by TORM.
TORM can only take certain material actions relating to
supermajority matters and Reserved Matters (as specified
in its Articles of Association) if either (i) the majority of the
Directors (who must include the Chairman and the B-
Director) approve the relevant action or (ii) (a) in case of a
supermajority action, if the B-Director did not approve such
action or attend the relevant Board meeting, such action is
approved by a shareholder resolution approved by at least
86% of the votes capable of being cast on such
supermajority action or (ii) (b) in case of a Reserved Matter
action, if the B-Director did not approve such action or
attend the relevant Board meeting, such action is approved
by a shareholder resolution approved by at least 70% of the
votes capable of being cast on such Reserved Matter
action.
Until the Threshold Date, the sole TORM C-share has
350,000,000 votes at the General Meetings in respect of
certain Specified Matters only, including the election of
members to the Board of Directors of TORM (including the
Chairman, but excluding the B-Director) and certain
amendments to the Articles of Association. The sole C-
shareholder, Oaktree, must continue to hold the C-share as
long as it or its affiliates beneficially own at least one third
of the issued shares (“Threshold Date”). Accordingly,
Oaktree may continue to operate as the Company’s
controlling shareholder, even if Oaktree does not own a
majority of the A-shares. Pursuant to the Articles of
Association, no more than one C-share can be issued by
TORM. A number of the A-shares are issued subject to
restrictions on transfer (“Restricted Shares”) imposed by
US securities laws. These Restricted Shares may only be
transferred pursuant to an effective registration statement
filed with the U.S. Securities and Exchange Commission
(SEC) or an exemption from the registration requirements
of the United States Securities Act of 1933 as amended.
There are no specific restrictions on the size of a holding of
the A-shares nor the transfer of the A-shares (except for
the Restricted Shares as detailed above), which are both
governed by the general provisions of the Articles of
Association and prevailing legislation.
The B-share can only be transferred to (i) another trustee (it
is currently held by SFM Trustee Limited on behalf of the
minority shareholders), or (ii) TORM if the B-share is
redeemed or (iii) any person who has acquired 100% of the
issued A-shares. The B-share cannot be encumbered.
The C-share is held by Oaktree and can only be transferred
(i) to one of Oaktree’s affiliates or (ii) to TORM if the C-
share is redeemed or (iii) any person who has acquired 100%
of the issued A-shares. The C-share cannot be
encumbered.
The B-share and the C-share do not have any rights to
receive dividends or other distributions which TORM
decides to pay. TORM must redeem the B-share and the C-
share at the same time as soon as possible after the
Threshold Date for USD 0.01 each. Once redeemed, the B-
share and the C-share must be cancelled, and no further B-
shares or C-shares can be issued by TORM.
TORM ANNUAL REPORT 2023
OTHER
133
Engagement and Decision-Making
The following information forms our section 172 statement, setting out how, in performing their duties over the course of the year,
Directors regarded the matters set out in section 172(1) (a-f) of the UK Companies Act 2006.
We have integrated our reporting on how our stakeholders have been considered in terms of our business model and governance
throughout this report. TORM's Board of Directors considers, both individually and together, that they have acted in good faith and in
the way they consider would be most likely to promote the success of TORM for the benefit of its members as a whole during the year
ended 31 December 2023.
Why?
How?
Outcomes and Actions
Why is it important to engage?
How did Management and Directors engage?
What was the impact of the engagement?
Shareholders
Transparent and open shareholder
communication is expected to support the
markets’ valuation of TORM shares and future
access to capital in the equity markets.
Employees
TORM’s employees are fundamental to enable us
to do business, and their continued engagement
is an integral part of the decision-making across
the organization. The Board of Directors
supports an open dialog between the Board and
the workforce.
TORM regards responsible behavior as a central
part of the company, our business, and the
mindset of our people.
To ensure consistent communication to all investors, quarterly and annual
financial statements and other stock exchange announcements are the
main vehicles of communication. TORM maintains regular capital market
contact through analyst and industry presentations, investor meetings,
and conference calls.
TORM’s Management and Directors have continuous focus on un-
leveraging the integrated One TORM platform, TORM’s capital structure,
TORM’s ESG agenda, and the product tanker market fundamentals in
support for short-term and long-term ROIC generation with the aim of
maximizing the long-term value for TORM’s shareholders.
TORM issued 29 regulatory stock exchange announcements in 2023 and
hosted open virtual investor presentations in connection with the release of
quarterly earnings.TORM's Management and IR Team participated in 133
virtual and physical meetings and presentations for investors and analysts in
2023 in London, Oslo, Copenhagen, New York, and Boston. Investor
interaction has picked up compared to 2022 where activity was still
impacted by COVID-19 in the beginning of the year. TORM is actively
communicating initiatives that are affecting our capital structure, leverage,
and liquidity.
The Board of Directors oversees the mechanisms we have in place to help
ensure that employees can raise any matters of concern, how such
matters are considered and, when necessary, how they are investigated
through the whistleblower facility.
Two employee-elected representatives attended all Board meetings as
Observers. The current Observers include one office-based employee and
one vessel-based employee. Observers are permitted to participate but are
not permitted to formally vote on matters submitted to a vote.
The Board of Directors receives and follows up on the Employee
Engagement Survey performed twice a year.
Since 2006, TORM’s Board of Directors has provided a whistleblower
facility with an independent lawyer as part of the internal control system.
Read more on page 46
The Observers on TORM’s Board of Directors allow TORM’s employees to
have a direct line of questioning to and receive feedback from the Board.
Full details of attendance can be found on page 97
In 2023, we continued our biannual real-time data engagement survey,
which we introduced in 2020. More than 96% of all office-based
employees responded to this survey. Read about TORM’s engagement
survey on page 42
TORM ANNUAL REPORT 2023
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134
Engagement and Decision-Making
Why?
Why is it important to engage?
How?
How did Management and Directors engage?
Outcomes and Actions
What was the impact of the engagement?
Suppliers and Customers
Managing the relationship with suppliers and
customers is an integral part of the way TORM
conducts business.
Beyond national and international regulation, TORM’s largest customers
have their own compliance criteria with which TORM and other product
tanker operators must comply.
Ensuring quality in everything TORM does is part of the One TORM KPI
Framework. Within this framework, the Board of Directors includes a
Tradability KPI ensuring that TORM vessels can meet our customers’
demands.
TORM encourages feedback from its customers and suppliers.
Lenders
Strong relationships with our banks, financial
institutions, and investors support TORM’s ability
to be financially flexible.
TORM maintains an ongoing dialog with several funding providers. TORM is
engaged with lenders and potential lenders to be able to fund vessel
acquisitions.
TORM is also in dialog with leasing providers for operational lease funding of
vessel acquisitions and for sale and leaseback transactions with buy-back
options and no obligations to mitigate stranded asset risk.
TORM is engaged with funding providers to understand ESG risks related to
financing in order to be an attractive and transparent borrower.
TORM has a high degree of approval by oil majors and regularly receives feedback
from our customers. TORM utilizes this feedback in solving future logistical
demands, understanding our customers’ difficulties and requirements, and to help
resolve issues each time they are encountered.
Read more about how TORM meets customer's requirements on page 30
In 2023, TORM made a supplier assessment to establish a baseline and understand
the status of our suppliers to facilitate a dialog with them about how we together
can extend and improve the quality of sustainability efforts.
During 2023, TORM completed major refinancing of bank and leasing agreements.
As a result of the transaction, debt maturities have been extended to 2028 and
2029 respectively. TORM maintains a strong partnership within our bank group,
which consists of bilateral facilities by specialized shipping banks, leasing facilities
and nine banks participated in a syndicated facility agreement.
TORM ANNUAL REPORT 2023
OTHER
135
Engagement and Decision-Making
Why?
Why is it important to engage?
How?
How did Management and Directors engage?
Outcomes and Actions
What was the impact of the engagement?
Regulators
As a company incorporated in the UK and listed on
Nasdaq in both Copenhagen and New York, TORM
must ensure that the high standards required by
local regulatory bodies are met.
Through close dialogue with the Management and the Committees, and
through compliance systems, the Board of Directors ensures that TORM
remains up to date with the latest regulatory changes. Examples of matters
discussed this year by the Board of Directors or the Committees include:
• IMO regulations on CO2 emissions
• Danish Shipping and the Charter for More Women in Shipping
• Mærsk McKinney Møller Center for Zero Carbon Shipping as a Mission
Ambassador
• ESG reporting requirements
• Sanctions compliance
TORM’s Business Principles ensure that TORM is always in compliance
with legislation and lives up to the commitment to responsible business
practices. See page 46
TORM’s Corporate Governance statement is available at www.torm.com/
about
TORM’s Modern Slavery Act Statement is available at www.torm.com/
responsibility
Read more about TORM’s participation in Danish Shipping and the Center
for Zero Carbon Shipping on page 32
Community and Environment
TORM remains committed to taking an active role in
caring for communities and our environment. It is
not just our shared duty, but our shared
responsibility. Therefore, TORM continues the work
to combat carbon, sulfur, and other emissions and
remains committed to enabling quality education,
as this is a matter of concern for TORM and its
employees. We believe that by having all involved
stakeholders work together on this, great results
can be achieved.
TORM is engaged in several local and global initiatives supporting the
different communities in which TORM operates. We also support efforts to
combat the overarching climate issues faced by the world. Initiatives include
our education foundation, our commitment to the UN SDGs 4 and 13, and our
climate engagement supporting initiatives.
TORM is improving our ESG reporting to gain more insight into our
environmental impact and to enable enhancement opportunities in the
future.
For information on how the TORM Philippines and TORM India’s Education
Foundations have been uplifting and supporting the educational
development actions in the community, see page 44
To see how TORM is actively involved in various industry collaborations
supporting our ambitious journey to achieve our 2050 environmental
target of zero CO2 emissions from our operating fleet, see page 32
To support TORM’s ambitious CO2 target, TORM’s Management will be
measured on achieving it. You can read more about TORM’s ESG journey
on pages 25
TORM ANNUAL REPORT 2023
OTHER
136
Directors’ Report
The Directors are pleased to present the Annual Report on
the affairs of the TORM Group for 2023, including financial
statements and the auditor’s report.
Find TORM’s corporate governance statement at
Details of Directors’ interests in the Company is
www.torm.com/investors/governance
set out on page 118
Other disclosure requirements, which form part of the
A description of the composition and operation of
Directors’ report, are included in other sections of this
the Board of Directors and its Committees can be
Annual Report. Details on information incorporated by
found on page 96
reference are generally set out under the relevant topics in
the Directors’ report.
TORM’s section 172 statement can be found on
page 134
Responsibility Statement
A responsibility statement made by the Board of Directors
regarding the preparation of the financial statements is
required under UK-adopted International Accounting
Standards.
TORM’s responsibility statement can be found on
page 140
Going Concern
TORM’s going concern statement can be found on
page 79
Corporate Governance Statement
The corporate governance statement sets out how TORM
Other Information Included in the Strategic
Report
The strategic report on pages 4-89 provides a review of
TORM’s operations in 2023 and the potential future
developments of those operations. Details on greenhouse
gas emissions are included in the strategic report from page
32, and details on TORM’s general policy relating to
recruitment, training, career development, and disabled
employees are included on page 41.
Information on the Directors’ regard for the need
to foster TORM’s business relationship with
suppliers, customers, and other stakeholders is set
out on pages 134
Directors and Their Interests
Information on the Directors of the Company who
served during the financial year 2023 and up to the
date of signing the financial statements can be
found on page 96
Indemnification of Directors and Insurance
TORM has not granted any indemnity for the benefit of the
Directors but has a general Directors’ and Officers’ Liability
Insurance and a Public Offering of Securities Insurance
covering the Prospectus and the Exchange Offer
documentation related to the Corporate Reorganization.
Requirements of the Listing Rules
TORM plc is listed on Nasdaq in Copenhagen and Nasdaq in
New York. The only listing rule requirement regarding the
content of the Annual Report is that TORM’s Annual Report
must comply with the provisions of the UK Companies Act,
including provisions for EEA-listed companies.
With effect from 01 January 2022, TORM plc elected
Denmark as its Home State under the Transparency
Directive rules due to the implications of Brexit.
Accordingly, TORM plc has complied with the guidelines laid
down in the Public Statement from The European Securities
and Markets Authority (ESMA32-61-1156) concerning the
application of transparency requirements by UK issuers
with securities admitted to trading on regulated markets in
the EU under Article 4 of the Transparency Directive, to
ensure compliance and transparency in this Annual Report.
complies with the UK Corporate Governance Code 2018
The rules relating to the appointment and the
and includes a description of the main features of our
internal control and risk management arrangements in
relation to the financial reporting process.
replacement of Directors and the Directors’
powers can be found in TORM’s Articles of
Association at www.torm.com/investors/
governance
Share Capital
More information on TORM’s share capital can be
found on page 131
TORM ANNUAL REPORT 2023
OTHER
137
Directors’ Report
Dividends
In line with the TORM’s Distribution Policy,
Articles of Association
As per section 21 of the Companies Act 2006, TORM may
Group Policy Compliance
TORM has implemented a comprehensive compliance
only amend its Articles of Association by special resolution.
program to ensure that we remain in compliance with rules
Sustainability
Information about TORM’s approach to sustainability risks
and opportunities is set out from page 82. Also included on
these pages are details on our greenhouse gas emissions.
Financial Risk Management
TORM uses financial instruments to manage risks related to
freight rates, bunker fuels, interest rates, and foreign
exchange. For further information on the use of financial
instruments, please refer to Note 23 to the financial
statements. Details on financial risks are provided in the
Risk Management section on pages 81-86.
Annual General Meeting
TORM’s next Annual General Meeting (AGM) will be held on
11 April 2024. The notice of the AGM, including the
complete proposals, will be available on TORM’s website,
www.torm.com, prior to the meeting and will be available
for inspection from the Company Secretary, Elemental
CoSec.
TORM's Articles of Association are available at
https://www.torm.com/investors/governance
Retirement, Reappointment, and Appointment
of Directors
In line with TORM’s Articles of Association on file at
Companies House, each Director, apart from the B-
Director, must retire from office at the first annual general
meeting after their appointment. TORM’s Directors were
re-elected at the 2023 Annual General Meeting and will
therefore be due to retire in 2024. The terms and
conditions of the appointment of Non-Executive Directors
are set out in TORM's Memorandum of Terms and
Conditions which, in accordance with the UK Companies
Act 2006, Chapter 5, Section 228, is available for
inspection from the Company Secretary, Elemental CoSec.
Payment for Loss of Office
TORM’s policy in regard to payments for loss of office can
be found in the Remuneration Policy.
TORM’s Remuneration Policy is available at
and regulations related to our business activities worldwide.
As part of this compliance program, all employees are
required to document that they are aware of and have
received all training required in relation to each compliance
area.
Company Branches
The TORM Group has offices in Denmark, India, the
Philippines, Singapore, the UK, the UAE, and the US.
Further details on TORM's global presence are set out on
page 192.
Political Donations
No political donations were made during 2023.
Significant Shareholdings
Details on significant shareholdings are set out in the
Investor Information on page 131.
Controlling Shareholder
TORM’s controlling shareholder, Oaktree, owns TORM plc’s
sole C-share, which carries 350,000,000 votes at the
General Meetings in respect of Specified Matters, including
https://www.torm.com/investors/governance
election of members to the Board of Directors of TORM plc
Research and Development
TORM continues to focus on optimization of assets but
does not allocate specific costs to research and
development.
(including the Chairman, but excluding the Deputy
Chairman) and certain amendments to the Articles of
Association.
TORM ANNUAL REPORT 2023
OTHER
138
Directors’ Report
Recent Developments and Post-Balance
Sheet Events
Details of important events affecting TORM which have
occurred since the end of the financial year are disclosed in
Note 2 to the financial statements.
Statement by the Directors in Performance
of their Statutory Duties in Accordance
with Section 172(1) of the UK Companies
Act 2006
Approval
On behalf of the Board of Directors
Christopher H. Boehringer
Chairman of the Board of Directors
07 March 2024
TORM’s engagement and decision-making can be
found on pages 134
Independent Auditor
Each person who is a Director at the date of approval of the
Annual Report confirms that:
• As far as the Director is aware, there is no relevant audit
information of which TORM’s independent auditor is
unaware.
•
The Director has taken all reasonable steps that he or
she ought to have taken as a Director in order to make
him or herself aware of any relevant audit information
and to establish that TORM’s independent auditor is
aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the UK
Companies Act 2006.
TORM ANNUAL REPORT 2023
OTHER
139
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual
In preparing these financial statements, the Directors are
•
In respect of the parent company financial statements
Report and the financial statements in accordance with
required to:
state whether applicable UK Accounting Standards,
applicable United Kingdom laws and regulations as well as
• Select suitable accounting policies in accordance with
including FRS 101, have been followed, subject to any
additional requirements for listed companies in accordance
IAS 8 Accounting Policies, Changes in Accounting
material departures disclosed and explained in the
with the Danish Financial Statements Act.
Estimates and Errors and then apply them consistently
financial statements
• Make judgements and accounting estimates that are
• Prepare the financial statements on the going concern
Company law requires the Directors to prepare financial
reasonable and prudent
basis unless it is inappropriate to presume that the
statements for each financial year. Under that law, the
• Present information, including accounting policies, in a
Company will continue in business
Directors are required to prepare the group financial
manner that provides relevant, reliable, comparable,
statements in accordance with UK-adopted International
and understandable information
Accounting Standards (UK-adopted IAS) as well as IFRS
• Provide additional disclosures when compliance with
Accounting Standards (“IFRS”) as issued by the
the specific requirements in UK-adopted IAS as well as
International Accounting Standards Board (“IASB”) and
IFRS Accounting Standards (“IFRS”) as issued by the
IFRS as adopted by the EU, as applied to financial periods
International Accounting Standards Board (“IASB”) and
beginning on or after 01 January 2023 and have elected to
IFRS as adopted by the EU, as applied to financial
prepare the parent company financial statements in
periods beginning on or after 01 January 2023
accordance with United Kingdom Generally Accepted
(or in respect of the parent company financial
Accounting Practice (United Kingdom Accounting
statements, FRS 101) is insufficient to enable users to
Standards and applicable law), including Financial Reporting
understand the impact of particular transactions, other
Standard 101 “Reduced Disclosure Framework” (FRS 101).
events and conditions on the entity's financial position
Under company law, the Directors must not approve the
and financial performance
financial statements unless they are satisfied that they give
•
In respect of the group financial statements, state
a true and fair view of the state of affairs of the Group and
whether UK-adopted IAS as well as IFRS Accounting
TORM and of the profit or loss of the Group and the
Standards (“IFRS”) as issued by the International
Company for that period.
Accounting Standards Board (“IASB”) and IFRS as
adopted by the EU, as applied to financial periods
Due to the Company having shares listed on a regulated
beginning on or after 01 January 2023 have been
market in Denmark, the Annual Report and financial
followed, subject to any material departures disclosed
statements are furthermore prepared in accordance with
and explained in the financial statements
the additional requirements of the Danish Financial
Statements Act applicable to listed companies (reporting
class D).
TORM ANNUAL REPORT 2023
OTHER
140
Statement of Directors’ Responsibilities
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s and the Group’s transactions and disclose
Directors’ Responsibility Statement
We confirm that to the best of our knowledge:
Further, the Annual Report for the financial year 01 January
- 31 December 2023 with the file
213800VL1H1ABVM1ZF63-2023-12-31-en.zip is prepared,
with reasonable accuracy at any time the financial position
•
The consolidated financial statements, prepared in
in all material respects, in compliance with the ESEF
of the Company and the Group and enable them to ensure
accordance with the Companies Act 2006 and UK-
Regulation (the European Single Electronic Format
that the Company and the Group financial statements
adopted International Accounting Standards as well as
Regulation).
comply with the Companies Act 2006 as well as additional
IFRS Accounting Standards (“IFRS”) as issued by the
disclosure requirements for listed companies in accordance
International Accounting Standards Board (“IASB”) and
This responsibility statement was approved by the Board of
with the Danish Financial Statements Act. They are also
IFRS as adopted by the EU, as applied to financial
Directors on 07 March 2024 and is signed on its behalf by:
Jacob Meldgaard
Executive Director
responsible for safeguarding the assets of the Group and
periods beginning on or after 01 January 2023, and the
the Company and hence for taking reasonable steps for the
parent company financial statements, prepared in
prevention and detection of fraud and other irregularities.
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Under applicable laws and regulations, the Directors are
Standards and applicable law), give a true and fair view
also responsible for preparing a strategic report, Directors’
of the assets, liabilities, financial position, and profit or
report, Directors’ remuneration report, and corporate
loss of the Company and the undertakings included in
governance statement that comply with that law and those
the consolidation taken as a whole.
regulations including additional disclosure requirements for
•
The Annual Report, including the Strategic report,
listed companies in accordance with the Danish Financial
includes a fair review of the development and
Statements Act. The Directors are responsible for the
performance of the business and the position of the
maintenance and integrity of the corporate and financial
Company and the undertakings included in the
information included on the Company’s website. Legislation
consolidation taken as a whole, together with a
in the United Kingdom governing the preparation and
description of the principal risks and uncertainties that
dissemination of financial statements may differ from
they face.
legislation in other jurisdictions.
•
The Annual Report, taken as a whole, is fair, balanced,
and understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model, and
strategy.
TORM ANNUAL REPORT 2023
OTHER
141
Safe Harbor Statement
as to the Future
Matters discussed in this release may constitute 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 reflect our current
views with respect to future events and financial
performance and may 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.
The Company desires to take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995 and is including this cautionary statement in
connection with this safe harbor legislation. Words such as,
but not limited to, “expects,” “anticipates,” “intends,”
“plans,” “believes,” “estimates,” “targets,” “projects,”
“forecasts,” “potential,” “continue,” “possible,” “likely,”
“may,” “could,” “should” and similar expressions or phrases
may identify forward-looking statements. The forward-
looking statements in this release are based upon various
assumptions, many of which are, in turn, based upon
further assumptions, including without limitation, the
Management’s examination of historical operating trends,
data contained in our records and other data available from
third parties. Although the Company believes that these
assumptions were reasonable when made, because these
assumptions are inherently subject to significant
uncertainties and contingencies that are difficult or
impossible to predict and are beyond our control, the
Company cannot guarantee that it will achieve or
accomplish these expectations, beliefs, or projections.
Important factors that, in our view, could cause actual
results to differ materially from those discussed in the
forward-looking statements include, but are not limited to,
our future operating or financial results; changes in
governmental rules and regulations or actions taken by
regulatory authorities; the central bank policies intended to
combat overall inflation and rising interest rates and foreign
exchange rates; inflationary pressure; 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 their impact on
the demand for seaborne transportation of petroleum
products; general domestic and international political
conditions or events, including sanctions, “trade wars”, and
the conflict between Russia and Ukraine, the developments
in the Middle East, including the conflicts in Israel and the
Gaza Strip, and the conflict regarding the Houthi attacks in
the Red Sea; 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 ESG policies; Foreign Corrupt Practices Act
of 1977 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; 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; 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; and the length and number of
off-hire periods and dependence on third-party managers.
In the light of these risks and uncertainties, undue reliance
should not be placed on forward-looking statements
contained in this release because they are statements
about events that are not certain to occur as described or
at all. 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. Except to the
extent required by applicable law or regulation, the
Company undertakes no obligation to release publicly any
revisions or updates to these forward-looking statements
to reflect events or circumstances after the date of this
release or to reflect the occurrence of unanticipated
events. Please see TORM’s filings with the U.S. Securities
and Exchange Commission for a more complete discussion
of certain of these and other risks and uncertainties. The
information set forth herein speaks only as of the date
hereof, and the Company disclaims any intention or
obligation to update any forward-looking statements as a
result of developments occurring after the date of this
communication.
TORM ANNUAL REPORT 2023
OTHER
142
Financial
Statements
Consolidated Financial Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Parent Company Financial Statements
Management Review for TORM plc
Income Statement
Statement of Comprehensive Income
Parent Company Balance Sheet
Parent Company Statement of Changes in Equity
Cash Flow Statement
Notes to Parent Company Financial Statements
Other
Independent Auditor’s Report
Fleet Overview
Glossary and Alternative Performance Measures
144
144
145
146
148
149
198
199
199
200
201
202
203
210
216
219
TORM ANNUAL REPORT 2023
FINANCIAL STATEMENTS
143
Consolidated Income Statement
01 January-31 December
Consolidated Statement of
Comprehensive Income
01 January-31 December
USD '000
Revenue
Note
2023
2022
2021
USD '000
3,4 1,520,393
1,443,351
619,532
Net profit/(loss) for the year
2023
2022
2021
647,967
562,574
-42,089
Port expenses, bunkers, commissions, and
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
Operating profit before depreciation,
amortization and impairment losses
(EBITDA)
-430,313
-459,468
-240,937
5
-215,968
-202,098
-190,471
27
50,377
10,165
—
5,6
-82,932
-55,005
-51,542
6,355
5,992
—
152
414
-104
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
-89
-531
-209
Reclassification of exchange rate adjustments on
disposal of joint venture
—
51
—
Fair value adjustment on hedging instruments
3,076
54,851
8,455
847,912
743,089
136,892
Fair value adjustment on hedging instruments
Impairment losses on tangible assets
8,10,27
—
-2,647
-4,645
Depreciation and amortization
7,8,9
-149,311
-139,023
-130,851
Operating profit (EBIT)
Financial income
Financial expenses
Profit/(loss) before tax
Tax
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
698,601
601,419
1,396
12
12
14,259
4,037
241
-60,858
-48,793
-42,382
652,002
556,663
-40,745
16
-4,035
5,911
-1,344
647,967
562,574
-42,089
648,265
562,754
-42,089
-298
-180
—
647,967
562,574
-42,089
Basic earnings/(loss) per share (USD)
Diluted earnings/(loss) per share (USD)
31
31
7.75
7.48
6.92
6.80
-0.54
-0.54
transferred to income statement
Tax on other comprehensive income
-21,975
1,739
8,667
4,640
-13,162
—
Items that may not be reclassified to profit or loss:
Remeasurements of net pension and other post-
retirement benefit liability or asset
19
—
-8
Other comprehensive income/(loss) after tax
-14,329
42,948
16,905
Total comprehensive income/(loss) for the year
633,638
605,522
-25,184
Total comprehensive income/(loss) for the year
attributable to:
TORM plc shareholders
Non-controlling interest
633,989
605,607
-25,184
-351
-85
—
Total comprehensive income/(loss) for the year
633,638
605,522
-25,184
TORM ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
144
Consolidated Balance Sheet
As of 31 December
Note
2023
2022
2021
USD '000
Note
2023
2022
2021
USD '000
ASSETS
Intangible assets
Goodwill
Other intangible assets
Total intangible assets
Tangible fixed assets
Land and buildings
7,10,33
7
1,795
1,852
3,647
1,835
1,941
3,776
—
—
—
8,9
5,500
3,814
4,824
Vessels and capitalized dry-docking
8,9,10,20 2,070,189 1,855,903
1,937,791
Prepayments on vessels
Other non-current assets under
construction
Other plant and operating equipment
8
8
85,975
—
11,996
4,161
4,353
—
—
5,573
6,327
EQUITY AND LIABILITIES
Equity
Common shares
Share premium
Treasury shares
Hedging reserves
Translation reserves
Retained profit
Equity attributable to TORM plc
shareholders
Non-controlling interest
Total equity
17
862
823
812
260,000
167,531
159,558
17
-4,235
-4,235
25,611
39,870
-474
-439
-4,235
-3,559
137
1,382,221
1,297,774 899,467
1,663,985
1,501,324
1,052,180
33
1,998
2,350
—
1,665,983
1,503,674
1,052,180
Total tangible fixed assets
2,170,178
1,865,290 1,960,938
Liabilities
Financial assets
Investments in joint ventures
Loan receivables
Deferred tax asset
Other investments
Total financial assets
11
16
76
4,523
432
1
76
4,570
555
197
1,473
4,617
651
1
5,032
5,398
6,742
Total non-current assets
3 2,178,857
1,874,464
1,967,680
Inventories
Trade receivables
Other receivables
Prepayments
Cash and cash equivalents incl. restricted
cash
61,744
72,033
48,812
211,015
259,479
83,968
60,502
74,026
39,966
15,186
10,371
5,624
13
14
15
32
295,628
323,803
171,733
Current assets excluding assets held for sale
644,075
739,712
350,103
Assets held for sale
Total current assets
TOTAL ASSETS
27
47,215
—
13,216
691,290
739,712
363,319
2,870,147
2,614,176 2,330,999
Non-current tax liability related to held-
over gains
Deferred tax liability
Borrowings
Other non-current liabilities
Total non-current liabilities
Borrowings
Trade payables
Current tax liabilities
Other liabilities
Provisions
Prepayments from customers
Total current liabilities
16
16
45,176
3,580
45,176
6,082
45,176
—
9,19,20,22
886,897
849,818 926,450
18
3,015
3,038
—
938,668
904,114
971,626
9,19,20,22
172,665
117,107
208,951
22
43,053
48,502
35,332
650
18,22
45,197
1,953
31,141
30
564
6,800
3,367
885
929
43,681
18,300
—
265,496
206,388
307,193
Total liabilities
1,204,164
1,110,502
1,278,819
TOTAL EQUITY AND LIABILITIES
2,870,147 2,614,176 2,330,999
TORM ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
145
Consolidated Statement of Changes in Equity
01 January-31 December
USD '000
Common
shares Share premium
Treasury
shares ¹⁾
Hedging
reserves
Translation
reserves Retained profit
Equity
attributable to
shareholders
of TORM plc
Non-
controlling
interest
Total
Equity as of 01 January 2021
748
102,044
-4,235
-20,681
346
939,247
1,017,469
—
1,017,469
Comprehensive income/loss for the year:
Net profit/(loss) for the year
Other comprehensive income/(loss) for the year²⁾
Total comprehensive income/(loss) for the year
Capital increase ³⁾
Transaction costs of capital increase
Share-based compensation
Total changes in equity 2021
—
—
—
64
—
—
64
—
—
—
57,799
-285
—
57,514
—
—
—
—
—
—
—
—
-42,089
-42,089
-209
-209
-8
-42,097
—
—
—
—
—
2,317
16,905
-25,184
57,863
-285
2,317
34,711
17,122
-209
-39,780
Equity as of 31 December 2021
812
159,558
-4,235
-3,559
137
899,467
1,052,180
—
—
—
—
—
—
—
—
-42,089
16,905
-25,184
57,863
-285
2,317
34,711
1,052,180
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
Dividend paid
Total changes in equity 2022
Non-controlling interest arising on acquisition
—
—
—
—
11
—
—
—
11
—
—
—
—
—
8,004
-31
—
—
7,973
—
—
—
—
—
—
—
—
—
—
—
—
562,754
562,754
-180
562,574
-576
—
-576
—
—
—
—
—
—
56,015
-13,162
562,754
605,607
—
—
2,211
8,015
-31
2,211
-166,658
-166,658
95
—
-85
—
—
—
—
56,110
-13,162
605,522
8,015
-31
2,211
-166,658
449,059
43,429
-576
398,307
449,144
-85
Equity as of 31 December 2022
823
167,531
-4,235
39,870
-439
1,297,774
1,501,324
—
—
—
—
2,435
2,350
2,435
1,503,674
—
17,122
17,122
—
—
—
—
56,591
-13,162
43,429
—
—
—
—
TORM ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
146
Consolidated Statement of Changes in Equity
01 January-31 December
USD '000
Common
shares Share premium
Treasury
shares ¹⁾
Hedging
reserves
Translation
reserves Retained profit
Equity
attributable to
shareholders
of TORM plc
Non-
controlling
interest
Total
Equity as of 01 January 2023
823
167,531
-4,235
39,870
-439
1,297,774
1,501,324
2,350
1,503,674
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
Dividend paid
Total changes in equity 2023
—
—
—
—
39
—
—
—
39
—
—
—
—
92,635
-166
—
—
92,469
—
—
—
—
—
—
—
—
—
—
-18,899
4,640
-14,259
—
—
—
—
—
-35
—
-35
—
—
—
—
648,265
648,265
19
—
-18,915
4,640
-298
-54
—
647,967
-18,969
4,640
648,284
633,990
-352
633,638
—
—
22,547
92,674
-166
22,547
-586,384
-586,384
—
—
—
—
92,674
-166
22,547
-586,384
-14,259
-35
84,447
162,661
-352
162,309
Equity as of 31 December 2023
862
260,000
-4,235
25,611
-474
1,382,221
1,663,985
1,998
1,665,983
¹⁾ Please refer to Note 17 for further information on treasury shares.
²⁾ Please refer to "Consolidated Statement of Comprehensive Income".
³⁾ Please refer to Note 17 for further information on capital increases during the year.
TORM ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
147
Consolidated Cash Flow Statement
01 January-31 December
USD '000
Note
2023
2022
2021
USD '000
Note
2023
2022
2021
Cash flow from operating activities
Net profit/(loss) for the year
Adjustments:
Profit from sale of vessels
Depreciation and amortization
647,967
562,574
-42,089
-50,377
-10,165
—
7,8
149,311
139,023
130,851
Impairment losses on tangible assets
7,10,27
Share of profit/(loss) from joint ventures
Financial income
Financial expenses
Tax expenses/(income)
Other non-cash movements
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.
Net cash flow from operating activities
12
12
16
28
—
—
2,647
-152
-14,259
-4,037
4,645
104
-241
60,858
48,793
42,382
4,035
14,557
-5,911
-3,691
—
—
14,259
4,037
1,344
1,350
275
241
-65,995
-49,631
-41,046
-3,123
-658
-1,379
28
47,817
-180,915
-48,489
805,050
501,914
47,948
Cash flow from investing activities
Investment in tangible fixed assets ¹⁾
Investment in intangible fixed assets
Acquisition of subsidiaries, net of cash
acquired
Sale of tangible fixed assets
Change in restricted cash
Net cash flow from investing activities
Cash flow from financing activities
Proceeds, borrowings
Repayment, borrowings
Dividend paid
Capital increase ¹⁾
Transaction costs share issue
-509,630
-119,344
-319,787
33
27
-563
-618
—
1,070
—
—
166,362
106,623
10,033
-26,738
23,542
19,161
-370,569
11,273
-290,593
11,19
676,374
96,254
548,817
19 -585,404
-275,155 -253,420
-586,384
-166,658
17
6,187
-167
8,015
-31
—
2,863
-285
Net cash flow from financing activities
-489,394
-337,575
297,975
Net cash flow from operating, investing,
and financing activities
-54,913
175,612
55,330
Cash and cash equivalents as of 01
January
Cash and cash equivalents as of 31
December
320,456
144,844
89,514
265,543
320,456
144,844
Restricted cash as of 31 December
32
30,085
3,347
26,889
Cash and cash equivalents, including
restricted cash as of 31 December
295,628
323,803
171,733
¹⁾ In 2023, the share capital was increased by USD 92.7m (2022: USD 8.0m, 2021: USD 57.9m) including a
USD 86.5m (2022: USD 0.0m, 2021:USD 55.0m) non-cash share issue in relation to the acquisition of five
(2022: zero, 2021:eight) vessels. Please refer to Note 17 for further reference.
TORM ANNUAL REPORT 2023
CONSOLIDATED FINANCIAL STATEMENTS
148
Notes to the
Consolidated Financial Statements
– Accounting Policies, Critical Accounting Estimates and Judgements
Note 1
Note 2 – Liquidity, Capital Resources and Subsequent Events
Note 3 – Segment
Note 4 – Revenue from Contracts with Customers
Note 5 – Staff Costs
Note 6 – Remuneration to Auditors Appointed at the Parent Company’s Annual
General Meeting
– Intangible Assets
Note 7
Note 8 – Tangible Fixed Assets
Note 9 – Leasing
Note 10 – Impairment Testing
Note 11 – Loan Receivables
Note 12 – Financial Items
Note 13 – Trade Receivables
Note 14 – Other Receivables
Note 15 – Prepayments
Note 16 – Tax
150
155
157
160
161
164
164
165
168
170
173
173
173
174
174
174
– Common Shares and Treasury Shares
Note 17
Note 18 – Other Liabilities
Note 19 – Effective Interest Rate, Outstanding Borrowings
Note 20 – Collateral Security for Borrowings
Note 21 – Guarantee Commitments and Contingent Liabilities
Note 22 – Contractual Rights and Obligations
Note 23 – Derivative Financial Instruments
Note 24 – Risks Associated with TORM’s Activities
Note 25 – Financial Instruments
Note 26 – Related Party Transactions
Note 27 – Assets Held for Sale and Non-Current Assets Sold During the Year
Note 28 – Cash Flows
Note 29 – Entities in the Group
Note 30 – Provisions
Note 31 – Earnings per Share and Dividend per Share
Note 32 – Cash and Cash Equivalents, Including Restricted Cash
Note 33 – Business combinations
177
178
179
180
180
181
183
186
190
191
192
192
192
193
194
194
195
TORM ANNUAL REPORT 2023
NOTES TO THE FINANCIAL STATEMENTS
149
NOTE 1 – ACCOUNTING POLICIES, CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
NOTE 1 - continued
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 and the
associated effects on the product tanker market. The changed geopolitical situation has so far
been positive for the product tanker market, and TORM’s base case assumes that this positive
sentiment related to freight rates and vessel values will continue throughout 2024. TORM monitors
the general development in the geopolitical situation with current focus on the development of the
conflict between Hamas and Israel, the Red Sea conflict, and potential effects on the product
tanker market from those conflicts. In the base case, TORM has sufficient liquidity and headroom
for all the covenant limits.
TORM performs sensitivity calculations to reflect downside scenarios including, but not limited to,
future freight rates and vessel valuations, in order to identify risks to future liquidity and covenant
compliance and to enable the Management to take corrective actions, if required. The downside
scenarios cover the principal risks and uncertainties facing TORM as set out on pages 82-86 and
include different distressed outlooks for the product tanker market. In a low case scenario, The
Management has stressed freight rates to the lowest rolling four-quarter average since 2000 on a
per vessel class basis and a decline in vessel values. In such a scenario, TORM maintains sufficient
headroom for liquidity and covenants.
The Board of Directors has considered TORM’s cash flow forecasts and the expected compliance
with TORM’s financial covenants for the period until 31 March 2025. TORM’s cash flow forecast
and expected covenant compliance are based on the Business Plan approved by the Board of
Directors. 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 the operational existence and comply with our financial covenants for the
period until 31 March 2025. Accordingly, TORM continues to adopt the going concern basis in
preparing our financial statements.
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 exhaust 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 Office 105, 20 St Dunstan’s Hill, London, EC3R 8HL, 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 the stock exchanges Nasdaq in Copenhagen, Denmark, and on Nasdaq in New
York, the United States.
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 01 January 2023 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
non-IFRS measure, EBITDA subtotal, has been added in the consolidated income statement as
TORM believes it is a meaningful measure for TORM's financial performance and is used for
financial outlook guidance. Please refer to glossary on page 219-225 for further reference.
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 31 December 2023, TORM’s available liquidity including undrawn and committed facilities
was USD 638m, including a total cash position of USD 296m (including cash held for dividend
payment). TORM’s net interest-bearing debt was USD 773m, and the net debt loan-to-value ratio
was 27.6% (Tanker segment only and before dividend payment related to Q4 2023). 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 24 to the
financial statements. The principal risks and uncertainties facing TORM are set out on pages
82-86.
TORM monitors our funding position throughout the year to ensure that we have access to
sufficient funds to meet the forecasted cash requirements, including newbuilding 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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
150
NOTE 1 - continued
NOTE 1 - continued
Adoption of New or Amended IFRS Standards
TORM has implemented the following standards and amendments issued by the IASB and adopted
by the UK in the consolidated financial statements for 2023:
Accounting Policies
The Group’s material accounting policy information is provided below. In addition to this, specific
accounting policies are described in each of the individual notes to the consolidated financial
statements as outlined in the following notes:
•
•
•
•
•
IFRS 17 Insurance Contracts
IAS 12 amendments Deferred Tax related to Assets and liabilities arising from a Single
Transaction
IAS 12 amendments International Tax Reform – Pillar Two Model Rules
IAS 8 amendments Definition of Accounting Estimates
IAS 1 and IFRS Practice Statement 2 amendments Disclosure of Accounting Policies
The amendments on International Tax Reform Pillar Two Model Rules introduce a mandatory
exception in IAS 12 ‘Income Taxes’ to recognizing and disclosing information about deferred tax
assets and liabilities related to Pillar Two income taxes.
For the remaining new standards and amendments, it is assessed that application of these
effective on 01 January 2023 has not had any material impact on the consolidated financial
statements in 2023.
Accounting Standards and Interpretations Not Yet Adopted
IASB has issued a number of new or amended accounting standards (IFRS) and interpretations
(IFRIC) which have not yet come into effect:
•
•
•
•
•
Amendments to IAS 1 Presentation of Financial Statements (January 2024)
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback (January 2024)
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements (January 2024)
Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of
Exchangeability (January 2025)
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)
Segment reporting
Revenue from contracts with customers
Staff costs
Intangible assets
Tangible fixed assets
Leasing
Impairment
Loan receivables
Financial items
Trade receivables
Tax
•
•
•
•
•
•
•
•
•
•
•
• Other liabilities
Borrowings
•
• Derivative financial instruments
•
•
•
Provisions
Earnings per share
Business combinations
Consolidation Principles
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 has assessed the accounting standards and interpretations not yet adopted, and TORM
does not expect the new standards to have any material impact on neither TORM’s figures nor the
disclosures.
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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
151
NOTE 1 - continued
NOTE 1 - continued
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.
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, balances, and shareholdings as well as gains and losses on
transactions between the consolidated entities.
Foreign Currencies
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.
Income Statement
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
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.
Depreciation and impairment losses and reversals of impairment losses
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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
152
NOTE 1 - continued
Balance Sheet
Financial assets
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.
NOTE 1 - continued
Trade payables
Trade payables are recognized at the fair value of the item purchased and are subsequently
measured at amortized cost.
Deferred income
Deferred income relates to amounts received from customers in advance of the related
performance obligations being satisfied.
Investments in joint ventures
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.
Cash flow statement
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.
Inventories
Inventories consist of bunkers, lube oil and other inventories and are stated at the lower of cost in
accordance with the FIFO-principle and net realizable value. Cost of bunkers and lube oil includes
expenditure incurred in acquiring bunkers and lube oil 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.
Treasury shares
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.
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, dividend 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.
Dividend
Interim dividends are recognized when paid. Any year-end dividend is recognized as a liability at the
date of approval at the AGM.
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.
Other non-current liabilities
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
Allowance fund.
Critical Accounting Estimates and Judgements
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
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
153
NOTE 1 - continued
NOTE 1 - continued
Further, market valuations from leading, independent, and internationally recognized shipbrokers
are obtained on the reporting date as part of the review for potential impairment indicators. 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 review for potential impairment indicators and projection of future discounted cash flows
related to the vessels 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. For more information on key
assumptions and related sensitivities, please refer to Note 10.
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 experience change, an impairment write-down or reversal of impairment may be required.
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 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 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.
In addition, the activities within the Marine Exhaust 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 Exhaust 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 such as reported sale and
purchase prices, market demand and general market conditions.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
154
NOTE 2 – LIQUIDITY, CAPITAL RESOURCES AND SUBSEQUENT EVENTS
NOTE 2 - continued
Liquidity and Capital Resources
As of 31 December 2023, TORM’s cash and cash equivalents including restricted cash totaled
USD 296m (2022: USD 324m , 2021: USD 172m), and undrawn and committed credit facilities as
listed below amounted to USD 343m (2022: USD 93m, 2021: USD 38m). Subsequently, in
January 2024 TORM issued a five-year senior unsecured bond in the amount of USD 200m from
which USD 165.0m will be used to cancel the undrawn term facility with the syndicated banks.
TORM had no newbuildings on order as of 31 December 2023 (2022: None, 2021: One).
TORM has the following debt facilities as of 31 December 2023.
Outstanding
amount
2023
(mUSD)
Outstanding
amount
2022
(mUSD)
Outstanding
amount
2021
(mUSD)
Maturity
Debt Facility
Syndicated Facilities 2023
Syndicated Facilities 2020
Danish Ship Finance Facility 2020
ING Facility 2023
HCOB Facility 2023
HCOB Facilities 2020-2021
KfW Facility 2019
CEXIM 2016
Other credit facilities
Sale and leaseback transaction prepayment
2028
Repaid
2029
2029
2029
Repaid
2032
Repaid
2026
2022
224.0
—
192.6
57.9
31.2
—
34.8
—
4.8
—
—
143.8
201.8
—
—
63.5
37.9
41.1
4.9
—
Total
545.3
493.0
—
279.4
221.9
—
—
110.7
40.9
44.9
—
21.0
718.8
During 2023 TORM refinanced a number of debt facilities. Further to that, TORM repaid three
vessels to Danish Ship Finance and obtained financing from ING for the same vessels. TORM
extended the maturity of the facility with Danish Ship Finance from 2027 to 2029. TORM also
signed an Additional Facility with Danish Ship Finance to finance four second-hand MR vessels.
This facility is partially utilized as TORM took delivery of two out of the four vessels in 2023. As of
31 December 2023, the scheduled minimum payments on mortgage debt and bank loans in 2024
were USD 107m.
TORM has the following undrawn facilities as of 31 December 2023.
Undrawn Facility
Maturity
Outstanding
amount
2023
(mUSD)
Outstanding
amount
2022
(mUSD)
Outstanding
amount
2021
(mUSD)
Syndicated Facilities 2023 - RCF
2028
100.0
Syndicated Facilities 2020 - RCF
Cancelled
HCOB Facility 2023 - RCF
DSF Additional Facility
Syndicated Bridge to Bond Facility
Bocomm Leasing Facility
Total
2029
2029
2025
2031
—
24.9
52.6
165.0
—
342.5
—
92.6
—
—
—
—
92.6
—
—
—
—
—
38.2
38.2
TORM has Revolving Credit Facilities as part of the Syndicated Facilities and with Hamburg
Commercial Bank. The Additional Facility with Danish Ship Finance to finance four second-hand
MR vessels has an undrawn amount, as two out of the four vessels were delivered in January 2024.
The Bridge to Bond Facility with four syndicated banks was signed in December 2023 to finance
five of the eight purchased LR2 vessels announced on 22 November 2023. Subsequently, TORM
cancelled this facility in February 2024.
Lease Facility
Maturity
Outstanding
amount
2023
(mUSD)
Outstanding
amount
2022
(mUSD)
Outstanding
amount
2021
(mUSD)
Bocomm Leasing Facilities 2019-2021
Bocomm Leasing Facilities 2019
Springliner Leases
China Development Bank Financial Leasing
China Merchant Bank Financial Leasing
Showa Leasing
Eifuku Leasing
Total
2031
Repaid
2026
2032
2033
Repaid
Repaid
148.9
—
27.9
149.0
195.8
—
—
162.2
49.4
30.7
160.8
37.3
18.7
20.9
137.3
59.2
33.4
150.8
—
20.9
22.4
521.6
480.0
424.0
During 2023, TORM repaid a number of lease facilities and took ownership of the previously leased
vessels, which are currently financed by the Syndicated Facilities. In 2023 TORM also signed a new
lease facility with China Merchant Bank Financial Leasing to finance seven second-hand LR1
vessels. As of 31 December 2023, the scheduled minimum payments on lease agreements in 2023
were USD 65m.
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 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 07 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 ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
155
NOTE 2 - continued
NOTE 2 - continued
On 07 March 2024, our Board of Directors decided to recommend to the Annual General Meeting
to approve a dividend of USD 1.36 per share, with a total dividend payment of approximately
126.3m. The distribution is in line with TORM’s Distribution Policy for 2023 with a cash position of
USD 295.6m, working capital facilities of USD 124.9m, restricted cash of USD 30.1m, earmarked
proceeds of USD 111.7m, and a cash position related to Marine Exhaust Technology A/S of USD
4.9m. Cash reservation per vessel is USD 1.8m for 82 vessels, USD 147.6m in total.The dividend
payment is expected to be on 24 April 2024, to shareholders on record as of 16 April 2024, with
the ex-dividend date on 15 April 2024. The dividend payment will not be recognized as a liability and
there are no tax consequences.
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)
During 2023, 2022 and 2021, TORM did not have any covenant breaches, and the Management
has assessed that a covenant breach in the near future is remote.
Subsequent Events
In January 2024, TORM delivered the two LR1 vessels TORM Signe and TORM Sofia and the MR
vessel TORM Loke, all of which were held for sale at 31 December 2023, to the new owners.
In January 2024, TORM took delivery of the remaining two of four purchased 2015 and 2016-built
MR eco product tanker vessels in a partly share-based transaction previously disclosed in the
quarterly report for the third quarter of 2023.
In January 2024, TORM took delivery of five of the eight 2010 to 2012-built LR2 eco vessels in a
partly share-based transaction previously disclosed in the quarterly report for the third quarter of
2023. Two of the remaining three vessels are expected to be delivered during the end of March
2024 and one in the beginning of April 2024.
In January 2024, TORM entered into an agreement to purchase one 2011-built LR2 eco vessel for a
total consideration of USD 51.5m, with a cash consideration of USD 30.9m and the issuance of
approximately 570,000 shares. The vessel is expected to be delivered mid March 2024. The
purchase price is subject to certain adjustments that will be impacted by TORM’s share price
development and the vessels’ delivery schedules.
As announced on 11 January 2024, TORM issued five-year senior unsecured bonds of USD 200m.
The Bonds will carry a fixed coupon of 8.25%, payable semi-annually. The net proceeds from the
bond issue will be used to part finance the acquisition of five of the eight LR2 eco vessels
announced in November 2023, including full cancellation of the Syndicated Bridge to Bond Facility.
In February 2024, TORM signed a facility agreement of USD 93m with Hamburg Commercial Bank
to finance three of the eight LR2 eco vessels announced in November 2023.
On 07 March 2024, TORM amended the distribution policy with effect from the first quarter of
2024. Please refer to section ‘Liquidity and Capital Resources’ under Note 2 for further
explanation.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
156
NOTE 3 – SEGMENT
Segment Reporting - Consolidated Income Statement
USDm
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
2023
2022
Tanker
segment
Marine Exhaust
segment
Intersegment
elimination
Total
Tanker
segment
Marine Exhaust
segment
Intersegment
elimination
1,491.4
-407.6
—
-216.4
50.4
-76.5
6.0
—
—
-148.2
699.1
14.3
-60.5
652.9
-4.0
648.9
48.0
—
-36.6
—
—
-6.4
0.3
—
—
-1.1
4.2
—
-0.4
3.8
—
3.8
-19.0
1,520.4
—
13.9
0.4
—
—
—
—
—
—
-4.7
—
—
-4.7
—
-4.7
-407.6
-22.7
-216.0
50.4
-82.9
6.3
—
—
-149.3
698.6
14.3
-60.9
652.0
-4.0
648.0
1,440.4
-458.9
—
-202.1
10.2
-52.4
5.8
0.2
-2.6
-138.7
601.9
4.0
-48.7
557.2
5.9
563.1
5.9
—
-3.0
—
—
-2.6
—
—
—
-0.3
—
0.1
-0.1
—
—
—
-2.9
—
2.4
—
—
—
—
—
—
—
-0.5
—
—
-0.5
—
-0.5
Total
1,443.4
-458.9
-0.6
-202.1
10.2
-55.0
5.8
0.2
-2.6
-139.0
601.4
4.1
-48.8
556.7
5.9
562.6
Prior to the acquisition of Marine Exhaust Technology A/S (MET) on 01 September 2022, TORM had only one reportable segment, the Tanker segment. Accordingly, comparative segmental information is
not provided.
The eliminations above represent revenue and other costs of goods and services sold from the installation of scrubbers performed by the Marine Exhaust entities on tanker vessels within the Tanker
segment. All revenue from the Tanker segment is derived from external customers.
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. In 2023, Switzerland and
United States contributed with 16.0% (USD 242.5m) and 12.0%% (USD 182.7m) respectively of TORM’s revenue. In 2022, Switzerland and Mexico contributed with 15.3% (USD 220.9m) and 12.8% (USD
178.2m) respectively of TORM’s revenue. In 2021, Switzerland and Mexico contributed with 23.2% (USD 143.5m),and 15.6% (USD 96.6m) respectively of TORM’s revenue. Revenue is allocated to
countries based on the customer’s ultimate parent domicile.
A major part of TORM’s revenues stems from a small group of customers. In 2023, no customers accounted for more than 10% of TORM’s revenue in the Tanker segment (2022: One accounted for 12%
in the Tanker segment; 2021: One customer accounted for more than 15% in the Tanker segment).
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
157
NOTE 3 – continued
Segment Reporting - Consolidated Balance Sheet
USDm
2023
2022
Tanker
segment
Marine Exhaust
segment
Intersegment
elimination
Total
Tanker
segment
Marine Exhaust
segment
Intersegment
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
—
0.9
0.9
4.9
2,081.7
86.0
—
3.3
2,175.9
0.1
4.5
0.4
—
5.0
2,181.8
58.0
206.2
58.8
10.7
290.7
624.4
47.2
671.6
2,853.4
1.8
0.9
2.7
0.6
—
—
4.5
1.1
6.2
—
—
—
—
—
8.9
3.7
5.0
1.7
4.5
4.9
19.8
—
19.8
28.7
—
—
—
—
-11.5
—
-0.3
—
-11.8
—
—
—
—
—
-11.8
—
-0.2
—
—
—
-0.2
—
-0.2
1.8
1.8
3.6
—
0.7
0.7
5.5
2.8
2,070.2
1,863.4
86.0
4.2
4.4
—
—
4.1
2,170.3
1,870.3
0.1
4.5
0.4
—
5.0
0.1
4.6
0.5
0.2
5.4
2,178.9
1,876.4
61.7
211.0
60.5
15.2
295.6
644.0
47.2
61.1
255.7
72.7
9.7
321.4
720.6
—
691.2
720.6
-12.0
2,870.1
2,597.0
1.8
1.3
3.1
1.0
—
—
—
1.5
2.5
—
—
—
—
—
5.6
11.0
4.2
1.3
0.7
2.4
19.6
—
19.6
25.2
—
—
—
—
-7.5
—
—
—
1.8
2.0
3.8
3.8
1,855.9
—
—
5.6
-7.5
1,865.3
—
—
—
—
—
-7.5
-0.1
-0.4
—
—
—
-0.5
—
-0.5
-8.0
0.1
4.6
0.5
0.2
5.4
1,874.5
72.0
259.5
74.0
10.4
323.8
739.7
—
739.7
2,614.2
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
158
NOTE 3 – continued
Segment Reporting - Consolidated Balance Sheet
USDm
2023
2022
EQUITY AND LIABILITIES
Total equity
Liabilities
Non-current tax liability related to held-over gains
Deferred tax liability
Borrowings
Other non-current liabilities
Total non-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
Tanker
segment
Marine Exhaust
segment
Intersegment
elimination
Total
Tanker
segment
Marine Exhaust
segment
Intersegment
elimination
Total
1,661.3
9.9
-5.2
1,666.0
1,498.0
6.2
-0.5
1,503.7
45.2
3.3
884.0
2.2
934.7
169.7
39.6
0.6
44.8
—
2.7
257.4
1,192.1
2,853.4
—
0.6
4.4
520.4
86.0
—
1.1
612.5
—
0.3
2.9
0.8
4.0
3.0
3.4
—
0.5
0.6
7.3
14.8
18.8
28.7
—
—
—
—
—
4.5
0.2
4.7
—
—
—
—
—
—
—
—
-0.1
—
-6.7
-6.8
-6.8
45.2
3.6
886.9
3.0
938.7
172.7
43.0
0.6
45.2
0.6
3.3
45.2
5.8
844.6
2.2
897.8
115.7
46.4
1.6
31.0
6.5
—
265.4
201.2
1,204.1
1,099.0
-12.0
2,870.1
2,597.0
—
—
—
-4.0
—
-0.3
—
-4.3
—
0.6
4.4
516.4
86.0
4.2
1.3
612.9
—
0.6
0.3
84.7
43.1
—
0.8
129.5
—
0.3
5.2
0.8
6.3
1.4
3.5
0.4
0.3
0.3
6.8
12.7
19.0
25.2
1.8
1.2
1.1
—
—
—
1.6
5.7
—
—
—
—
—
—
-1.4
—
-0.2
—
-5.9
-7.5
-7.5
-8.0
—
—
—
-7.5
—
—
—
-7.5
45.2
6.1
849.8
3.0
904.1
117.1
48.5
2.0
31.1
6.8
0.9
206.4
1,110.5
2,614.2
1.8
1.8
1.4
77.2
43.1
—
2.4
127.7
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
159
NOTE 3 - continued
NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company’s non-current assets are based on domicile of the legal entity ownership in the
following countries:
USDm
UK
Denmark
Singapore
USA
Other countries
Non-current assets
2023
2022
2021
0.2
0.1
1,746.6
1,607.7
336.7
257.1
79.8
10.6
—
4.5
—
1,651.5
308.0
—
2.9
2,173.9
1,869.3
1,962.4
Accounting Policies
The segmentation is based on the Group’s internal management and reporting structure. The
Group has two operating segments, the Tanker segment, for which the services provided primarily
comprise transportation of refined oil products such as gasoline, jet fuel, and naphtha, and the
Marine Exhaust 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 Exhaust segment. Consequently, geographical
segment information on revenue from external customers or non-current segment assets for the
Tanker segment or the Marine Exhaust segment are not provided.
USDm
Disaggregation of revenue
2023
2022
2021
Transportation of refined oil products
1,491.4
1,440.4
619.5
Scrubbers and related services
Welding and mounting
Others
Total revenue
Tanker segment
Marine Exhaust segment
Intersegment elimination
Total revenue
USDm
Customer contract balances
Trade receivables
Customer contract assets¹⁾
Customer contract liabilities²⁾
Total
¹⁾ Recognized in prepayments.
²⁾ Recognized in prepayments from customers.
21.7
5.3
2.0
1.2
1.1
0.7
—
—
—
1,520.4
1,443.4
619.5
1,491.4
1,440.4
619.5
48.0
-19.0
5.9
-2.9
—
—
1,520.4
1,443.4
619.5
2023
2022
2021
211.0
2.5
-3.4
210.1
259.5
3.0
-0.9
261.6
84.0
2.0
—
86.0
Refer to Note 13 for further information on trade receivables. Customer contract assets primarily
relate to prepaid voyage expenses until the cargo load date. During the year, USD 3.0m was
recognized relating to customer contracts entered in 2022 (2022: USD 2.0m relating to 2021,
2021: USD 1.4m relating to 2020). 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 prepaid charter hire
of USD 2.7m.
Accounting policies
Revenue
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 Exhaust revenue. Revenue is recognized when or as performance obligations are satisfied
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
160
NOTE 4 - continued
NOTE 4 - continued
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.
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 exhaust 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.
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.
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, 95% 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 Exhaust revenue
Some of the Group’s contracts with customers relate to the sale of marine exhaust equipment
with installation services. Customers obtain control of the marine exhaust 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 exhaust equipment when the goods are delivered
to and have been accepted by the customers.
NOTE 5 – STAFF COSTS
Employee Information
Staff costs included in operating expenses relate to the 105 seafarers employed under Danish
contracts (2022: 100, 2021:106).
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
Total staff costs
2023
2022
2021
Staff costs included in operating expenses
8.6
7.7
9.7
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
69.3
77.9
46.9
23.0
3.8
1.4
2.8
77.9
105
468
573
42.0
49.7
38.8
2.9
3.3
1.5
3.2
49.7
100
386
486
42.4
52.1
42.1
2.3
3.6
1.3
2.8
52.1
106
341
447
At the end of 2023 TORM has a pool of 3,271 (2022: 3,218, 2021: 3,420) 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 2023 was 1,625 (2022: 1,565, 2021: 1,449).
Total seafarers’ costs in 2023 were USD 127.1m (2022: USD 124.9m, 2021: USD 121.2m), which
is included in “Operating expenses” of which USD 118.5m (2022: USD 117.2m, 2021: USD 111.5m)
pertains to cost for seafarers on board vessels on short term contracts and USD 8.6m (2022:
USD 7.7m, 2021: USD 9.7m) pertains to cost for seafarers employed under the Danish contract as
indicated in the staff costs table above.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
161
NOTE 5 - continued
USD '000
Non-Executive Board and Committee remuneration, short
term
Christopher H. Boehringer
David N. Weinstein
Göran Trapp
Annette Malm Justad
Total
Executive Management
USD '000
Executive Management remuneration
Jacob Meldgaard
2021, TORM A/S¹⁾
2021, TORM plc¹⁾
2022, TORM A/S¹⁾
2022, TORM plc¹⁾
2023, TORM A/S¹⁾
2023, TORM plc¹⁾
¹⁾ Paid by legal entity as noted.
2023
2022
2021
214
219
164
164
761
210
207
155
155
727
235
234
176
176
821
Taxable
benefits
Annual
performance
bonus
Salary
Total
2,366
82
1,672
72
1,161
82
1,040
72
1,119
77
44
—
39
—
40
—
1,161
—
593
—
1,277
2,436
—
77
Key management personnel consist of the Board of Directors and the Executive Director. Total
compensation to key management personnel expensed during the year as detailed in this note
amounts to USD 3.3m (2022: USD 2.5m, 2021: USD 3.3m) excluding share-based
compensation.
NOTE 5 - continued
Senior Management Team
The aggregated compensation paid by the Group to the three (2022: three, 2021: three) other
members of the Senior Management Team in 2023 (excluding CEO Jacob Meldgaard) was USD
1.6m (2022: USD 2.1m, 2021: USD 2.2m), which includes an aggregate of USD 0.1m (2022: USD
0.1m, 2021: USD 0.1m) allocated for pensions (defined contribution plans) for these individuals,
but excludes share-based compensation.
LTIP element of CEO Jacob Meldgaard's remuneration package 2023:
Grant Date
RSU LTIP grant¹⁾
Exercise price per share
Ordinary
Ordinary
Ordinary
Retention
18-Mar-21 23-Mar-22
29-Mar-23 29-Mar-23
255,200
255,200
255,200
300,000
DKK 53.50 DKK 58.00 DKK 220.60
USD 0.01
RSU grant value assuming 100% vesting
USD 0.6m USD 0.5m
USD 2.5m USD 10.7m
¹⁾ LTIP award is fixed by the Board of Directors and was communicated via company announcement no. 7
dated18 March 2021, announcement no. 9 dated 23 March 2022 and announcement no.9 dated 29 March
2023, therefore there is no minimum or maximum for 2021, 2022 and 2023.
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 115 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.
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. 7 dated 18 March 2021, the CEO was granted a total of 255,200
RSUs which will vest in equal amounts over the next three years. The first amount can be
exercised from 01 January 2022. The exercise price for each RSU is DKK 53.5, corresponding to
the average price of TORM shares in the 90 calendar days preceding the publication of TORM plc’s
2020 Annual Report plus a 15% premium. Vested RSUs may be exercised for a period of 360 days
from each vesting date.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
162
NOTE 5 – continued
NOTE 5 – continued
As detailed in announcement no. 9 issued on 23 March 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 can be
exercised from 01 January 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 29 March 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 can be
exercised from 01 January 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 01 March 2026.
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 three years for key employees. The exercise price is set at
DKK 220.6. The exercise period is 360 days from each vesting date. The fair value of the options
granted in 2023 was determined using the Black-Scholes model and amounts to USD 10.8m. The
average remaining contractual life for the restricted shares as of 31 December 2023 is 1.5 years.
In addition to the RSUs granted above, the other management is granted a total of 1,333,222
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 01 March
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 40.4m.
Accounting Policies
Employee benefits
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.
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.
Pension plans
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.
Share-based payments
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.
The program comprises the following number of shares in TORM plc:
Number of shares (1,000)
2023
2022
2021
Outstanding as of 01 January
Granted during the period
Exercised during the period
Expired/forfeited during the period
Outstanding as of 31 December
2,424.0
2,372.9
2,187.5
3,136.6
1,393.0
-1,137.6
-5.3
-1,078.0
-263.9
1,355.1
-409.4
-760.3
4,417.7
2,424.0
2,372.9
Exercisable as of 31 December
—
—
—
In 2021, the Board of Directors agreed to grant a total of 1,355,121 RSUs to other management.
The vesting period of the program is three years for key employees. The exercise price is set at
DKK 53.5. The exercise period is 360 days from each vesting date. The fair value of the options
granted in 2021 was determined using the Black-Scholes model and is not material. The average
remaining contractual life for the restricted shares as of 31 December 2021 was 1.5 years, and as
of 31 December 2023 was 0.0 years.
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 three years for key employees. The exercise price is set at
DKK 58.0. The exercise period is 360 days from each vesting date. The fair 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 31 December 2022 was 1.5 years, and as
of 31 December 2023 was one year.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
163
NOTE 6 – REMUNERATION TO AUDITORS APPOINTED AT THE PARENT COMPANY’S ANNUAL
GENERAL MEETING
NOTE 7 – INTANGIBLE ASSETS
The remuneration of the auditor is required to be presented as follows:
USDm
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
Tax services
Others
Total non-audit fees
Total
2023
2022
2021
1.2
0.1
1.3
0.1
—
0.1
0.2
0.9
0.1
1.0
0.2
—
0.2
0.4
1.5
1.4
0.5
0.3
0.8
0.1
0.1
—
0.2
1.0
USDm
GOODWILL
Cost:
Balance as of 01 January
Additions from business combinations
Balance as of 31 December
Impairment:
Balance as of 01 January
Balance as of 31 December
2023
2022
2021
13.2
—
13.2
11.4
1.8
13.2
11.4
11.4
11.4
11.4
11.4
—
11.4
11.4
11.4
Carrying amount
1.8
1.8
—
The opening balance in 2021 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 1.8m relates to the acquisition of
Marine Exhaust Technology A/S, which is allocated to the Marine Exhaust cash-generating unit. Please refer to
note 33 for further reference on acquisition and note 10 for further reference on impairment testing.
Under SEC regulations, the remuneration of the auditor of USD 1.5m (2022: USD 1.4m, 2021: USD
1.0m) is required to be presented as follows: Audit fees USD 1.4m (2022: USD 1.4m, 2021: USD
0.8m), audit-related fees USD 0.1m (2022: USD 0.0m, 2021: USD 0.1m), tax fees USD 0.0m
(2022: USD 0.0m, 2021: USD 0.1m), and all other fees USD 0.0m (2022: USD 0.0m, 2021: USD
0.0m.).
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.
USDm
OTHER INTANGIBLE ASSETS
Cost:
Balance as of 01 January
Exchange rate adjustments
Additions
Additions from business combinations
Transfer from other items
Balance as of 31 December
Amortization:
Balance as of 01 January
Amortization for the year
Transfer from other items
Balance as of 31 December
2023
2022
2021
2.3
—
0.6
—
—
2.9
0.4
0.6
—
1.0
—
0.2
0.6
1.2
0.3
2.3
—
0.3
0.1
0.4
—
—
—
—
—
—
—
—
—
—
—
Carrying amount
1.9
1.9
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
164
NOTE 7 - continued
NOTE 8 – TANGIBLE FIXED ASSETS
Accounting Policies
Goodwill
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 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.
Other Intangible Assets
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
USDm
LAND AND BUILDINGS
Cost:
Balance as of 01 January
Exchange rate adjustment
Additions
Additions from business combinations
Disposals
Balance as of 31 December
Depreciation:
Balance as of 01 January
Exchange rate adjustment
Disposals
Depreciation for the year
Balance as of 31 December
2023
2022
2021
12.0
-0.2
4.4
—
-1.6
14.6
8.2
—
-1.6
2.5
9.1
10.9
-0.3
0.3
1.1
—
12.0
6.1
-0.2
—
2.3
8.2
11.7
-0.1
0.1
—
-0.8
10.9
4.6
—
-0.8
2.3
6.1
Carrying amount as of 31 December
5.5
3.8
4.8
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
165
NOTE 8 - continued
USDm
VESSELS AND CAPITALIZED DRY-DOCKING
Cost:
Balance as of 01 January
Additions
Disposals
Transferred from prepayments
Transferred to assets held for sale
Balance as of 31 December
Depreciation:
Balance as of 01 January
Disposals
Depreciation for the year
Transferred to assets held for sale
Balance as of 31 December
Impairment:
Balance as of 01 January
Impairment losses on tangible fixed assets¹⁾
Transferred to assets held for sale
Balance as of 31 December
2023
2022
2021
NOTE 8 - continued
USDm
PREPAYMENTS ON VESSELS
Cost:
2,421.2
2,443.3
2,160.1
Balance as of 01 January
476.0
-31.9
40.6
77.2
-14.2
55.1
-283.8
-140.2
290.3
-40.9
78.6
-44.8
Additions
Transferred to vessels
Balance as of 31 December
2,622.0
2,421.2
2,443.3
Carrying amount as of 31 December
2023
2022
2021
—
126.6
-40.6
86.0
86.0
12.0
43.1
-55.1
—
—
12.0
78.6
-78.6
12.0
12.0
543.8
-31.9
143.7
-119.3
536.3
21.5
—
-5.9
15.5
475.0
-14.2
133.7
-50.7
543.8
30.5
2.7
-11.7
21.5
406.2
-40.9
126.2
-16.5
475.0
31.4
4.6
-5.5
30.5
During the year, borrowing costs of USD 0.0m (2022: 0.0m, 2021: 0.6m) have been capitalized.
The capitalization rate in 2021 was 3.7%.
USDm
2023
2022
2021
OTHER PLANT AND OPERATING EQUIPMENT
Cost:
Balance as of 01 January
Exchange rate adjustment
Additions
Additions from business combinations
Disposals
Transfers
Balance as of 31 December
Depreciation:
Balance as of 01 January
Exchange rate adjustment
Disposals
Depreciation for the year
Transfers
Balance as of 31 December
10.5
—
1.3
—
-0.6
—
11.2
4.9
—
-0.6
2.5
—
6.8
9.3
-0.2
0.8
1.6
-0.7
-0.3
10.5
3.0
-0.2
-0.6
2.8
-0.1
4.9
7.6
-0.1
1.9
—
-0.1
—
9.3
0.8
-0.1
-0.1
2.4
—
3.0
Carrying amount as of 31 December
4.4
5.6
6.3
Carrying amount as of 31 December
2,070.2
1,855.9
1,937.8
¹⁾ For additional information regarding impairment considerations, please refer to Note 10
Included in the carrying amount for “Vessels and capitalized dry-docking” are capitalized dry-
docking costs in the amount of USD 75.1m (2022: USD 50.1m, 2021: USD 65.9m).
Included in the carrying amount for “Vessels and capitalized dry-docking” are vessels on time
charter leases (as lessor) in the amount of USD 169.8m (2022: 13.7m, 2021: 398.8m). Please
refer to Note 22 for expected redelivery of the vessels.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
166
NOTE 8 - continued
NOTE 8 - continued
For information on assets provided as collateral security, please refer to Note 20. Please refer to
Note 10 for information on impairment testing.
The depreciation expense related to “Other plant and operating equipment” of USD 2.5m relates
to “Administrative expense” (2022: USD 2.8m, 2021: USD 2.4m). Depreciation and impairment
losses on tangible fixed assets on “Vessels and capitalized dry-docking” relate to operating
expenses.
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.
Accounting Policies
Vessels
Vessels consist of owned vessels and leased vessels. The accounting policy for leased vessels is
specified under “Leases”. Owned 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. 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 is gradually 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. Currently the weight on green recycling prices are 70% compared to
30% on conventional recycling prices. 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.
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”.
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
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.
• Other plant and operating equipment
• Company cars: Over the lease term, typically 3 years
•
•
• Other equipment 3–15 years
IT equipment: 3–5 years
Software: 3–5 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 commencement date of the lease.
Assets held for sale
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
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
167
NOTE 8 - continued
NOTE 9 - continued
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”.
NOTE 9 – LEASING
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 8.
As of 31 December 2023, TORM had recognized the following right-of-use assets:
USDm
Cost:
Balance as of 01 January 2023
Exchange rate adjustments
Additions
Disposals
Balance as of 31 December 2023
Depreciation:
Balance as of 01 January 2023
Exchange rate adjustment
Disposals
Depreciation for the year
Balance as of 31 December 2023
Other plant
and
operating
equipment
Land and
buildings
12.0
-0.2
4.4
-1.6
14.6
8.2
—
-1.6
2.5
9.1
1.3
0.1
0.1
—
1.5
0.4
-0.1
—
0.4
0.7
Carrying amount as of 31 December 2023
5.5
0.8
USDm
Cost:
Balance as of 01 January 2022
Exchange rate adjustments
Additions
Additions from business combinations
Disposals
Balance as of 31 December 2022
Depreciation:
Balance as of 01 January 2022
Exchange rate adjustments
Disposals
Depreciation for the year
Balance as of 31 December 2022
Carrying amount as of 31 December 2022
USDm
Cost:
Balance as of 01 January 2021
Exchange rate adjustments
Additions
Disposals
Balance as of 31 December 2021
Depreciation:
Balance as of 01 January 2021
Disposals
Depreciation for the year
Balance as of 31 December 2021
Other plant
and
operating
equipment
Land and
buildings
10.9
-0.3
0.3
1.1
—
12.0
6.1
-0.2
—
2.3
8.2
0.7
—
0.1
0.9
-0.4
1.3
0.5
—
-0.3
0.2
0.4
3.8
0.9
Other plant
and
operating
equipment
Land and
buildings
11.7
-0.1
0.1
-0.8
10.9
4.6
-0.8
2.3
6.1
0.6
—
0.2
-0.1
0.7
0.4
-0.1
0.2
0.5
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
168
Carrying amount as of 31 December 2021
4.8
0.2
NOTE 9 - continued
NOTE 9 – continued
The table below describes the nature of the Group’s leasing activities by type of right-of-use
assets recognized on the balance sheet as of 31 December 2023:
No. of right-of-use assets leased
Range of remaining term
Average remaining lease term
No. of leases with extension options
No. of leases with options to purchase
No. of leases with termination options
Other plant
and
operating
equipment
Land and
buildings
15
17
0 - 5 years 0 - 3 years
2.8 years
1.3 years
13
0
12
8
1
12
Lease liabilities regarding right-of-use assets are included on the balance sheet under
“Borrowings”.
USDm
2023
2022
2021
Maturity analysis - contractual undiscounted cash flow
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities as of 31 December
Lease liabilities included under “Borrowings” as of 31
December
Non-current
Current
2.9
4.7
—
7.6
2.7
2.6
—
5.3
6.6
5.0
4.1
2.5
2.5
2.5
2.8
3.0
0.1
5.9
5.6
3.7
1.9
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 3.2m (2022: USD 2.7m, 2021: USD 2.8m).
Accounting policies
TORM assesses whether a contract is or contains a lease at inception of the contract and
recognizes right-of-use assets and 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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
169
NOTE 10 – IMPAIRMENT TESTING
NOTE 10 - continued
The Management of TORM has assessed that TORM has two CGUs being the Main Fleet and the
Marine Exhaust cash-generating unit, following the acquisition of Marine Exhaust in 2022 and the
disposal of the two remaining Handysize vessel in 2022.
As of 31 December 2023, the Management tested the carrying amount of the Main Fleet and the
Marine Exhaust investment for impairment as further set out below.
Tanker Segment
As of 31 December 2023 and 31 December 2022, the assessment of the recoverable amount of
the Main Fleet was based on the fair value less cost of disposal. As of 31 December 2021, the
assessment of the recoverable amount was based on the value in use for the Main Fleet and
Handysize CGUs. The results of impairment testing were summarized as follows:
CGU
Main Fleet ²⁾
Handysize ¹⁾ ²⁾
Total
Recoverable amount
Excess values (recoverable
amount less carrying amount) ³⁾
2023
USDm
2022
2021
USDm
USDm
2023
USDm
2022
2021
USDm
USDm
3,495.0 2,647.0 2,276.0
952.1
784.0
269.0
—
—
26.0
—
—
—
3,495.0 2,647.0 2,302.0
952.1
784.0
269.0
¹⁾ Comprising two product tankers with a cargo carrying capacity of 35,000-37,000 dwt, these smaller
vessels are typically used in shorter and coastal trade routes, including for transportation of various clean
petroleum products within Europe and in the Mediterranean.
2) No impairment losses and reversals was incurred in 2023, 2022 and 2021.
³⁾ Included in the excess value is the outstanding installments for purchased not delivered vessels.
31 December 2023
As of 31 December 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 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 recoverable amount of the Main Fleet as of 31 December 2023 amounts to USD 3,495m, 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, assuming these effects are included in the shipbrokers' valuations. 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 31 December 2023 assets within the
Main Fleet were not impaired as the fair value less costs of disposal exceeded the carrying amount
by USD 952m.
No Impairment was recognized during 2023 in connection with disposal of individual vessels as set
out in Note 8.
31 December 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 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 recoverable amount of the Main Fleet as of 31 December 2022 amounts to USD 2,647m, 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 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 31 December 2022 assets within the
Main Fleet were not impaired as fair value less costs of disposal exceeded the carrying amount by
USD 784m.
Impairments recognized during 2022 of USD 2.7m (2021: USD 4.6m) 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
31.8m. The fair value was based on sales price less transaction costs (fair value hierarchy Level 2).
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
170
NOTE 10 - continued
NOTE 10 - continued
31 December 2021
The assessment of the recoverable amount was based on the value in use for the Main Fleet. The
impairment test was sensitive to reasonably possible changes in key assumptions.
The product tankers were expected to generate normal income for 25 years from delivery from the
shipyard. Given the current age profile of the Tanker Fleet, the average remaining life would be
approximately 14 years. The estimated residual value of the vessels was based on TORM’s green
recycling policy.
Key assumptions used in the determination of value in use
The assessment of the value in use of each CGU was based on the net present value of the
expected future cash flows. The freight rate estimates in the period 2022 - 2024 was based on
TORM’s business plans. Beyond 2024, the freight rates were based on TORM’s 10-year historical
average rates, adjusted for expected inflation of 2% in line with U.S. Federal Reserve and ECB
target over the medium term. TORM believed that the approach used for long-term rates
appropriately reflected the cyclical nature of the shipping industry and was the most reliable
estimate for periods beyond those included in its three-year business plan.
TORM’s business plans for 2022 - 2024 and beyond also included the anticipated benefit arising
from the installation of scrubbers on certain of the Group’s vessels (the “scrubber premium”). This
is based on current market differentials between the cost of heavy and low-sulphur fuel oil.
As part of determining fair value, the impact of climate changes and the climate agenda on the
global oil demand, emission regulations, and operating expenses, etc. was considered with
focus on the short to medium term implications and our commitment to reduce CO2 emissions by
40% by 2025 and 45% by 2030. However, no adverse impact of climate changes was anticipated
in impairment testing our current fleet. We continue to monitor the development closely and are
working 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.
The discount rate used in the value in use calculation was based on a Weighted Average Cost of
Capital (WACC) of 6.7% as of 31 December 2021. WACC was calculated by using a standard
WACC model in which cost of equity, cost of debt and capital structure were the key parameters.
As of 31 December 2021, the 10-year historical average spot freight rates used in the value in use
calculation were as follows:
•
LR2: USD/day 19,111
LR1: USD/day 17,856
•
• MR: USD/day 16,044
• Handysize: USD/day 13,208
Operating expenses and administrative expenses were estimated based on TORM's business plans
for the period 2022 - 2024. Beyond 2024, operating expenses were adjusted for 2% inflation, and
administrative expenses were adjusted for 2% inflation in line with U.S. Federal Reserve and ECB
target over the medium term.
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 freight rates,
the WACC applied as discounting factor in the calculations, and the development in operating
expenses. All other things being equal, the sensitivities to the value in use have been assessed as
follows:
•
•
•
An increase/decrease in the tanker freight rates of USD/day 1,000 would result in an
increase/decrease in the value in use of USD 285m and USD 6m for the Main Fleet and the
two Handysize vessels, respectively.
An increase/decrease in WACC of 1% would result in an increase/decrease in the value in use
of approx. USD 148-167m and USD 2m for the Main Fleet and the two Handysize vessels,
respectively.
An increase/decrease in operating expenses of 10.0% would result in a decrease/increase in
the value in use of USD 201m and USD 4m for the Main Fleet and the two Handysize vessels,
respectively.
As outlined above, the impairment test has been prepared on the basis that the Company will
continue to operate its vessels as a fleet in the current setup.
The fair value based on broker values for vessels in the Main Fleet including the order book and
leased vessels was USD 1,892m, which is USD 72m below the carrying amount. The fair value
based on broker values for the Handysize vessels was 21m, which is USD 3m below the carrying
amount.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
171
NOTE 10 - continued
NOTE 10 - continued
Marine Exhaust Segment
Marine Exhaust Technology A/S was acquired in 2022 which was also the first year the
impairment testing was performed.
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 31 December 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 3.8m.
Accounting Policies
Impairment of assets
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 impairment is monitored for internal management purposes.
31 December 2023
As of 31 December 2023, the assessment of the recoverable amount of the Marine Exhaust cash-
generating unit is based on value in use. The result of the impairment test showed an excess value
of USD 9.8m compared to the carrying amount. No impairment of goodwill was recognized as of 31
December 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 0.1m 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 31 December 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 12.1m.
31 December 2022
As of 31 December 2022, the assessment of the recoverable amount of the Marine Exhaust cash-
generating unit is based on value in use. The result of the impairment test showed an excess value
of USD 3.2m compared to the carrying amount. No impairment of goodwill was recognized as of 31
December 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 0.3m 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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
172
NOTE 11 – LOAN RECEIVABLES
NOTE 12 – FINANCIAL ITEMS
2023
2022
2021
USDm
2023
2022
2021
USDm
Loan receivables
Cost:
Balance as of 01 January
Balance as of 31 December
Expected credit loss:
Balance as of 01 January
Additions during the year
Balance as of 31 December
4.7
4.7
0.1
0.1
0.2
4.7
4.7
0.1
—
0.1
4.7
4.7
0.1
—
0.1
Carrying amount as of 31 December
4.5
4.6
4.6
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
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).
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
14.2
0.1
14.3
4.0
—
4.0
0.2
—
0.2
55.6
48.5
40.0
0.5
0.2
0.4
1.3
2.2
-2.4
3.3
60.9
0.5
0.6
2.4
-3.6
0.2
48.8
0.3
0.5
1.1
1.4
-1.2
0.3
42.4
Total financial items
-46.6
-44.8
-42.2
¹⁾ Interest for financial assets and liabilities not at fair value through profit and loss.
Accounting Policies
Financial income
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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
173
NOTE 13 – TRADE RECEIVABLES
NOTE 13 - continues
USDm
2023
2022
2021
Analysis as of 31 December of trade receivables:
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.
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
97.4
42.6
62.4
15.3
217.7
6.7
211.0
122.3
52.1
76.8
14.2
265.4
5.9
259.5
43.4
17.9
23.2
2.6
87.1
3.1
84.0
Expected credit losses
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.
The Management makes allowance for expected credit loss 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. Expected credit loss for receivables overdue more
than 180 days is 25%-100%, depending on the category of the receivable. Expected credit loss for
receivables overdue more than one year is 100%.
Movements in provisions for impairment of freight receivables during the year are as follows:
USDm
Allowance for expected credit loss
Balance as of 01 January
Provisions for the year
Provisions reversed during the year
Balance as of 31 December
2023
2022
2021
5.9
4.0
-3.2
6.7
3.1
3.4
-0.6
5.9
5.8
0.7
-3.4
3.1
NOTE 14 – OTHER RECEIVABLES
USDm
Derivative financial instruments
Escrow accounts
Other
Balance as of 31 December
2023
2022
37.6
14.9
8.0
60.5
55.3
14.9
3.8
74.0
2021
8.3
27.4
4.3
40.0
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 25 for further information on fair value hierarchies.
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”.
NOTE 15 – PREPAYMENTS
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.
All allowance for expected credit loss relates to receivables due > 180 days.
Accounting Policies
Receivables
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.
USDm
Prepaid insurance payments
Prepaid operating expenses
Prepaid bareboat hire
Prepaid customer contract assets
Other prepayments
Balance as of 31 December
2023
2022
—
1.2
0.8
2.5
10.7
15.2
—
—
3.0
3.0
4.4
10.4
2021
0.8
—
0.4
2.0
2.4
5.6
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
174
NOTE 16 – continued
2023
2022
2021
USDm
2023
2022
2021
NOTE 16 – TAX
USDm
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
0.6
—
2.2
2.8
1.2
4.0
0.5
-0.1
-7.3
-6.9
1.0
-5.9
0.6
-0.1
-0.1
0.4
0.9
1.3
Adjustment of deferred tax of USD 2.2 m for the year ended 31 December 2023 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 31 December 2024. 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 Danish tonnage tax scheme, 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 1.0% (2022: -1.0%, 2021 3.3%). Net deferred tax liability in relation to
entities outside the tonnage tax regime amounts to USD 3.2m.
Deferred tax assets
Deferred tax assets related to CIR
Deferred tax assets related to trading losses
Deferred tax assets before offset
Offset against deferred tax liabilities from CIR
Offset against deferred tax liabilities from trading losses
Deferred tax assets, net as of 31 December
Deferred tax liabilities
Deferred tax liabilities arising from changes in equity
Other temporary differences
Deferred tax liabilities before offset
Offset from tax assets
Deferred tax liabilities in the balance sheet
0.5
5.1
5.6
-0.5
-4.7
0.4
8.5
0.3
8.8
-5.2
3.6
3.4
4.7
8.0
-3.4
-4.0
0.6
13.2
0.3
13.5
-7.4
6.1
—
0.7
0.7
—
—
0.7
—
—
—
—
—
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 31 December 2023, there are unused tax credits of USD 2.2m (2022: USD 2.2m, 2021
13.5m) 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 8.5m (2022: USD 13.2m, 2021: USD 0.0m) and
intangible assets of USD 0.0m (2022: USD 0.3m, 2021: 0.0m).
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
175
NOTE 16 – continued
NOTE 16 – continued
Tax
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
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.
Income tax balances
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.
USDm
Non-current tax liability related to held-over gains
2023
2022
2021
Balance as of 31 December
-45.2
-45.2
-45.2
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
On 20 June 2023, the government of UK, where the parent company is incorporated, enacted the
Pillar Two income taxes legislation effective from 01 January 2024. 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 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.
The Group has also prepared a preliminary Transitional Country-by-Country Reporting (CbCR) Safe
Harbour assessment concluding on fiscal year 2023, based on which it expects to be eligible for
the Transitional CbCR Safe Harbour in the majority of jurisdictions in which the Group is present
during fiscal year 2024. The top-up tax would not have had a material impact to the Group if it had
been applicable in 2023. At 31 December 2023, there are no indications that the top-up tax will
have material impact to the Group in 2024.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
176
NOTE 17 – COMMON SHARES AND TREASURY SHARES
NOTE 17 – continued
Common shares
2023
2022
2021
A-shares
B-shares
C-shares
Total
Nominal value
per share
(USD)
Number of
shares
Number of
shares
Number of
shares
0.01 86,225,684
82,311,299 81,233,269
0.01
0.01
1
1
1
1
1
1
86,225,686
82,311,301
81,233,271
During the year, the share capital was increased by 3,914,385 A-shares with a nominal value of
USD 39,143.85. The total amount including share premium amounted to USD 92.7m. USD 86.5m
was a non-cash increase in conjunction with the acquisition of the five vessels, and USD 6.2m 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 exercises of Restricted Share Units leading to a total cash
contribution of USD 8.0m.
During 2021, the share capital was increased by 6,377,340 A-shares with a nominal value of USD
63,733.40. The total amount including share premium amount to USD 57.9m. USD 55.0m was a
non-cash increase in conjunction with the acquisition of the eight Team Tanker vessels, and USD
2.9m was contributed in cash in connection with exercises of Restricted Share Units.
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.
Treasury shares
Number of shares ('000)
Balance as of 01 January
Balance as of 31 December
Nominal value USD '000
Balance as of 01 January
Balance as of 31 December
Percentage of share capital
Balance as of 01 January
Dilution due to capital increases
Balance as of 31 December
2023
2022
2021
493.4
493.4
493.4
493.4
493.4
493.4
2023
2022
2021
4.9
4.9
4.9
4.9
4.9
4.9
2023
2022
2021
0.6 %
— %
0.6 %
0.6 %
— %
0.6 %
0.7 %
-0.1 %
0.6 %
As of 31 December 2023, the Company's holding of treasury shares represented 493,371 shares
(2022: 493,371 shares, 2021: 493,371 shares) of USD 0.01 each at a total nominal value of USD
0.0m (2022: USD 0.0m, 2021: USD 0.0m) and a market value of USD 14.9m (2022: USD 14.0m,
2021: USD 3.9m).
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 3.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
177
NOTE 18 – OTHER LIABILITIES
USDm
Accrued operating expenses
Accrued interest
Wages and social expenses
Derivative financial instruments
Other
Balance as of 31 December
Hereof non-current
Hereof current
2023
2022
2021
20.2
2.1
21.8
2.8
1.3
48.2
3.0
45.2
12.0
3.6
15.0
1.9
1.6
34.1
3.0
31.1
11.8
2.3
15.1
11.3
3.2
43.7
—
43.7
The carrying amount is a reasonable approximation of fair value due to the short-term nature of
the payable. Please refer to Note 25 for further information on fair value hierarchies.
Accounting Policies
Other liabilities are generally measured at amortized cost. Derivative financial instruments
included in other liabilities are measured at fair value.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
178
NOTE 19 – EFFECTIVE INTEREST RATE, OUTSTANDING BORROWINGS
USDm
Borrowings
Syndicate Facility
DSF Facility
DSF Facility 2
HCOB Facility
ING
KFW Facility
BoComm 2 (USD)³⁾
BoComm 3 (USD)³⁾
CDBL³⁾
Springliner (USD)³⁾
CMBFL³⁾
Other credit facilities
CEXIM (USD)
HCOB Facility 2
BoComm 1 (USD)³⁾
Eifuku (USD)³⁾
Showa (USD)³⁾
Sale and leaseback transaction prepayment
Weighted average effective interest rate⁴⁾
Total borrowings
Borrowing costs included (amortised costs)
Right-of-use lease liabilities
Total
Hereof non-current
Hereof current
Fixed/
floating
Maturity
2023
Effective
interest¹⁾
Carrying
value²⁾
Maturity
2022
Effective
interest¹⁾
Carrying
value²⁾
Maturity
2021
Effective
interest¹⁾
Carrying
value²⁾
Floating
Floating
Floating
Floating
Floating
Floating
Floating
Floating
Fixed
Fixed
Fixed
Floating
Floating
Floating
Floating
Floating
Floating
N/A
2028
2029
2029
2029
2029
2032
2032
2029
2032
2026
2033
2026
—
—
—
—
—
—
2026
2027
—
2025
—
2032
2031
2029
2029
2026
2033
2026
2030
2026
2025
2026
2024
—
7.6 %
6.7 %
—
9.9 %
—
7.1 %
7.4 %
7.8 %
5.8 %
4.8 %
4.9 %
3.1 %
7.0 %
8.3 %
8.7 %
7.9 %
8.6 %
—
7.1 %
6.6 %
5.9 %
5.8 %
7.8 %
5.9 %
6.4 %
7.0 %
7.3 %
5.7 %
4.8 %
5.7 %
4.7 %
—
—
—
—
—
—
6.2 %
224.0
140.1
52.5
31.2
57.9
34.8
66.7
82.2
149.0
27.9
195.8
4.8
—
—
—
—
—
—
1,066.9
-13.9
6.6
1,059.6
886.9
172.7
143.8
201.8
—
42.4
—
37.9
71.3
90.9
160.8
30.7
37.3
4.9
41.1
21.1
49.4
20.9
18.7
—
973.0
-11.1
5.0
966.9
849.8
117.1
2026
2027
—
2025
—
2032
2031
2029
2029
2026
—
—
2030
2026
2025
2026
2024
2022
3.8 %
3.6 %
—
5.1 %
—
4.1 %
4.9 %
4.9 %
5.8 %
4.8 %
—
—
4.0 %
4.5 %
4.9 %
4.3 %
4.1 %
—
4.4 %
279.4
221.9
—
85.3
—
40.9
37.8
99.5
150.8
33.4
—
—
44.9
25.4
59.2
22.4
20.9
21.0
1,142.8
-13.0
5.6
1,135.4
926.5
209.0
¹⁾ Effective interest rate includes deferred and amortized bank fees.
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 402.8m (compared to a total
carrying value as of 31 December 2023 of USD 372.7m).
³⁾ Lease debt recognized under sale and leaseback arrangement with repurchase options (accounted for as finance transactions).
⁴⁾ Please refer to Note 23 for average interest rate including hedges.
In addition to the facilities above, TORM had undrawn credit facilities of USD 342.5m as of 31 December 2023.
Please refer to Note 2 for further information on the Company’s liquidity and capital resources as well as to Note 2 Subsequent events for commitment obtained for refinancing existing facilities and
Notes 23 and 24 for further information on interest rate swaps and financial risks.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
179
NOTE 19 - continued
NOTE 20 – COLLATERAL SECURITY FOR BORROWINGS
The following table summarizes the reconciliation of liabilities arising from financing activities:
Cash movements
Non-cash movements
Opening
balance
as of
01 January
USDm
Borrowings
Total
2023 Borrowings Repayments
966.9
966.9
676.4
676.4
-585.4
-585.4
Business
combin-
ations
End balance
as of 31
December
2023
Other
changes
—
—
1.7
1.7
1,059.6
1,059.6
Cash movements
Non-cash movements
Opening
balance
as of
01 January
USDm
Borrowings
Total
2022 Borrowings Repayments
1,135.4
1,135.4
96.3
96.3
-275.2
-275.2
Business
combin-
ations
End balance
as of 31
December
2022
Other
changes
7.9
7.9
2.5
2.5
966.9
966.9
The total carrying amount for vessels which have been provided as security for borrowings
amounts to USD 2,070m as of 31 December 2023 (2022: USD 1,856m, 2021: USD 1,928m),
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 0.7m (2022: USD 0.7m) in floating charge in Marine Exhaust Technology A/S have been
provided as security for loans to other lenders.
USD 0.4m (2022: USD 0.4m) in floating charge in Marine Exhaust Technology A/S have been
provided as security for loans to banks.
10,500 shares (2022: 10,500 shares) in ME Production A/S with a book value of 2.1m (2022:
USD 2.1m) have been provided as security for loans to the lenders of Marine Exhaust Technology A/
S.
USD 6.6m (2022: USD 6.4m) in floating charge in ME Production A/S with a book value of 10.5m
(2022: USD 10.2m) have been provided as security for loans to banks.
Please refer to Note 1 for further information.
Cash movements
Non-cash movements
NOTE 21 – GUARANTEE COMMITMENTS AND CONTINGENT LIABILITIES
Opening
balance
as of
01 January
USDm
Borrowings
Total
2021 Borrowings Repayments
842.4
842.4
548.8
548.8
-253.4
-253.4
Business
combin-
ations
End balance
as of 31
December
2021
Other
changes
—
—
-2.4
-2.4
1,135.4
1,135.4
The guarantee commitments of the Group are less than USD 0.1m (2022: USD 0.1m, 2021: USD
0.1m) and relate to guarantee commitments to Danish Shipping.
The Group is involved in certain other legal proceedings and disputes (refer to Note 30). 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.
Accounting Policies
Borrowings consist of mortgage debt, bank loans, and lease liabilities.
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 recognition of a new financial liability.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
180
NOTE 22 – CONTRACTUAL RIGHTS AND OBLIGATIONS
The following table summarizes the Group's contractual obligations as of 31 December 2023.
USDm
Borrowings ¹⁾
Interest payments related to scheduled interest fixing
Estimated variable interest payments ²⁾
Newbuilding installments ³⁾
Secondhand vessel commitments
Committed scrubber installations ⁴⁾
Trade payables and other obligations
Total
The following table summarizes the Group's contractual obligations as of 31 December 2022.
USDm
Borrowings ¹⁾
Interest payments related to scheduled interest fixing
Estimated variable interest payments ²⁾
Newbuilding installments ³⁾
Committed scrubber installations ⁴⁾
Trade payables and other obligations
Total
The following table summarizes the Group's contractual obligations as of 31 December 2021.
USDm
Borrowings ¹⁾
Interest payments related to scheduled interest fixing
Estimated variable interest payments ²⁾
Newbuilding installments ³⁾
Committed scrubber installations ⁴⁾
Trade payables and other obligations
Total
2024
174.9
41.0
6.3
—
190.4
23.6
85.0
521.2
2023
119.8
34.8
3.3
—
17.3
81.6
2025
148.0
32.5
5.3
—
—
—
—
2026
148.4
26.7
6.1
—
—
2.0
—
2027
2028
Thereafter
Total
112.0
24.5
6.2
—
—
8.1
—
120.0
370.2
1,073.5
19.5
7.5
—
—
2.0
—
18.4
8.9
—
—
—
2.7
162.6
40.3
—
190.4
35.7
87.7
185.8
183.2
150.8
149.1
400.1
1,590.2
2024
130.0
30.6
1.6
—
1.1
—
2025
127.2
24.7
2.5
—
—
—
2026
185.9
18.0
2.2
—
—
—
2027
Thereafter
161.7
253.4
14.1
5.5
—
—
—
22.1
11.1
—
—
2.5
Total
978.0
144.3
26.2
—
18.4
84.1
256.8
163.3
154.4
206.1
181.3
289.1
1,251.0
2022
211.7
43.4
-0.3
39.9
8.1
62.5
365.3
2023
129.9
38.6
-0.8
—
0.5
—
2024
139.3
33.0
-0.7
—
—
—
2025
134.2
25.4
-0.1
—
—
—
2026
Thereafter
181.4
17.8
0.2
—
—
—
351.9
35.3
2.8
—
—
—
Total
1,148.4
193.5
1.1
39.9
8.6
62.5
168.2
171.6
159.5
199.4
390.0
1,454.0
¹⁾ The presented amounts to be repaid do not include directly related costs arising from the issuing of the loans of USD 13.9m (2022: USD 11.1m. 2021: USD 13.0m), which are amortized over the term of the loans. Borrowing costs
capitalized during the year amount to USD 9.0m (2022: USD 0.7m, 2021: USD 5.8m).
²⁾ Variable interest payments are estimated based on the forward rates for each interest period including hedging instruments.
³⁾ As of 31 December 2023, TORM had zero contracted newbuildings (2022: Zero, 2021: One). Commitments regarding newbuilding installments are in excess of the prepayments included in Note 8.
⁴⁾ Commitments for pollution reduction installations
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
181
NOTE 22 - continued
TORM has contractual rights to receive future payments as lessor of vessels on time charter and bareboat charter to customers.
The following table summarizes the Group's contractual rights as of 31 December 2023.
USDm
Contractual rights - as lessor:
Charter hire income for vessels ⁵⁾
Total
The following table summarizes the Group's contractual rights as of 31 December 2022
USDm
Contractual rights - as lessor:
Charter hire income for vessels ⁵⁾
Total
The following table summarizes the Group's contractual rights as of 31 December 2021
USDm
Contractual rights - as lessor:
Charter hire income for vessels ⁵⁾
Total
2024
2025
2026
2027
2028
Thereafter
Total
37.8
37.8
24.1
24.1
—
—
—
—
—
—
—
—
61.9
61.9
2023
2024
2025
2026
2027
Thereafter
Total
2.1
2.1
—
—
—
—
—
—
—
—
—
—
2.1
2.1
2022
2023
2024
2025
2026
Thereafter
Total
21.6
21.6
—
—
—
—
—
—
—
—
—
—
21.6
21.6
⁵⁾ Charter hire income for vessels on time charter is recognized under "Revenue". During the years revenue from time charter amounted to 43.8m (2022: 64.7m, 2021: 90.7m).
The average period until redelivery of the vessels for the period ended 31 December 2023 was 1.6 years (2022: 0.4 years, 2021: 0.3 years).
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
182
NOTE 23 – DERIVATIVE FINANCIAL INSTRUMENTS
NOTE 23 – continued
Please refer to Note 25 for further information on fair value hierarchies.
2023
2022
2021
USDm
2021
Offsetting financial assets and financial liabilities:
Gross amount
Net amount presented in the statement of financial position
Financial
assets
Financial
liabilities
7.7
7.7
-10.8
-10.8
USDm
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 31 December
1.7
-0.2
-0.5
—
—
—
0.5
35.3
36.8
0.4
53.7
54.1
0.4
0.2
0.1
-1.6
-2.2
-3.1
Derivative financial instruments are presented as below on the balance sheet:
USDm
2023
Offsetting financial assets and financial liabilities:
Gross amount
Offsetting amount
Net amount presented in the statement of financial position
USDm
2022
Offsetting financial assets and financial liabilities:
Gross amount
Net amount presented in the statement of financial position
Financial
assets
Financial
liabilities
37.7
-0.1
37.6
-0.9
0.1
-0.8
Financial
assets
Financial
liabilities
54.5
54.5
-0.4
-0.4
Derivative financial instruments assets are offset against derivative financial instruments liabilities
where the counterparty is identical.
Hedging of risks with derivative financial instruments is made with a ratio of 1:1. Sources of
ineffectiveness are mainly derived from differences in timing and credit risk adjustments. 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 in
comprehensive income. Gains and losses on cash flow hedges are transferred upon realization
from the equity hedging reserve into the income statement.
At year-end 2023, 2022, and 2021, TORM held the following derivative financial instruments
designated as hedge accounting:
2023
Forward exchange contracts
(USD/DKK) ¹⁾
Interest rate swaps ²⁾
Bunker swaps ³⁾
Notional
value
Unit
2024
2025
After
2025
Expected maturity
325.5
923.0
DKKm
USDm
325.5
103.3
—
172.0
647.7
9,600.0
MT
9,600.0
—
—
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 USD 539.2
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
183
Notional
value
Unit
2023
2024
After
2024
Further details on derivative financial instruments are provided in Notes 24 and 25.
Expected maturity
TORM did not enter into any enforceable netting arrangements.
NOTE 23 – continued
Forward freight agreements (FFAs) of USD 23.0m (net gain) have been recognized in the income
statement in 2023 (2022: USD -33.3m, 2021: USD 0.4m). 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.
Bunker swap agreements of USD 1.0m (net gain) have been recognized in the income statement in
2023 (2022: USD 13.8m, 2021: USD 12.0m). Bunker swaps with a duration similar to the period
hedged are used to reduce the exposure to fluctuations in bunker prices for fixed voyages. Bunker
swap agreements are designated as hedge accounting when appropriate.
Forward exchange contracts with a fair value of USD 0.5m (net gain) are designated as hedge
accounting relationships to hedge a part of TORM payments in 2024 regarding administrative and
operating expenses denominated in DKK with a notional value of DKK 325.5m (2022: DKK
280.3m, 2021: DKK 274.0m).
NOTE 23 – continued
Hedge accounting
2022
Forward exchange contracts
(USD/DKK) ¹⁾
Interest rate swaps ²⁾
280.3
687.2
DKKm
USDm
280.3
136.9
—
51.6
—
498.7
¹⁾ The average hedge of USD/DKK currency was 6.9
²⁾ The average interest rate was 1.37 p.a. plus margin.
Hedge accounting
Expected maturity
2021
Forward exchange contracts
(USD/DKK) ¹⁾
Interest rate swaps ²⁾
Bunker swaps ³⁾
Notional
value
Unit
2022
2023
After
2023
274.0
768.7
DKKm
USDm
274.0
130.9
—
—
136.9
500.9
9,920.0
MT
9,920.0
—
—
¹⁾ The average hedge of USD/DKK currency was 6.3
²⁾ The average interest rate was 1.38 p.a. plus margin.
³⁾ The average price of the hedging instruments was USD 642.4
Interest rate swaps with a fair value of USD 35.3m (net gain) applying the USD Secured Overnight
Financing Rate ("SOFR") compounded in arrears settings are designated as hedge accounting
relationships to fix a part of TORM's interest payments during the period 2024-2032 with a
notional value of USD 923.0m (2022: USD 687.2m, 2021: USD 768.7m).
The derivatives are not under central clearing but are settled on a bilateral basis with the
counterparties. All contracts are settled in a net amount per counterparty, and therefore the net
value per counterparty is presented in the financial statement.
Cash collateral of USD 27.9m (2022: USD 1.4m, 2021: USD 3.7m) 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 ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
184
NOTE 23 - continued
The table below shows realized amounts as well as fair value adjustments regarding derivative financial instruments recognized in the income statements and equity in 2023, 2022 and 2021.
USDm
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
2021
Forward freight agreements
Bunker swaps
Forward exchange contracts
Interest rate swaps
Total
Income statement
Other comprehensive income
Equity
Port
expenses,
bunkers, and
commissions
Financial
items
Operating
expenses
Admini-
strative
expenses
Transfer to
income
statement
Fair value
adjustment
Hedging
reserves as of
31 December
23.0
1.0
—
—
24.0
-33.3
13.8
—
—
-19.5
0.4
12.0
—
—
12.4
—
—
—
24.7
24.7
—
—
—
3.2
3.2
—
—
—
-10.8
-10.8
—
—
—
—
—
—
—
-2.4
—
-2.4
—
—
0.1
—
0.1
—
—
-0.1
—
-0.1
—
—
-2.3
—
-2.3
—
—
0.1
—
0.1
—
0.3
0.1
-22.3
-21.9
—
-3.3
4.6
0.4
1.7
—
-2.8
-0.2
11.7
8.7
—
-0.8
0.1
3.7
3.0
—
3.3
-2.7
54.3
54.9
—
2.1
-3.4
9.8
8.5
—
-0.5
0.5
34.1
34.1
—
—
0.4
52.6
53.0
—
0.1
-1.6
-2.1
-3.6
The hedging reserves as of 31 December relates to derivatives used for cash flow hedge for open hedge instruments, only. Certain interest rate swaps include portions of ineffectiveness. The
ineffectiveness is recognized in "Financial expenses" in the income statement. Please refer to page 183 for a full overview of the fair value of hedge instruments.
Please refer to Note 21 for further information on commercial and financial risks.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
185
NOTE 23 - continued
NOTE 24 – RISKS ASSOCIATED WITH TORM’S ACTIVITIES
Accounting Policies
Derivative financial instruments and hedge accounting
Derivative financial instruments, primarily forward currency exchange contracts, forward freight
agreements, interest rate hedges, and forward contracts regarding bunker purchases are entered
into to eliminate 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.
Changes in the fair value of derivative financial instruments designated as cash flow hedges and
deemed to be effective are recognized 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. However, when the hedged transaction results in the
recognition of a fixed asset, the gains and losses previously accumulated in “Other comprehensive
income” are transferred from “Other comprehensive income” and included in the initial
measurement of the cost of the fixed asset. Changes in the fair value of a portion of a hedge
deemed to be ineffective are recognized 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 with cap features and under “Port
expenses, bunkers and commissions” for forward freight agreements and forward bunker
contracts.
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 under Climate-related risk analysis and TCFD on
pages 87-89 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 10 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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
186
NOTE 24 - continued
NOTE 24 - continued
During 2023, 12.6% (2022: 12.8%, 2021: 31.5%) of the 29,152 earning days deriving from
operating the Company’s product tankers were hedged in this way. Physical time charter
contracts accounted for 8.5% (2022: 46.1%, 2021: 35.7%) of overall hedging. In 2023, the
Company sold FFAs with a notional contract value of USD 213.9375m (2022: USD58.3m, 2021:
USD 44.2m) and bought FFAs with a notional contract value of USD 0m (2022: USD 92.3m,
2021: USD 110.3m). The total notional contract volume sold in 2023 was 5,400,000 metric tons
(2022: 2,310,000 metric tons; 2021: 2,410,000 metric tons), and the total notional volume
bought was 0 metric tons (2022: 2,592,000 metric tons, 2021: 5,962,000 metric tons). At the
end of 2023, the coverage of available earning days for 2024 was 11.3% through time charters,
current spot voyages and cargo contracts (2022: 3.7%, 2021: 9.9%).
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.
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:
Bunker price fluctuations
The cost of fuel oil consumed by the vessels, known in the industry as bunkers, accounted for
66.6% (2022: 61.3%, 2021: 56.4%) of the total voyage costs in 2023 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 2023,
17.7% (2022: 15.2%, 2021: 42.1%) of TORM’s total bunker purchase was hedged through bunker
hedging contracts. At the end of 2023, TORM had covered 5% (2022: 0%, 2021: 4.1%) of its
bunker requirements for 2024. The total bunker exposure is estimated to be approximately
415,436 metric tons.
Sensitivity to changes in freight rates
USDm
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
2024
2023
2022
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:
-27.8
-27.8
-26.5
-26.5
-27.2
-27.2
Sensitivity to changes in the bunker price
USDm
2024
2023
2022
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 31 December 2023, the
carrying value of the fleet was USD 2,070m (2022: USD 1,856.0m, 2021: USD 1,937.8m). Based
on broker valuations, TORM’s fleet had a market value of USD 3,080.9m as of 31 December 2023
(2022: USD 2,650.3m, 2021: USD 1,869.5m).
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
-25.9
-25.9
-22.1
-22.1
-22.6
-22.6
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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
187
NOTE 24 - continued
NOTE 24 - 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 2023, the aggregate insured value of hull and machinery and interest
for TORM’s owned vessels amounted to USD 2.34bn (2022: USD 2.8bn, 2021: USD 2.1bn).
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 2023, one
customer accounted for 8% of TORM’s freight revenues (2022: one accounted for 12%, 2021:
One accounted for 15%). 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 98.6% (2022: 98.6%, 2021: 97.0%), which is considered to be satisfactory
given the differences in interpretation of events. In 2023, demurrage represented 16% (2022:
14.0%, 2021: 18.0%) of the total freight revenues. Please refer to Note 1 for more details on
recognition of demurrage claims into revenue.
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. 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 2023, 100% (2022: 100%, 2021: 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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
188
NOTE 24 - continued
NOTE 24 - continued
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 60.2% (2022: 81.4%, 2021: 86.0%) for administrative expenses and approximately
21.6% (2022: 19.8%, 2021: 21.3%) for operating expenses. TORM’s expected administrative and
operating expenses in DKK and EUR for 2024 are approximately DKK 476.1m, whereof 68.3%
(2022: 68.9%, 2021: 70.3%) are hedged through FX forward contracts. All FX forward contracts
have maturity within 2024, and TORM’s average hedge USD/DKK currency rate is 6.77. 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
All things being equal, a change in the USD/DKK and the USD/EUR exchange rates of 10% would
result in a change in profit/loss before tax and equity as follows:
USDm
2024
2023
2022
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 19 for additional information on
borrowings. At the end of 2023, TORM had fixed 86.9% (2022: 94.6%, 2021: 84.9%) of the debt
then outstanding with interest rate swaps and fixed rate leasing debt corresponding to an amount
of USD 923.0m. USD 550.3m of this amount is hedged at an interest rate of 1.45% plus margin
with interest rate swaps with maturity in the period 2023-2028.
TORM’s debt and interest hedging was based on USD London Interbank Offered Rate ("LIBOR")
until 30 June 2023, when the USD LIBOR ceased to exist. As of that date SOFR is used as best
practice for USD derivatives and financial contracts. During 2023 TORM implemented
amendments on all legacy financing and hedging contracts. TORM implemented compound SOFR
on the majority of the agreements. A total of USD 95.3m as per September 2023 of TORM’s
borrowing did not qualify the IBOR reform exemption of IFRS 9 and therefore applied modification
accounting which resulted to immaterial effect.The rest applies the exemption, and no
modification accounting was applied. TORM has performed a hedge effectiveness testing in
relation to the transition to SOFR and concluded that hedging relationships remain effective.
TORM identified one ineffective relationship due to basis risk component of a loan agreement.
Financial impact is measured quarterly and currently deemed immaterial.
Sensitivity to Changes in Interest Rates
All things being equal, a change in the interest rate level of 1%-point would result in a change in the
interest rate expenses as follows:
-2.2
-2.2
-1.8
-1.8
-1.8
-1.8
USDm
2024
2023
2022
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
-2.7
10.4
-0.7
16.3
-2.1
19.9
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 31 December 2023,
TORM’s loan portfolio was spread across 13 different banks.
As of 31 December 2023, TORM maintains a liquidity reserve of USD 295.6m in cash and cash
equivalents, including restricted cash, combined with USD 342.5m 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 22.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
189
NOTE 25 – FINANCIAL INSTRUMENTS
Categories of financial assets and liabilities (USDm):
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
Observable input
(Level 2)
Financial instruments
measured at fair value
Financial instruments
measured at amortized cost
Total carrying value
—
—
37.6
—
37.6
—
—
—
2.8
2.8
—
—
55.3
—
55.3
—
—
—
1.9
1.9
—
—
37.6
—
37.6
—
—
—
2.8
2.8
—
—
55.3
—
55.3
—
—
—
1.9
1.9
4.5
211.0
22.9
295.6
534.0
1,059.6
3.0
43.1
42.4
1,148.1
4.6
259.5
18.7
323.8
606.6
966.9
3.0
48.5
29.2
1,047.6
4.5
211.0
60.5
295.6
571.6
1,059.6
3.0
43.1
45.2
1,150.9
4.6
259.5
74.0
323.8
661.9
966.9
3.0
48.5
31.1
1,049.5
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
190
NOTE 25 - continued
Categories of financial assets and liabilities (USDm):
2021
Financial assets
Loan receivables¹⁾
Trade receivables¹⁾
Other receivables
Cash and cash equivalents, including restricted cash¹⁾
Total
Financial liabilities
Borrowings¹⁾²⁾
Trade payables¹⁾
Other liabilities¹⁾
Total
Observable
input (Level 2)
Financial instruments
measured at fair value
Financial instruments
measured at amortized cost
Total carrying value
—
—
8.3
—
8.3
—
—
11.2
11.2
—
—
8.3
—
8.3
—
—
11.2
11.2
4.6
84.0
31.7
171.7
292.0
1,135.3
35.3
32.5
1,203.1
4.6
84.0
40.0
171.7
300.3
1,135.3
35.3
43.7
1,214.3
¹⁾ Due to the short maturity, the carrying value is considered to be an appropriate expression of the fair value.
²⁾ See Note 20.
³⁾ Derivative financial instruments are presented in the balance sheet line "Other receivables" and "Other liabilities".
NOTE 25 - continued
NOTE 26 – RELATED PARTY TRANSACTIONS
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)
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 valuation methods
discount the future fixed and estimated cash flows and valuation of any option elements.
TORM’s ultimate controlling party is Oaktree Capital Group, 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 and the
Executive Director, is disclosed in Note 5.
On 01 September 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 01 September 2022, TORM’s transactions with its joint venture entity producing
scrubbers for the TORM fleet covered CAPEX of USD 5.6m in total.
During 2021, TORM effected transactions with its joint venture producing scrubbers for the TORM
fleet amounting to USD 1.4m in total.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
191
NOTE 27 – ASSETS HELD FOR SALE AND NON-CURRENT ASSETS SOLD DURING THE YEAR
NOTE 29 – ENTITIES IN THE GROUP
During 2023, TORM sold and delivered eight vessels for a total consideration of USD 166.4m. The
vessels sold and delivered to new owners during 2023 had a carrying value of USD 111.4m. After
deducting related bunker cost, the sales resulted in a profit of USD 50.4m which are recognized in
the income statement for 2023. Additionally, TORM sold three vessels with a carrying value of
USD 47.2m classified as assets held for sale at the end of 2023 as the vessels were not yet
delivered to new owners.
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 106.6m. The vessels sold and
delivered to the new owners during 2022 had a carrying value of USD 93.8m. The sales resulted in
an impairment loss of USD 2.6m and a profit of USD 10.2m which are recognized in the income
statement for 2022.
During 2021, TORM sold and delivered one vessel for a total consideration of USD 10.0m. The
vessels sold and delivered to the new owners during 2021 had a carrying value of USD 10.3m.
Additionally, TORM sold one vessel with a carrying value of USD 13.2m classified as assets held for
sale at the end of 2021 as the vessel was not yet delivered to new owners. The vessel was
subsequently delivered during 2022. The sales resulted in an impairment loss on tangible assets of
USD 4.6m
NOTE 28 – CASH FLOWS
USDm
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
Change in inventories, receivables, and payables:
Change in inventories
Change in receivables
Change in prepayments
Change in trade payables and other liabilities
Total
2023
2022
2021
0.1
-0.3
22.5
-1.5
-6.5
-0.1
14.6
2.2
0.6
-6.3
0.1
-3.7
-0.7
2.3
-0.2
—
—
1.4
2023
2022
2021
1.2
-21.8
-26.9
45.2
-158.1
-37.5
-1.8
3.2
-5.7
4.7
-3.5
19.4
47.8
-180.9
-48.5
Entity
TORM plc
Investments in subsidiaries ⁶⁾:
Entity
TORM A/S
DK Vessel HoldCo GP ApS ¹⁾
DK Vessel HoldCo K/S ¹⁾
OCM Singapore Njord Holdings Alice, Pte. Ltd ¹⁾
OCM Singapore Njord Holdings Almena, Pte. Ltd ²⁾
OCM Singapore Njord Holdings Hardrada, Pte. Ltd
OCM Singapore Njord Holdings St.Michaelis Pte. Ltd ²⁾
OCM Singapore Njord Holdings St. Gabriel Pte. Ltd ²⁾
OCM Singapore Njord Holdings Agnete, Pte. Ltd ²⁾
OCM Singapore Njord Holdings Alexandra, Pte. Ltd ¹⁾
OMI Holding Ltd.²⁾
TORM Crewing Service Ltd.²⁾
TORM Middle East DMCC
TORM Shipping India Private Limited ⁴⁾
TORM Singapore Pte. Ltd.
TORM Tanker Corporation⁷⁾
TORM USA LLC⁷⁾
VesselCo 6 Pte. Ltd. ¹⁾
VesselCo 8 Pte. Ltd. ²⁾
VesselCo 9 Pte. Ltd.
VesselCo 10 Pte. Ltd. ³⁾
VesselCo 11 Pte. Ltd. ²⁾
VesselCo 12 Pte. Ltd.
TORM SHIPPING (PHILS.), INC.
Marine Exhaust Technology A/S
ME Production A/S
Marine Exhaust Technology (Hong Kong) Ltd.
Country
United Kingdom
Country
Denmark
Denmark
Denmark
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Mauritius
Bermuda
United Arab Emirates
India
Singapore
USA
USA
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Philippines
Denmark
Denmark
China
Ownership ⁵⁾
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
25 %
75 %
75 %
59 %
China
ME Production (Zhejiang) Co, Ltd.
Suzhou ME Production Technology Co, Ltd.⁷⁾
¹⁾ Entities dissolved in the financial year ended 31 December 2021.
²⁾ Entities dissolved in the financial year ended 31 December 2022.
³⁾ Entities dissolved in the financial year ended 31 December 2023.
⁴⁾ Entities with different reporting periods: TORM Shipping India has a financial reporting period that runs from
01 April to 31 March as required by the Indian government's laws and legislations.
⁵⁾For all subsidiaries, ownership and voting rights are the same except for TORM SHIPPING (PHILS.), INC
where voting rights are 100%.
⁶⁾ All subsidiaries are consolidated in full.
⁷⁾ Entities not audited
China
59 %
75 %
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
192
NOTE 30 – PROVISIONS
USDm
Cargo claim provisions
Warranty provisions
Balance as of 31 December
2023
2022
2021
—
0.6
0.6
6.5
0.3
6.8
18.3
—
18.3
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 of 31 December 2023, TORM has reassessed the provision and
reversed the remaining provision of USD 6.5m relating to the case complex to reflect the current
legal assessment of the outcome. TORM has estimated the potential exposure to be up to USD
16.6m should TORM contrary to current expectations not defeat any part of the claims in the case
complex. Legal proceedings are still ongoing and the outcome is therefore subject to uncertainty.
Warranty provisions relate to sold marine exhaust equipment.
Accounting Policies
Provisions are recognized when the Group has a legal or constructive obligation as a result of past
events, and when it is probable that 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.
NOTE 29 - continued
Interest in legal entities included as joint ventures:
There has been no activity in the two Danish joint ventures, Long Range 2 A/S and LR2
Management K/S, for which TORM controls 50%.
TORM obtained control over Marine Exhaust Technology Ltd. on 01 September 2022 following the
acquisition of Marine Exhaust Technology A/S, where it affected the profit and loss from
continuing operations in 2022 with -0.1m. Before the acquisition, TORM controlled 28% of Marine
Exhaust Technology A/S.
The table below shows the registered addresses for the companies mentioned above:
Denmark
Tuborg Havnevej 18
India
2nd Floor
Philippines
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
6 Battery Road #27-02
Office 105
USA
Suite 1625
Six Battery Road
20 St Dunstan's Hill
2500 City West
Singapore 049909
London, EC3R 8HL
Boulevard
Singapore
United Kingdom
77042, Houston , Texas
USA
Denmark
Sandholm 7
China
Hong Kong
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
China
Kwai Chung, New
Territories
Hong Kong
United Arab Emirates
Unit No: C1
DMCC Business Centre
Level No 13
AG Tower
Dubai, UAE
United Arab Emirates
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
193
NOTE 31 – EARNINGS PER SHARE AND DIVIDEND PER SHARE
NOTE 31 - continued
Earnings per share
2023
2022
2021
Net profit/(loss) for the year attributable to TORM plc
shareholders (USDm)
648.3
562.8
-42.1
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
84.1
-0.5
83.6
3.1
81.8
-0.5
81.3
1.5
78.6
-0.5
78.1
0.3
86.7
82.8
78.4
Basic earnings/(loss) per share (USD)
7.75
6.92
-0.54
Diluted earnings/(loss) per share (USD)
7.48
6.80
-0.54
When calculating diluted earnings per share for 2021, RSUs have been omitted as they are out-of-
the-money and thus not anti-dilutive, but the RSUs may potentially dilute earnings per share in the
future. Please refer to Note 5 for information on the RSUs.
Accounting Policies
Basic earnings per share are calculated by dividing the consolidated net profit/(loss) for the year
available to common shareholders by 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.
NOTE 32 – CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED CASH
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⁾
Sale and leaseback transaction prepayment to be
released upon delivery of the vessel²⁾
Restricted cash
2023
265.5
265.5
2022
320.5
320.5
30.1
0.0
30.1
3.3
0.0
3.3
Cash and cash equivalents, including restricted cash
295.6
323.8
2021
144.8
144.8
5.9
21.0
26.9
171.7
Dividend per share
²⁾ Prepayment released on 06 January 2022.
2023
2022
2021
¹⁾ The counterparties have an obligation to return any excess cash provided as security to the Group upon
settlement or early termination of the contracts.
Declared dividend per share (USD)
Declared dividend for the year (USDm)
4.42
370.9
4.63
378.7
Proposed dividend per share for approval at Annual
General Meeting (USD)
Proposed dividend for approval at Annual General
Meeting (USDm)
Dividend paid per share (USD)
Dividend 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)
1.36
126.3
7.01
586.4
86.2
-0.5
85.7
—
—
2.04
166.7
82.3
-0.5
81.8
—
—
—
—
—
—
81.2
-0.5
80.7
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
194
NOTE 33 – BUSINESS COMBINATIONS
NOTE 33 - continued
There were no business combinations in 2023.
On 01 September 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 2.0m. 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 0.3m recognized in the share of profit/
loss from joint ventures in the consolidated income statement.
The acquired assets include contractual receivables of USD 5.7m of which USD 0.3m were
considered to be uncollectible at the day of the acquisition.
Transaction costs in connection with the acquisition amounted to less than USD 0.1m and are
recognized as administration expenses.
The goodwill of USD 1.8m represents the value of expected synergies arising from the acquisition
and is allocated entirely to the Marine Exhaust 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 5.9m and
0.0m, respectively, and have been recognized in the consolidated income statement since the
acquisition. Had the acquisition taken place on 01 January 2022, the revenue and profit for the
Group for 2022 would have been USD 1,455.9m and USD 561.9m, respectively.
The following table summarizes the fair values of the assets acquired and the liabilities assumed on
01 September 2022:
USDm
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
01 September
2022
1.2
2.5
6.4
1.6
3.8
1.5
3.0
-7.9
-0.3
-0.4
-0.8
-1.5
-0.3
-4.3
-0.3
4.2
1.8
6.0
-2.4
3.6
2.0
1.6
3.6
3.0
-2.0
1.0
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
195
NOTE 33 - continued
Accounting Policies
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.
Business combinations are accounted for by applying the purchase method, whereby the acquired
entities’ identifiable assets, liabilities, and contingent liabilities are measured at fair value at the
acquisition date. The tax effect of the revaluation activities is also considered.
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.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
196
Parent Company 2023
Parent Company Financial Statements
Management Review
Parent Company Income Statement
Parent Company Statement of Comprehensive Income
Parent Company Balance Sheet
Parent Company Statement of Changes in Equity
Parent Company Cash Flow Statement
Notes to Parent Company Financial Statements
198
199
199
200
201
202
203
TORM ANNUAL REPORT 2023
PARENT COMPANY 2023
197
Management Review for TORM plc
The parent company activities include holding company activities for the TORM Group,
treasury activities as well as bareboat chartering activities.
In 2023, revenue amounted to USD 47.9m compared to USD 11.9m in 2022, primarily
driven by an increase in bareboat charter hire rates. The operating loss amounted to USD
7.3m compared to an operating loss of USD 4.6m in 2022, primarily impacted by an
increase in administration expenses due to issuance of the 2023 long-term incentive
program and the additional extraordinary retention program granted to the CEO.
During 2023, the parent company received dividends from subsidiaries amounting to USD
118.9m of which USD 117.1m pertain to three vessels being distributed from its subsidiary
TORM A/S. The parent company subsequently sold two vessels and contributed one vessel
in kind to its subsidiary, TORM Tanker Corporation. Primarily because of these transactions,
the net financial income increased by USD 96.7m to USD 130.3m compared to USD 33.6m
in 2022.
Reversal of impairment in subsidiaries amounted to USD 0.0m in 2023 compared to USD
139.0m in 2022, as all historical impairment losses were fully reversed in 2022.
Net profit amounted to USD 120.9m compared to USD 175.3m in 2022.
Total assets decreased by USD 257.4m to USD 1,362.4m as of 31 December 2023, mainly
impacted by a decrease in loans to subsidiaries of USD 306.9m partly offset by an increase
in investment in subsidiaries of USD 68.8m.
Total equity decreased by USD 364.4m to USD 837.8m as of 31 December 2023, primarily
impacted by dividend payments of USD 586.4m partly offset by net profit of USD 120.9m
and capital increases of USD 92.7m.
During 2023, total borrowings increased by USD 93.6m to USD 499.0m primarily impacted
by refinancing of credit facilities during the year.
TORM ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
198
Parent Company Income Statement
01 January-31 December
Parent Company Statement of
Comprehensive Income
01 January-31 December
USD '000
Revenue
Charter hire
Administrative expenses
Other operating income and expenses
Expected credit loss
Depreciation and amortization
Operating profit/(loss) (EBIT)
Impairment reversal on investment in subsidiaries
Financial income
Financial expenses
Profit before tax
Tax
Net profit for the year
Note
3
5
2
2
4
2023
47,895
-47,304
-10,429
49
2,517
-24
2022
11,861
-11,715
-4,737
44
-47
-39
-7,296
-4,633
–
138,984
144,004
-13,664
52,718
-19,107
123,044
167,962
-2,174
7,372
120,870
175,334
USD '000
Net profit for the year
Other comprehensive income:
Items that may be reclassified to profit or loss:
Fair value adjustment on hedging instruments
Fair value adjustment on hedging instruments transferred to income
statement
Tax on other comprehensive income
Other comprehensive income after tax
Total comprehensive income for the year
2023
2022
120,870
175,334
3,749
54,259
-22,307
4,640
-13,918
412
-13,162
41,509
106,952
216,843
TORM ANNUAL REPORT 2023
PARENT COMPANY FINANCIAL STATEMENTS
199
Parent Company Balance Sheet
As of 31 December
USD '000
ASSETS
Intangible assets
Other intangible assets
Total Intangible assets
Tangible fixed assets
Land and buildings
Total tangible fixed assets
Financial assets
Investments in subsidiaries
Loan receivables
Loans to subsidiaries
Total financial assets
Total non-current assets
Loans to subsidiaries
Other receivables
Prepayments
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Note
2023
2022
USD '000
Note
2023
2022
EQUITY AND LIABILITIES
—
—
102
102
Equity
Common shares
Treasury shares
Hedging reserves
Share premium
Retained profit
Total equity
86
86
81
81
5, 9
1,009,071
940,291
6
12
12
7
4,523
71,475
4,570
—
1,085,069
944,861
1,085,236
944,963
240,713
619,049
35,322
53,702
438
685
371
1,706
277,158
674,828
Liabilities
Deferred tax liability
Borrowings
Total non-current liabilities
Borrowings
Trade payables
Payables to subsidiaries
Other liabilities
Total current liabilities
Total liabilities
1,362,394
1,619,791
TOTAL EQUITY AND LIABILITIES
862
-4,235
25,567
170,262
823
-4,235
39,485
77,794
645,332
1,088,297
837,788
1,202,164
4
8
8
12
3,324
5,790
398,427
340,602
401,751
346,392
100,611
64,882
278
19,814
2,152
122,855
349
2,993
3,011
71,235
524,606
417,627
1,362,394
1,619,791
The financial statements of TORM plc, company number 09818726, have been approved by the
Board of Directors and signed on their behalf by:
Jacob Meldgaard
Executive Director
07 March 2024
TORM ANNUAL REPORT 2023
PARENT COMPANY FINANCIAL STATEMENTS
200
Parent Company Statement of Changes in Equity
01 January-31 December
USD '000
EQUITY
Equity as of 01 January 2022
Comprehensive income for the year:
Net profit for the year
Other comprehensive income for the year
Tax on other comprehensive income
Total comprehensive income for the year
Capital increase
Transaction costs capital increase
Share-based compensation
Dividend paid
Total changes in equity 2022
Equity as of 31 December 2022
Comprehensive income for the year:
Net profit for the year
Other comprehensive income for the year
Tax on other comprehensive income
Total comprehensive income for the year
Capital increase
Transaction costs capital increase
Share-based compensation
Dividend paid
Total changes in equity 2023
Equity as of 31 December 2023
Common
shares ¹⁾
Treasury
shares ¹⁾
Hedging
reserves
Share
premium
Retained
profit
Total
812
-4,235
-2,024
69,821
1,077,410
1,141,784
—
—
—
—
11
—
—
—
11
—
—
—
—
—
—
—
—
—
—
54,671
-13,162
41,509
—
—
—
—
175,334
175,334
—
—
54,671
-13,162
175,334
216,843
—
—
—
—
—
8,004
-31
—
—
—
2,211
8,015
-31
2,211
— -166,658
-166,658
7,973
-164,447
-156,463
823
-4,235
39,485
77,794
1,088,297
1,202,164
—
—
—
—
39
—
—
—
39
—
—
—
—
—
—
—
—
—
—
-18,558
4,640
-13,918
—
—
—
—
120,870
—
—
120,870
-18,558
4,640
120,870
106,952
—
—
—
—
—
92,635
-167
—
—
—
92,674
-167
22,549
22,549
— -586,384
-586,384
92,468
-563,835
-471,328
862
-4,235
25,567
170,262
645,332
837,788
¹⁾ Please refer to Note 17 to the Group consolidated financial statements for further information
TORM ANNUAL REPORT 2023
PARENT COMPANY FINANCIAL STATEMENTS
201
Parent Company Cash Flow Statement
01 January-31 December
USD '000
Cash flow from operating activities
Net profit for the year
Reversals:
Note
2023
2022
USD '000
Note
2023
2022
120,870
175,334
Investment in intangible fixed assets
Repayments of loans to subsidiaries
Cash flow from investing activities
Reversal of depreciation and impairment losses
24
39
Net cash flow from investing activities
Reversal of other non-cash movements
13
51,536
12,418
Impairment reversal on investment in subsidiaries
Financial income
Financial expenses
Tax
Interest received
Interest paid
Net exchange rate gains and losses
Repayments of intercompany trading balances
Change in inventories, receivables, and payables, etc.
2
2
4
13,664
2,174
14,293
-16,160
107
-43,653
-194
— -138,984
-144,004
-52,718
19,107
-7,372
Cash flow from financing activities
Borrowing, mortgage debt
Repayment/redemption, mortgage debt
Repayment/redemption, leases
Capital increase
—
Transaction costs capital increase
-18,553
Dividends paid
-717
15,501
356
Net cash flow from financing activities
Net cash flow from operating, investing, and financing
activities
Net cash flow from operating activities
-1,343
4,411
Cash and cash equivalents as of 01 January
Cash and cash equivalents as of 31 December
-89
—
485,461
356,093
485,372
356,093
8
8
8
489,974
20,000
-394,641
-222,708
-19
6,187
-167
-38
8,015
-31
-586,384
-166,658
-485,050
-361,420
-1,021
-916
1,706
2,622
685
1,706
TORM ANNUAL REPORT 2023
PARENT COMPANY FINANCIAL STATEMENTS
202
Notes to Parent Company
Financial Statements
Note 1 – Accounting Policies – Supplementary for the Parent Company
Note 2 – Financial Items
Note 3 – Staff Costs
Note 4 –Tax
Note 5 – Financial assets
Note 6 – Loan Receivables
Note 7 – Other receivables
Note 8 – Borrowings
Note 9 – Impairment Testing
Note 10 – Collateral Security for Mortgage Debt and Bank Loans
Note 11 – Guarantee Commitments and Contingent Liabilities
Note 12 – Related Party Transactions
Note 13 – Cash flows
204
205
205
205
207
207
207
207
207
208
208
208
TORM ANNUAL REPORT 2023
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
203
NOTE 1 – ACCOUNTING POLICIES - SUPPLEMENTARY FOR THE PARENT COMPANY
NOTE 1 - continued
Basis of Preparation
TORM plc is a public company limited by shares and incorporated in England and Wales. Its
registered number is 09818726, and its registered address is Office 105, 20 St Dunstan’s Hill,
London, EC3R 8HL. The Parent Company meets the definition of a qualifying entity under Financial
Reporting Standard 100 (“FRS 100”) issued by the Financial Reporting Council. Therefore, these
financial statements were prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law), including
Financial Reporting Standard 101 Reduced Disclosure Framework and additional disclosure
requirements for listed companies in accordance with the Danish Financial Statements Act.
As permitted by FRS 101, the Parent Company has taken advantage of the disclosure exemptions
available under that standard in relation to accounting standards issued but not yet effective or
implemented, share-based payment information, financial instruments, capital management,
presentation of comparative information in respect of certain assets and certain related party
transactions.
The following exemptions available under FRS 101 have been applied:
•
•
•
•
•
•
•
Paragraphs 45(b) and 46 to 52 of IFRS 2, “Shared-based payment” (details of the number and
weighted-average exercise prices of share options, and how the fair value of goods or services
received was determined)
IFRS 7 “Financial Instruments: Disclosures”
Paragraph 91 to 99 of IFRS 13, “Fair value measurement” (disclosure of valuation techniques
and inputs used for fair value measurement of assets and liabilities)
The following paragraphs of IAS 1 “Presentation of financial statements”
•
•
Paragraph 30 and 31 of IAS 8 “Accounting policies, changes in accounting estimates and
errors” (requirement for the disclosure of information when an entity has not applied a new
IFRS that has been issued but is not yet effective)
Paragraph 17 and 18A of IAS 24 “Related Party Disclosures” (Key management personnel
compensation)
The requirements in IAS 36 “Impairment of Assets” (disclosure of valuation technique and
assumptions used in determining recoverable amount)
16 (statement of compliance with all IFRS)
134-136 (capital management disclosures)
The financial statements have been prepared on a going concern basis. Further information
relating to the going concern assumption is provided in Note 1 to the Group consolidated financial
statements.
Where required, the equivalent disclosures are given in the Group's consolidated financial
statements. Key sources of estimating uncertainty disclosure are provided in the accounting
policies and in relevant notes to the Group consolidated financial statements as applicable.
Details of the Parent Company's share-based payment schemes are provided in Note 5 to the
Group consolidated financial statements.
Accounting Policies
In supplement to the accounting policies provided in Note 1 to the Group consolidated financial
statements, the following material accounting policy information provided below were applied to
the Parent Company’s financial statements.
Investment in Subsidiaries and Joint Ventures
Investment in subsidiaries, associated companies, and joint ventures are recognized and measured
in the financial statements of the Parent Company at cost less provision for impairment and
classified as “non-current assets”. Dividends are recognized under “Financial income”.
The carrying amount of investment in subsidiaries and joint ventures is increased to its recoverable
amount if there have been changes in the estimates used to determine the recoverable amount
since the last impairment loss was recognized.
Reversal of impairment losses on investment in subsidiaries and joint ventures is recognized in
“Impairment reversal on investment in subsidiaries”.
Critical Accounting Estimates and Judgements
In supplement to the critical accounting estimates and judgements provided in Note 1 to the Group
consolidated financial statements, the following is considered a significant accounting estimate
used in the preparation of the Parent Company’s financial statements.
Carrying Amounts of Investments in Subsidiaries
The Parent Company evaluates the carrying amounts of subsidiaries to determine if events have
occurred which would require a modification of their carrying amounts. The valuation of
subsidiaries is reviewed based on the performed impairment testing of the Group’s cash-
generating unit, excluding the Parent Company’s effect on the value in use of the cash-generating
unit.
For further information regarding the underlying impairment testing of the vessels in the Group,
please refer to Note 10 to the Group consolidated financial statements.
TORM ANNUAL REPORT 2023
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
204
NOTE 2 – FINANCIAL ITEMS
NOTE 4 – TAX
Interest income from subsidiaries
24,916
30,582
USD '000
Financial income
Interest income from cash and cash equivalents, including
restricted cash
Dividends from subsidiaries
Other financial income
Exchange rate adjustments, including loss from forward
exchange rate contracts
Total
Financial expenses
Interest expenses on borrowings
Interest expense from right-of-use assets
Commitment fees
Amortization of interest rate swaps
Ineffectiveness on interest rate swaps
Exchange rate adjustments, including loss from forward
exchange rate contracts
Other financial expenses
Total
2023
2022
The major components of income tax for the years ended 31 December 2023 and 2022 are:
USD '000
Tax for the year
Origination and reversal of temporary differences
2023
2022
2,174
2,174
-7,372
-7,372
35
4
Total
118,906
22,083
48
99
49
—
144,004
52,718
-11,960
-18,955
-4
-1,298
-2,215
2,388
—
-575
-1
-622
-2,394
3,622
-713
-44
-13,664
-19,107
The net movement in deferred tax of USD 2.2m for the year ended 31 December 2023 consists of
the utilization of deferred tax assets for unused tax credits for charges subject to the corporate
interest restriction of -2.8m (2022: USD 3.4m) and the recognition of deferred tax assets for
additional carried forward loss of USD 0.6m (2022: USD 4.0m).
Tax effects directly recognized in equity or other comprehensive income for the years ended 31
December 2023 and 2022 are:
USD '000
2023
2022
Deferred tax charged in the statement of Other Comprehensive
Income
Deferred tax related to items recognized in OCI during the year
Total
-4,640
-4,640
13,162
13,162
Tax recognized in equity or other comprehensive income relates to the unrealized fair value
adjustment on hedging instruments recognized directly in equity or other comprehensive income.
Dividends from subsidiaries of USD 118.9m primarily relate to three vessels distributed from its
subsidiary TORM A/S based on a market value of the vessels of USD 117.1 derived from an average
of valuations from two internationally acknowledged shipbrokers with appropriate qualifications
and recent experience in the valuation of vessels.
NOTE 3 – STAFF COSTS
USD'000
Total staff costs
Staff costs included in administrative expenses
Total staff costs
Average number of permanent employees
2023
2022
8,454
8,454
1
1,180
1,180
1
Employee information
The average number of employees is calculated as a full-time equivalent (FTE).
TORM ANNUAL REPORT 2023
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
205
NOTE 4 – continued
Reconciliation of tax charge
USD '000
Accounting profit before income tax
Adjustment of income
Reversal of impairment
Dividend distribution
Legal and professional fees
Other non-deductible expenses for tax purposes
Other non-taxable income
Corporate interest restriction
Capital allowances
Adjusted taxable loss
At effective UK income tax rate of 23.5% (2022: 19%)
Recognition of deferred tax asset
Income tax reported in the Income Statement
Deferred taxes
USD '000
Deferred tax assets
Deferred tax asset related to CIR
Deferred tax asset related to trading losses
Deferred tax assets before offset
Offset against deferred tax liabilities
Deferred tax assets in the balance sheet
USD '000
Deferred tax liabilities
Deferred tax liabilities arising from changes in equity
Deferred tax liabilities before offset
Offset against tax assets
Deferred tax liabilities in the balance sheet
NOTE 4 – continued
2023
2022
123,044
167,962
All deferred tax movements arise from the origination and reversal of temporary differences.
As per 31 December 2023 there are unused tax credits of USD 2.2m (2022: USD 2.2m) 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.
Deferred tax at the balance sheet date have been measured using the appropriate enacted tax
rates and are reflected in these financial statements.
The UK Government announced on 03 March 2021 that the rate of corporation tax will increase to
25% from 01 April 2023. This new law was substantively enacted on 24 May 2021. Deferred taxes
at the balance sheet date have been measured using this tax rate and are reflected in these
financial statements.
Pillar Two Tax Effects
On 20 June 2023, the government of UK, where the parent company is incorporated, enacted the
Pillar Two income taxes legislation effective from 01 January 2024. 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 per cent. 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 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.
The Group has also prepared a preliminary Transitional Country-by-Country Reporting (CbCR) Safe
Harbour assessment concluding on fiscal year 2023, based on which it expects to be eligible for
the Transitional CbCR Safe Harbour in the majority of jurisdictions in which the Group is present
during fiscal year 2024. The top-up tax would not have had a material impact to the Group if it had
been applicable in 2023. At 31 December 2023, there are no indications that the top-up tax will
have material impact to the Group in 2024.
— -138,984
-118,906
-22,083
262
6,740
-2,163
-11,339
-283
-2,645
—
-2,174
-2,174
909
48
—
-12,242
-345
-4,735
—
7,372
7,372
2023
2022
529
4,669
5,198
-5,198
—
3,364
4,008
7,372
-7,372
—
2023
2022
8,522
8,522
-5,198
3,324
13,162
13,162
-7,372
5,790
Deferred tax assets and liabilities are offset and reported net where appropriate within territories.
Deferred tax assets are recognized to the extent that the realization of the relaxed tax benefit
through future taxable profits is probable.
TORM ANNUAL REPORT 2023
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
206
NOTE 5 – FINANCIAL ASSETS
NOTE 7 – OTHER RECEIVABLES
USD'000
Investments in subsidiaries
Cost:
Balance as of 01 January
Additions
Adjustments to prior years
Capital decreases in subsidiaries
Capital increases related to share-based payments
Balance as of 31 December
Impairment:
Balance as of 01 January
Adjustments to prior years
Impairment (reversal)/losses for the year
Balance as of 31 December
2023
2022
940,291
1,079,689
62,912
—
—
-3,116
-9,941
-137,838
15,809
1,556
1,009,071
940,291
—
—
142,100
-3,116
— -138,984
—
—
Carrying amount as of 31 December
1,009,071
940,291
Additions during the year of USD 62.9m primarily relate to one vessel contributed in kind to the
newly incorporated subsidiary, TORM Tanker Corporation. The historical cost of this investment in
subsidiary amounts to USD 37.8m and is based on a market value of the vessel derived from an
average of valuations from two internationally acknowledged shipbrokers with appropriate
qualifications and recent experience in the valuation of vessels.
NOTE 6 – LOAN RECEIVABLES
USD '000
Loan receivables
Cost:
Balance as of 01 January
Balance as of 31 December
Expected credit loss:
Balance as of 01 January
Additions during the year
Balance as of 31 December
2023
2022
4,711
4,711
4,711
4,711
141
47
188
94
47
141
Carrying amount as of 31 December
4,523
4,570
USD '000
Derivative financial instruments
Other
Balance as of 31 December
NOTE 8 – BORROWINGS
2023
35,301
21
2022
53,686
16
35,322
53,702
As of 31 December 2023, the Parent Company had borrowed USD 505.7.m (2022: USD 409.2m).
The loan proceeds were USD 6.7m lower (2022: USD 3.8m) due to borrowing fees. The fees are
amortized over the loan periods.
As of 31 December 2023, the Parent Company had lease liabilities of USD 0.1m (2022: USD
0.1m).
The following table summarizes the reconciliation of liabilities arising from financing activities:
Cash movements
Non-cash
movements
Opening
balance
as of
01 January
2023
Borrowings
Repayments Other changes
End balance
as of 31
December
2023
405.5
405.5
490.0
490.0
-394.7
-394.7
-1.8
-1.8
499.0
499.0
Cash movements
Non-cash
movements
Opening
balance
as of
01 January
2022
Borrowings
Repayments Other changes
End balance
as of 31
December
2022
606.6
606.6
20.0
20.0
-222.7
-222.7
1.6
1.6
405.5
405.5
USDm
Borrowings
Total
USDm
Borrowings
Total
TORM ANNUAL REPORT 2023
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
207
NOTE 9 – IMPAIRMENT TESTING
NOTE 12 – RELATED PARTY TRANSACTIONS
As of 31 December 2023, the Management performed an impairment test of investments in
subsidiaries. The subsidiaries of TORM plc are the formal owners of TORM’s vessels and operate in
the product tanker market.
TORM’s ultimate controlling party is Oaktree Capital Group, LLC, a limited liability company
incorporated in the USA. The immediate controlling shareholder is OCM Njord Holdings S.à.r.l.
(Njord Luxco).
As of 31 December 2023, the recoverable amount of the investments in subsidiaries was based on
the fair value less costs of disposal.
Based on this test, the Management concluded that there was no indications of impairment on
investments in subsidiaries. As of 31 December 2022 the Management concluded that a full
reversal of prior year's impairment changes of USD 138.9m was needed.
The assessment of the fair value less costs of disposal of the subsidiaries was based on the net
asset value of the subsidiaries where the key input is the broker valuation of vessels owned by the
subsidiaries. The broker valuations are an average of valuations from two internationally
acknowledged shipbrokers with appropriate qualifications and recent experience in the valuation
of vessels.
Please refer to Note 10 to the Group consolidated financial statements for further information in
respect of the fair value less costs of disposal of these vessels.
NOTE 10 – COLLATERAL SECURITY FOR MORTGAGE DEBT AND BANK LOANS
The vessels owned by subsidiaries of the Parent Company which have been provided as security
for TORM’s debt amounted to USD 505.7m as of 31 December 2023 (2022: USD 409.2m).
NOTE 11 – GUARANTEE COMMITMENTS AND CONTINGENT LIABILITIES
The Parent Company is guarantor for a loan amounting to USD 35m established in the subsidiary
TORM A/S.
As part of sale and leaseback transactions made by a subsidiary, the Parent Company issued a
guarantee to the third party in relation to future lease payments to be made by the subsidiary,
which are expected to total approximately USD 522m.
The Parent Company has received dividends from subsidiaries amounting to USD 118.9m (2022:
USD 22.1m) of which USD 117.1m pertains to vessels being distributed from its subsidiary TORM A/
S.
The Parent Company has sold two vessels to its subsidiary TORM Tanker Corporation amounting
to USD 79.4m and contributed one vessel in kind amounting to USD 37.8m.
The Parent Company has issued two unsecured loans to two subsidiaries with a total outstanding
balance of USD 312.2m as per 31 December 2023 maturing in 2026 and 2028 respectively. The
loans carry interest rate in accordance with SOFR compounded in arrears plus a margin of 1.75%
and 1.85% respectively.
The Parent Company has income in the form of interests from its subsidiaries of USD 24.9m
(2022: USD 30.6m) relating to loans to subsidiaries.
The Parent Company has income in the form of bareboat hire from its subsidiary TORM A/S of
USD 47.9m (2022: USD 11.9m).
As part of the business model in TORM, the Parent Company has bareboat agreements (short term
leases) with subsidiaries, which are nullified on a continuing basis through dividends, capital
reductions, etc. Consequently, the intercompany liability of USD 19.8m at 31 December 2023
towards subsidiaries is expected to be settled during 2024. The Parent Company has paid
bareboat hire to its subsidiaries in the amount of USD 47.3m (2022: USD 11.7m).
There have been no or limited transactions with related parties during the financial year other than
the transactions disclosed above.
NOTE 13 – CASH FLOWS
USD '000
Reversal of other non-cash movements:
Share-based payments
Bareboat hire expense
Other adjustments
Total
2023
2022
6,740
47,304
-2,508
51,536
655
11,715
48
12,418
TORM ANNUAL REPORT 2023
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
208
TORM ANNUAL REPORT 2023
209
Independent Auditor’s Report to the Members of TORM plc
Report on the Audit of the Financial Statements
Opinion
In our opinion:
•
•
•
•
•
TORM plc’s group financial statements and parent
company financial statements (the “financial statements”)
give a true and fair view of the state of the group’s and of
the parent company’s affairs as at 31 December 2023 and
of the group’s profit for the year then ended;
the group financial statements have been properly prepared
in accordance with UK adopted international accounting
standards;
the parent company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice and additional
disclosure requirements for listed companies in accordance
with the Danish Financial Statements Act;
the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006; and
The group 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 EU, as applied to
financial periods beginning on or after 1 January 2023 and
additional disclosure requirements for listed companies in
accordance with the Danish Financial Statements Act.
We have audited the financial statements of TORM plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2023 which comprise:
Group
Parent company
Consolidated Income Statement for the year then ended
Income Statement for the year then ended
Consolidated Statement of Comprehensive Income for the year
then ended
Statement of Comprehensive Income for the year then ended
Consolidated Balance Sheet as at 31 December 2023
Balance Sheet as at 31 December 2023
Consolidated Statement of Changes in Equity for the year then
ended
Statement of Changes in Equity for the year then ended
Consolidated Statement of Cash Flows for the year then ended Statement of Cash Flows for the year then ended
Related notes 1 to 33 to the financial statements, including
material accounting policy information.
Related notes 1 to 13 to the financial statements including
material accounting policy information
The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law
and UK adopted international accounting standards. The
consolidated group 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 EU, as applied to financial periods
beginning on or after 1 January 2023 and additional disclosure
requirements for listed companies in accordance with the
Danish Financial Statements Act. The financial reporting
framework that has been applied in the preparation of the
parent company financial statements is applicable law and
United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice) and additional disclosure
requirements for listed companies in accordance with the
Danish Financial Statements Act.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in
the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the
group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions Relating to Going Concern
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our
evaluation of the directors’ assessment of the group and parent
company’s ability to continue to adopt the going concern basis
of accounting included carrying out the following procedures:
TORM ANNUAL REPORT 2023
INDEPENDENT AUDITOR'S REPORT
210
Independent Auditor’s Report to the Members of TORM plc
Report on the Audit of the Financial Statements
• We confirmed our understanding of management’s going
concern assessment process and assessed the design,
implementation and operating effectiveness of related
controls and also engaged with management early to
ensure key factors were considered in their assessment.
• We obtained management’s board approved forecast cash
flows and covenant calculation covering the period of
assessment from the date of signing to 31 March 2025. As
part of this assessment, the group has modelled a low case
and stress case scenario in their cash forecasts and
covenant calculations in order to incorporate unexpected
changes to the forecasted liquidity and covenant
compliance of the group.
• We assessed the reasonableness of the cashflow forecast
by analyzing management’s historical forecasting accuracy.
• We evaluated the key assumptions and sensitivities
identified underpinning the group’s assessment by
challenging how these compared with external benchmarks,
historical performance adjusted for inflation, the lowest
rolling 4-quarter average since 2000, as well as
performance in the period post year end.
• We have evaluated the key assumptions underpinning the
group’s base case, low case and stress case scenario by
challenging the appropriateness of the low case and stress
case scenarios modelled and how these compared with the
principal risks and uncertainties of the group.
• We have evaluated the stress case scenario and considered
whether the combination of factors (notably significantly
reduced freight rates and vessel values) is a plausible
outcome or remote based upon the historical performance,
external benchmarks, and performance and conditions in
the period post year end.
• We tested the clerical accuracy and logical integrity of the
model used to prepare the group’s going concern
assessment.
• We considered whether the group’s forecasts in the going
concern assessment were consistent with other forecasts
used by the group in its accounting estimates.
• Our analysis also considered the mitigating actions such as
sale of older vessels that management could undertake in
an extreme downside scenario and whether these were
achievable and in control of management considering
timing and quantum.
• We also confirmed the continued availability of debt
facilities through the going concern period, and reviewed
their underlying terms, including covenants, by examination
of executed documentation.
• We have considered factors, such as freight rates and
vessel values, in the period immediately after the going
concern period by comparing them to the external
benchmarks.
• We considered whether management’s disclosures in the
financial statements sufficiently and appropriately reflect
the going concern assessment and outcomes.
Overview of our audit approach
Audit scope
We performed an audit of the complete
financial information of the group.
Key audit matter Carrying value of vessels.
Materiality
Overall group materiality is $17m which
represents 2% of the group’s EBITDA
The group is forecast to be profitable and generate positive
operating cash flows throughout the going concern period in
base case scenario, low case scenario and stress case scenario
modelled. In each scenario TORM continues to meet its
covenants. The combination of factors to achieve a reverse
stress test position is considered to be remote.
We considered subsequent events, including issuance of
unsecured bonds in January 2024, committed vessel
acquisitions in 2024 as well as the development of an open
legal claim, and obtained management’s assessment over the
impact of these events. Management has assessed that the
subsequent events do not change the conclusion of
Management’s assessment.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
group and parent company’s ability to continue as a going
concern for the period to 31 March 2025.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report. However, because not all future events or
conditions can be predicted, this statement is not a guarantee
as to the group’s ability to continue as a going concern.
An Overview of the Scope of the Parent and Group Audits
Tailoring the Scope
Our assessment of audit risk, our evaluation of materiality and
our allocation of performance materiality determine our audit
scope for each company within the Group. Taken together, this
enables us to form an opinion on the consolidated financial
statements.
In assessing the risk of material misstatement to the Group
financial statements, we considered that all significant
elements of the group’s finance and accounting function are
situated and managed centrally in Copenhagen, Denmark, and
operate under one common internal control environment; and
all operations of the group are also managed from this location
together with the UK headquarters. All audit work performed for
the purposes of the audit was undertaken by the group audit
team, as an integrated audit engagement team, consisting of
team members located in Denmark and the UK. As an
integrated team all audit work was performed in a shared
electronic workspace. The audit plan was developed jointly and
both teams were involved in the execution of the plan and in the
consideration of areas of significant judgement and estimation.
During the course of the audit, the UK senior members,
including the Senior Statutory Auditor, supervised the members
of the audit team who are based in Copenhagen, Denmark. We
held regular meetings with management and the Denmark
based audit team via video calls to direct and supervise the
audit and the UK team continued to access client
documentation and document our work in the shared electronic
work file. UK team members were also present in Copenhagen
during the interim and year end phase of the audit.
TORM ANNUAL REPORT 2023
INDEPENDENT AUDITOR'S REPORT
211
Independent Auditor’s Report to the Members of TORM plc
Report on the Audit of the Financial Statements
Climate Change
Stakeholders are increasingly interested in how climate change
will impact the group. The group has determined that the most
significant future impacts from climate change on its
operations will be from declining demand for oil and gas, higher
cost of capital and reduced access to capital, carbon price
regulations, and decarbonisation of vessels. These are
explained on pages 87-89 in the required Climate-Related Risk
Analysis and TCFD (Task Force On Climate Related Financial
Disclosures). They have also explained their climate
commitments on pages 17-19, 25 and 32-33. All of these
disclosures form part of the “Other information,” rather than
the audited financial statements. Our procedures on these
unaudited disclosures therefore consisted solely of considering
whether they are materially inconsistent with the financial
statements or our knowledge obtained in the course of the
audit or otherwise appear to be materially misstated, in line with
our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential
impacts of climate change on the group’s business and any
consequential material impact on its financial statements.
The group has explained in notes 8 and 10 to the group
financial statements how climate change has been reflected in
vessels value, how it has reflected the impact of climate change
and its climate targets on the estimated useful life and residual
value of vessels including its commitment to the aspirations of
the Paris Agreement to achieve net zero emissions by 2050.
Significant judgements and estimates relating to climate
change are included in notes 8 and 10. These disclosures also
explain where governmental and societal responses to climate
change risks are still developing, and where the degree of
certainty of these changes means that they cannot be taken
into account when determining asset and liability valuations
under the requirements of UK adopted international accounting
standards and IFRS issued IASB as adopted by the EU as
applied to financial periods beginning on or after 1 January
2023. In note 8 to the group financial statements the impact of
recycling prices have been provided.
Our audit effort in considering the impact of climate change on
the financial statements was focused on evaluating
management’s assessment of the impact of climate risk,
physical and transition, their climate commitments, the effects
of material climate risks disclosed on pages 87-89 and the
significant judgements and estimates disclosed in notes 8 and
10. We also considered whether these have been appropriately
reflected in the carrying value of vessels and where the fair
value of vessels may be negatively impacted by climate change
and climate change agenda. Details of our procedures and
findings on carrying value of vessels are included in our key
audit matter below.
We also challenged the Directors’ considerations of climate
change risks in their assessment of going concern and viability
and associated disclosures.
Based on our work we have not identified the impact of climate
change on the financial statements to be a key audit matter or
to significantly impact a key audit matter.
Key Audit Matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most
significant assessed risks of material misstatement (whether or
not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial
statements as a whole, and in our opinion thereon, and we do
not provide a separate opinion on these matters.
TORM ANNUAL REPORT 2023
INDEPENDENT AUDITOR'S REPORT
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Independent Auditor’s Report to the Members of TORM plc
Report on the Audit of the Financial Statements
Risk
Our Response to the Risk
We obtained an understanding, evaluated the design, and tested the operating effectiveness
of the controls over the Company’s impairment assessment process, including controls over
the identification of CGUs and review of the vessels’ fair value.
We performed audit procedures on the impairment assessment that includes, among others,
assessment of management’s CGU determination by evaluating their analysis in respect of
the smallest group of assets that generate largely independent cash flows. We inspected
evidenced used in Management's determination of the collective operation and homogenous
nature of the Main Fleet. We evaluated the recoverability of the carrying value of the vessels
by comparing them to the average fair value 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 disclosures in notes 1 and 10, including the impact from climate
changes, to the consolidation financial statements in accordance with IAS 36.
Carrying value of the group’s vessels as at 31 December
2023 totalled $2,070m (2022: $1,855m)
Refer to the Audit Committee Report (page 102); Accounting
policies (page 153 and 167); and Note 10 of the Consolidated
Financial Statements (page 170-172).
The Company assesses impairment 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 IAS36 impairment of
Assets. If any indications of impairment exist, or at least
annually, the Company prepares an impairment
assessment at the cash generating unit (CGU) level, which
has been determined as LR1, LR2 and MR vessels (the Main
Fleet) as they are operated collectively, are largely
interchangeable and the cash flow generated by them are
interdependent with other vessels. Impairment is
recognised if the recoverable amount, determined as the
higher of value in use and the fair value less cost of
disposal, is less than the carrying value of the
corresponding CGU. The Company determined the
recoverable amount to be the fair value less cost of
disposal, which was calculated as the average of two
valuations prepared by independent shipbrokers. Based on
the assessment, the Company concluded that the carrying
value was recoverable as of December 31, 2023.
Auditing the Company’s vessel impairment assessment
was complex due to the significant judgment required by
Management in determining the CGU and the degree of
subjectivity involved in determining 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
Key Observations Communicated
to the Audit Committee
Based on our audit procedures
performed, we concur with
Management’s conclusion on
impairment testing of vessels at 31
December 2023 as presented to the
Audit Committee on 18 January 2024,
including:
• Determination of CGUs (being Main
Fleet MR/LR1/LR2 and MET Group)
is judgmental, but is supported by
Management’s assessment.
• No impairment recognised for the
Main Fleet due to significant
headroom between the fair value
less cost of disposal and carrying
value.
The shipbroker valuations assumed
and applied have been
benchmarked to external sources
and assessed as reasonable.
The independent shipbrokers have
been assessed as competent,
capable and objective.
•
•
• We consider the disclosures in the
financial statements to be
sufficient and appropriate and in
compliance with accounting
standards.
TORM ANNUAL REPORT 2023
INDEPENDENT AUDITOR'S REPORT
213
Independent Auditor’s Report to the Members of TORM plc
Report on the Audit of the Financial Statements
Our Application of Materiality
We apply the concept of materiality in planning and performing
the audit, in evaluating the effect of identified misstatements
on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually
or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial
statements. Materiality provides a basis for determining the
nature and extent of our audit procedures.
We determined materiality for the group to be $17 million
(2022: $12 million), which is 2% (2022: 2%) of the group’s
EBITDA. We believe that the key users of the group’s financial
statements are primarily focused on the group’s earing-based
KPIs, primarily EBITDA.
We determined materiality for the Parent Company to be $6.3
million (2022: $7.4 million), which is 0.5% (2022: 0.5%) of
total assets as the parent company principally holds
investments in subsidiaries and does not trade externally.
Performance Materiality
The application of materiality at the individual account or
balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our
assessment of the Group’s overall control environment, our
judgement was that performance materiality was 50% (2022:
50%) of our planning materiality, namely $8.5m (2022: $6m).
Our objective in adopting this approach is to confirm the total
detected and undetected audit differences do not exceed our
materiality for the financial statements as a whole whole.
Reporting Threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would report to
them all uncorrected audit differences in excess of $0.85m
(2022: $0.6m), which is set at 5% of planning materiality, as
well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the
quantitative measures of materiality discussed above and in
light of other relevant qualitative considerations in forming our
opinion.
•
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
•
The information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
the strategic report and directors’ report have been
prepared in accordance with applicable legal requirements.
Other Information
The other information comprises the information included in the
annual report, including the Strategic Report and Governance
section, set out on pages 4-142, other than the financial
statements and our auditor’s report thereon. The directors are
responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appears to be
materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a
material misstatement of the other information, we are required
to report that fact.
We have nothing to report in this regard.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group
and the parent company and its environment obtained in the
course of the audit, we have not identified material
misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
•
Adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent company financial statements and the part of
the directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by
law are not made; or
•
•
• we have not received all the information and explanations
we require for our audit.
TORM ANNUAL REPORT 2023
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Independent Auditor’s Report to the Members of TORM plc
Report on the Audit of the Financial Statements
Responsibilities of Directors
As explained more fully in the directors’ responsibilities
statement set out on page 140, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group and parent company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the directors either intend to
liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable
of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities,
including fraud. The risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below. However, the primary responsibility for
the prevention and detection of fraud rests with both those
charged with governance of the company and management.
• We obtained an understanding of the legal and regulatory
•
frameworks that are applicable to the group and determined
that the most significant are UK adopted international
accounting standards, IFRS as issued by the IASB and
adopted by the EU as applied to financial periods beginning
on or after 1 January 2023, FRS 101, the Companies Act
2006 and Corporate Governance Code, the Danish
Financial Statement Act, the Danish and UK tax legislation,
and IMO 2020 Sulphur Regulation, IMO 2023 GHG
Strategy, and EU Taxonomy.
• We understood how TORM plc is complying with those
frameworks by making inquiries of management and
identifying the policies and procedures regarding
compliance with law and regulations. We also identified
those members of management who have the primary
responsibilities for ensuring compliance with law and
regulations, and for reporting any known instance of non-
compliance to those charged with governance. We
corroborated our enquiries through our review of board
minutes, discussion with the Audit Committee and any
correspondence received from regulatory bodies.
• We assessed the susceptibility of the group’s financial
statements to material misstatement, including how fraud
might occur by meeting with management to understand
where they considered there was susceptibility to fraud,
reviewing the group’s risk register, through enquiry with
management and the Audit Committee during the planning
and execution phases of our audit. We considered the
programmes and controls that the group has established to
address risks identified, or that otherwise prevent, deter
and detect fraud and material errors; and how management
monitors those programmes and controls.We also
considered performance targets and their influence on
efforts made by management to manage earnings. Where
this risk was considered to be higher, we performed audit
procedures to address each identified fraud risk. These
procedures included testing manual journals and were
designed to provide reasonable assurance that the financial
statements were free from material misstatements arising
from fraud.
Based on this understanding we designed our audit
procedures to identify non-compliance with such laws and
regulations. Our procedures involved as follows:
•
Inquiries of members of senior management, and when
appropriate, those charged with governance regarding
their knowledge of any non-compliance or potential
non-compliance with laws and regulations that could
affect the financial statements;
Review of minutes of meeting of those charged with
governance;
•
• Obtaining and reading correspondence from legal and
regulatory bodies;
• Obtaining confirmations from the group’s banking
•
provider to verifying the existence of cash balances and
completeness of loans and borrowings;
Journal entry testing, with a focus on manual journals
and journals indicating large or unusual transactions
based on our understanding of the business.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of Our Report
This report is made solely to the company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Lloyd Brown (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London - 07 March 2024
TORM ANNUAL REPORT 2023
INDEPENDENT AUDITOR'S REPORT
215
TORM Fleet Overview
As of 31 December 2023
Vessel type Vessel class Vessel
DWT
Built Ownership
Carrying value (USDm)
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR2
LR1
LR1
LR1
LR1
LR1
LR1
LR1
LR1
LR1
LR1
LR1
LR1
MR
MR
MR
MR
MR
MR
TORM HANNAH
TORM HELLERUP
TORM HELENE
TORM HERMIA
TORM HERDIS
TORM HILDE
TORM HOUSTON
TORM KIARA
TORM KIRSTEN
TORM KRISTINA
TORM MAREN
TORM MATHILDE
TORM SIGNE
TORM SOFIA
TORM VENTURE
TORM ELISE
TORM ELIZABETH
TORM EVELYN
TORM EVOLVE
TORM EVA
TORM EMMA
TORM EMILIE
TORM INTEGRITY
TORM INNOVATION
TORM ADVENTURER
TORM AGNES
TORM AGNETE
TORM ALEXANDRA
TORM ALICE
TORM ALLEGRO
109,999
114,000
114,000
114,000
114,000
114,000
114,000
114,445
114,445
114,323
109,672
109,672
72,718
72,660
73,700
75,000
75,000
74,606
74,554
74,552
75,000
75,013
73,800
73,847
46,042
49,999
49,999
49,999
49,999
46,184
2016
2018
2021
2018
2018
2018
2022
2015
2015
2015
2008
2008
2005
2005
2007
2020
2020
2011
2011
2011
2012
2013
2013
2013
2007
2011
2010
2010
2010
2012
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
40
45
48
44
43
46
48
37
36
36
30
30
16²⁾
17²⁾
22
35
35
33
34
30
34
35
35
38
14
18
20
20
18
23
TORM ANNUAL REPORT 2023
TORM FLEET OVERVIEW
216
TORM Fleet Overview
As of 31 December 2023
Vessel type Vessel class Vessel
DWT
Built Ownership
Carrying value (USDm)
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
TORM ALMENA
TORM AMALIE
TORM AMORINA
TORM ANABEL
TORM ARAWA
TORM ASLAUG
TORM ASTRID
TORM ATLANTIC
TORM AUSTRALIA
TORM CAVATINA
TORM CORRIDO
TORM DISCOVERER
TORM ERIC
TORM HELVIG
TORM INDIA
TORM LAURA
TORM LEADER
TORM LENE
TORM LILLY
TORM LOKE
TORM LOTTE
TORM LOUISE
TORM MALAYSIA
TORM NEW ZEALAND
TORM BIRGITTE
TORM BELIS
TORM BEATRICE
TORM PHILIPPINES
TORM PLATTE
TORM RAGNHILD
TORM REPUBLICAN
TORM RESILIENCE
TORM SINGAPORE
49,999
49,999
46,184
49,999
49,999
49,999
49,999
49,999
51,737
46,200
46,156
45,012
51,266
46,187
49,999
49,999
46,070
49,999
49,999
51,372
49,999
49,999
51,737
51,737
49,995
49,995
49,995
49,999
46,959
46,187
46,955
49,999
51,737
2010
2011
2012
2012
2012
2010
2012
2010
2011
2010
2011
2008
2006
2005
2010
2008
2009
2008
2009
2007
2009
2009
2011
2011
2013
2013
2013
2010
2006
2005
2006
2005
2011
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
18
18
21
21
21
18
22
19
19
16
20
18
12
14
16
19
21
19
18
15²⁾
21
19
19
19
36¹⁾
35
36
16
13
14
12
13
20
TORM ANNUAL REPORT 2023
TORM FLEET OVERVIEW
217
TORM Fleet Overview
As of 31 December 2023
Vessel type Vessel class Vessel
DWT
Built Ownership
Carrying value (USDm)
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
Tanker
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
MR
TORM SOLUTION
TORM SOVEREIGN
TORM SPLENDID
TORM STELLAR
TORM STRENGTH
TORM STRONG
TORM SUBLIME
TORM SUCCESS
TORM SUPREME
TORM THAMES
TORM THOR
TORM THUNDER
TORM TIMOTHY
TORM TITAN
TORM TORINO
TORM TROILUS
TORM VOYAGER
TORM DAGMAR
TORM DIANA
49,999
49,999
49,999
49,999
49,999
49,999
49,999
49,999
49,999
47,036
49,842
49,842
49,842
49,842
49,842
49,842
45,916
49,999
49,999
2019
2017
2020
2020
2019
2019
2019
2019
2017
2005
2015
2015
2015
2016
2016
2016
2008
2015
2016
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
29
27
29
29
28
29
28
28
25
13
26
27
26
27
27
27
18
37
39
¹⁾ Indicates vessels for which TORM believes that, as of 31 December 2023, the basic charter-free market value is lower than the vessel's carrying amount.
²⁾ Indicates that the vessels are assets held-for-sale
TORM ANNUAL REPORT 2023
TORM FLEET OVERVIEW
218
Demurrage: A charge against the charterer of a vessel for
delaying the vessel beyond the allowed free time. The demurrage
rate will typically be at a level equal to the earnings in USD/day
for the voyage.
MR: Medium Range. A specific class of product tankers with a
cargo carrying capacity of 40,000–60,000 dwt.
MT: Metric ton.
DKK: Danish kroner.
Oaktree: Oaktree Capital Management, L.P.
Glossary
Available earning days: A measure of unfixed operating days
available for generating earnings.
B/B: Bareboat: A form of charter arrangement where the
charterer is responsible for all costs and risks in connection with
the operation of the vessel.
Backwardation: A situation in which the spot price of a
commodity is higher than the forward price. The opposite is
known as contango.
Bunker hedge: A forward agreement used to reduce a company’s
exposure to fluctuating bunker costs.
Bunkers: Fuel with which to run a vessel’s engines.
CAPEX: Capital expenditure.
Charter-in and leaseback days: A measure of operating days
available for generating earnings from vessels that are not
owned by the Company.
Dwt: Deadweight ton. The cargo carrying capacity of a vessel.
EBIT/Operating profit: Earnings Before Interest
and Tax.
Earning days: A measure of operating days available for
generating earnings.
ESG: Environment, Social, and Governance.
FFA: Forward freight agreement. A financial derivative
instrument enabling freight to be hedged forward at a fixed price.
Handysize: A specific class of product tankers with a cargo
carrying capacity of 20,000–40,000 dwt.
Charter party: A lease or freight agreement between a shipowner
and a charterer for a longer period of time or for a single voyage.
IAS: International Accounting Standards.
Classification society: Independent organization that ensures
through verification of design, construction, building process,
and operation of vessels that the vessels at all times meet a long
list of requirements to seaworthiness, etc. If the vessels do not
meet these requirements, insuring and mortgaging the vessel will
typically not be possible.
COA: Contract of Affreightment. A contract that involves a
number of consecutive cargos at previously agreed freight rates.
Coating: The internal coatings applied to the tanks of a product
tanker enabling the vessel to load refined oil products.
Commercial management: An agreement to manage a vessel’s
commercial operations for the account and risk of the
shipowner.
Coverage: A measure of Covered days divided by Earning days.
Covered days: A measure of fixed operating days.
IFRS: IFRS Accounting Standards issued by the International
Accounting Standards Board.
IMO: International Maritime Organization.
KPI: Key Performance Indicator. A measure of performance used
to define and evaluate how the Company is making progress
towards its long-term organizational goals.
Loan-to-value (LTV): A measure of notional debt divided by
broker values of the encumbered vessels.
LR1: Long Range 1. A specific class of product tankers with a
cargo carrying capacity of 60,000–80,000 dwt.
LR2: Long Range 2. A specific class of product tankers with a
cargo carrying capacity of 80,000–110,000 dwt.
LTAF: Lost Time Accident Frequency. Work-related personal
injuries that result in more than one day off work per million
hours of work.
Oil major: One of the world’s largest publicly owned oil and gas
companies. Examples of oil majors are BP, Chevron, ExxonMobil,
Shell and Total.
OPEC: Organization of the Petroleum Exporting Countries.
Owned days: A measure of operating days available for
generating earnings from vessels that are owned by the
Company.
P&I club: Protection & Indemnity club.
Product tanker: A vessel suitable for carrying clean petroleum
products such as gasoline, jet fuel, and naphtha.
Spot market: Market in which vessels are contracted for a single
voyage for near-term delivery.
T/C: Time charter: An agreement covering the chartering out of
a vessel to an end user for a defined period of time where the
owner is responsible for crewing the vessel, but the charterer
must pay port costs and bunkers.
Technical management: An agreement to manage a vessel’s
technical operations and crew for the account and risk of the
shipowner.
Ton-mile: A unit of freight transportation equivalent to a ton of
freight moved one mile.
UN Global Compact: The United Nation’s social charter for
enterprises, etc.
Vetting: An audit of the safety and performance status of a
tanker vessel made by oil majors.
TORM ANNUAL REPORT 2023
GLOSSARY
219
Glossary
Key Financial Figures
TCE per day
Gross profit %
EBITDA %
Operating profit %
Return on Equity (RoE) %
Return on Invested Capital
(ROiC) %
Equity ratio
Earnings per share, EPS
Diluted earnings/(loss) per share, EPS
=
=
=
=
=
=
=
=
=
TCE excluding unrealized gains/losses on derivatives
Available earning days
Gross profit
Revenue
EBITDA
Revenue
Operating profit (EBIT)
Revenue
Net profit/(loss) for the year
Average equity
Operating profit less tax
Average invested capital
Equity
Total assets
Net profit/(loss) for the year
Average number of shares
Net profit/(loss) for the year
Average number of shares less average number of treasury shares
TORM ANNUAL REPORT 2023
GLOSSARY
220
Glossary
Alternative Performance Measures
Group
Throughout the annual report, several alternative performance measures (APMs) are used. The
following APMs relate to the Group.
Net profit/(loss) for the year excluding non-recurrent items: Net profit excluding impairment is net
profit less impairment and reversals of impairment generated from impairment testing during the
year (please refer to Note 10). TORM reports net profit excluding impairment because we believe
it provides additional meaningful information to investors regarding the operational performance
excluding fluctuations in the valuation of fixed assets. The APM replaces “Net profit/(loss) for the
year” excluding impairment as it is more relevant and provides more useful information.
USDm
2023
2022
2021
Reconciliation to net profit/(loss) for the year
Net profit/(loss) for the year
Profit from sale of vessels
Impairment losses on tangible assets
Provisions
Expense of capitalized bank fees at refinancing
Termination of finance leases
Step-up gain related to acquisition
648.0
-50.4
—
-6.5
3.5
1.3
—
Net profit/(loss) for the year ex. non-recurrent items
595.9
562.6
-10.2
2.6
-6.3
—
—
-0.3
548.4
-42.1
—
4.6
—
1.1
—
—
-36.4
Gross profit: TORM defines Gross profit, a performance measure, as revenue less port expenses,
bunkers and commissions, and other cost of goods sold, charter hire and operating expenses.
TORM reports Gross profit because we believe it provides additional meaningful information to
investors, as Gross profit measures the net earnings from shipping activities. Gross profit is
calculated as follows:
USDm
Reconciliation to revenue
Revenue
Port expenses, bunkers, commissions, and other cost of
goods and services sold
Operating expenses
Gross profit
2023
2022
2021
1,520.4
1,443.4
619.5
-430.3
-216.0
874.1
-459.5
-202.1
781.8
-240.9
-190.5
188.1
Return on Invested Capital (ROIC): TORM defines ROIC as earnings before interest and tax (EBIT)
less tax, divided by the average invested capital for the period. Invested capital is defined below.
ROIC expresses the returns generated on capital invested in TORM. The progression of ROIC is
used by TORM to measure progress against our long-term value creation goals outlined to
investors. ROIC is calculated as follows:
USDm
Operating profit (EBIT)
Tax
EBIT less tax
Invested capital, opening balance
Invested capital, ending balance
Average invested capital for the year
2023
698.6
-4.0
694.6
2022
601.4
5.9
607.3
2021
1.4
-1.3
0.1
2,142.3
2,425.1
2,283.7
2,011.3
2,142.3
2,076.8
1,719.7
2,011.3
1,865.5
Return on Invested Capital (ROIC)
30.4 %
29.2 %
0.0 %
TORM ANNUAL REPORT 2023
GLOSSARY
221
Glossary
Alternative Performance Measures
Group
Adjusted Return on Invested Capital (Adjusted RoIC): TORM defines Adjusted RoIC as earnings
before interest and tax (EBIT) less tax and impairment losses and reversals, divided by the
average invested capital less average impairment for the period. Invested capital is defined
below.
The Adjusted RoIC expresses the returns generated on capital invested in TORM adjusted for
impacts related to the impairment of the fleet. The progression of RoIC is used by TORM to
measure progress against our long-term value creation goals outlined to investors. Adjusted
RoIC is calculated as follows:
USDm
EBIT less tax
Profit from sale of vessels
Impairment losses on tangible assets
Provisions
Step-up gain related to acquisition
EBIT adjusted
2023
694.6
-50.4
—
-6.5
—
637.7
2022
607.3
-10.2
2.6
-6.3
-0.3
593.1
2021
0.1
0.0
4.6
0.0
0.0
4.7
Average invested capital¹⁾
Average impairment ²⁾
Average invested capital adjusted for impairment
2,283.7
2,076.8
1,865.5
29.9
2,313.6
37.4
2,114.2
42.3
1,907.8
Invested Capital: Invested capital as defined by TORM measures the net investment used to
achieve TORM’s operating profit. TORM believes that invested capital is a relevant measure that
the Management uses to measure the overall development of the assets and liabilities generating
the net profit. Such measure may not be comparable to similarly titled measures of other
companies. Invested capital is calculated as follows:
USDm
Tangible and intangible fixed assets
Investments in joint ventures
Deferred tax asset
Other investments
Inventories
Trade receivables ¹⁾
Assets held for sale
Non-current tax liability related to held-over gains
Deferred tax liability
Trade payables ²⁾
Current tax liabilities
Provisions
Prepayments from customers
2023
2,173.8
2022
2021
1,869.1
1,960.9
0.1
0.4
—
61.7
286.7
47.2
-45.2
-3.6
-91.3
-0.7
-0.6
-3.4
0.1
0.6
0.2
72.0
343.9
—
-45.2
-6.1
-82.6
-2.0
-6.8
-0.9
1.5
0.7
—
48.8
129.6
13.2
-45.2
—
-79.0
-0.9
-18.3
—
Adjusted RoIC
27.6 %
28.1 %
0.2 %
Invested capital
2,425.1
2,142.3
2,011.3
¹⁾ Average invested capital is calculated as the average of the opening and closing balance of invested capital.
²⁾ Average impairment is calculated as the average of the opening and closing balances of impairment charges
on vessels and goodwill in the balance sheet.
¹⁾ Trade receivables also include Other receivables and Prepayments.
²⁾ Trade payables includes Trade payables and Other liabilities.
TORM ANNUAL REPORT 2023
GLOSSARY
222
Glossary
Alternative Performance Measures
Group
Adjusted EBITDA: TORM defines adjusted EBITDA as EBITDA net of fair value adjustments on
freight and bunker derivatives. EBITDA is used as a supplemental financial measure by the
Management and external users of financial statements, such as lenders, to assess TORM
operating performance as well as compliance with the financial covenants and restrictions
contained in TORM’s financing agreements. TORM believes that EBITDA assists the Management
and investors by increasing comparability of TORM’s 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.
Due to temporary fluctuations of the fair value of freight and bunker derivatives, the Management
believes that an adjustment for unrealized gains/losses on freight and bunker derivatives help to
increase comparability in EBITDA developments. The adjusted EBITDA is calculated as follows:
USDm
EBITDA
Fair value adjustments on freight and bunker derivatives
Adjusted EBITDA
2023
847.9
-1.5
846.4
2022
743.1
0.6
743.7
2021
136.9
-0.2
136.7
Net interest-bearing debt: Net interest-bearing debt is defined as borrowings (current and non-
current) less loans 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 TORM’s investments. As
such, TORM believes that net interest-bearing debt is a relevant measure which the Management
uses to measure the overall development of the 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:
USDm
Borrowings ¹⁾
Loan receivables
Cash and cash equivalents incl. restricted cash
Net interest-bearing debt
2023
1,073.5
-4.5
-295.6
773.4
2022
978.0
-4.6
-323.8
649.6
2021
1,148.4
-4.6
-171.7
972.1
¹⁾ Borrowings include long-term and short-term borrowings, excluding capitalized loan costs for the year of
USD 13.9m (2022 USD 11.1m, 2021: USD 13.0m)
TORM ANNUAL REPORT 2023
GLOSSARY
223
Glossary
Alternative Performance Measures
Group
Net Asset Value per share (NAV/share): TORM believes that the NAV/share is a relevant measure
which the Management uses to measure the overall development of the assets and liabilities per
share. Such measure may not be comparable to similarly titled measures of other companies.
NAV/share is calculated using broker values of vessels and excluding charter commitments.
NAV/share is calculated as follows:
USDm
Net Asset Value per share
2023
2022
2021
Total vessel values including newbuildings (broker values)
3,080.9
2,650.3
1,926.0
Vessel values of purchased secondhand vessels not
delivered (broker values)
Committed investment capital expenditure
Committed liability capital expenditure
Goodwill
Other intangible assets
Land and buildings
Other plant and operating equipment
Investments in joint ventures
Loan receivables
Deferred tax asset
Other investments
Inventories
Accounts receivables ¹⁾
Cash and cash equivalents incl. restricted cash
Deferred tax liability
Borrowings ²⁾
Trade payables ³⁾
Current tax liabilities
Provisions
Prepayments from customers
Total Net Asset Value (NAV)
Non-controlling interest
479.9
35.7
-226.1
1.8
1.9
5.5
4.4
0.1
4.5
0.4
—
61.7
286.7
295.6
-3.6
-1,073.5
-91.3
-0.6
-0.6
-3.4
—
18.4
-18.4
1.8
1.9
3.8
5.6
0.1
4.6
0.6
0.2
72.0
343.9
323.8
-6.1
-978.0
-82.7
-2.0
-6.8
-0.9
—
39.9
-39.9
—
—
4.8
6.3
1.5
4.6
0.7
—
48.8
129.6
171.7
—
-1,148.4
-79.0
-0.9
-18.3
—
2,860.0
2,332.2
1,047.4
2.0
2.4
—
Total Net Asset Value (NAV) excl. non-controlling interest
2,858.0
2,329.8
1,047.4
Total number of shares end of period excl. treasury
shares (million)
Total Net Asset Value per share (NAV/share) (USD)
85.7
33.3
81.8
28.5
80.7
13.0
¹⁾ Trade receivables includes Trade receivables, Other receivables and Prepayments.
²⁾ Borrowings include long-term and short-term borrowings, excluding capitalized loan costs of USD 13.9m.
³⁾ Trade payables includes, Trade payables, Other non-current liabilities and Other liabilities.
Liquidity: TORM defines liquidity as available cash, comprising cash and cash equivalents, including
restricted cash as well as undrawn and committed credit facilities.
TORM finds the APM important as the liquidity expresses TORM’s financial position, ability to
meet current liabilities, and cash buffer. Further, it expresses TORM’s ability to act and invest
when possibilities occur.
USDm
Cash and cash equivalents incl. restricted cash
Undrawn credit facilities and committed facilities incl.
sale & leaseback financing transactions
Liquidity
2023
295.6
342.5
638.1
2022
323.8
92.6
416.4
2021
171.7
38.2
209.9
Free cash flow: TORM defines free cash flow as net cash flow from operating activities less the net
cash flow from investing activities. TORM finds free cash flow important as free cash flow reflects
our ability to generate cash, repay liabilities and pay dividends.
USDm
Net cash flow from operating activities
Net cash flow from investing activities
Free cash flow
2023
805.1
-370.6
434.5
2022
501.9
11.3
513.2
2021
47.9
-290.6
-242.7
TORM ANNUAL REPORT 2023
GLOSSARY
224
Glossary
Alternative Performance Measures
Tanker segment
Net Loan-to-value (LTV): TORM defines Loan-to-value (LTV) ratio as vessel values divided by net
borrowings on the vessels.
LTV describes the net debt ratio on the vessel and is used by TORM to describe the financial
situation, the liquidity risk as well as to express the future possibilities to raise new capital by new
loan facilities.
USDm
2023
2022
2021
Vessel values, including newbuildings (broker values)
3,080.9
2,650.3
1,926.0
Time Charter Equivalent (TCE) earnings: TORM defines TCE earnings, a performance measure, as
revenue after port expenses, bunkers and commissions incl. freight and bunker derivatives. The
Company reports TCE earnings because we believe it provides additional meaningful information to
investors in relation to revenue, the most directly comparable IFRS measure. TCE earnings 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. For this reason, we apply TCE earnings in our financial outlook on
page 68. Below is presented a reconciliation from revenue to TCE earnings:
Vessel values of purchased secondhand vessels not
delivered (broker values)
Other committed investment capital expenditure
Total vessel values
Borrowings
- Debt on Land and buildings and Other plant and
operating equipment
Committed liability capital expenditure
Loan receivables
Cash and cash equivalents incl. restricted cash
Total (loan)
479.9
35.7
—
18.4
—
39.9
3,596.5
2,668.7
1,965.9
USDm
Reconciliation to revenue
Revenue
Port expenses, bunkers, commissions, and other cost of
goods and services sold
1,067.6
971.4
1,148.4
TCE earnings
-5.4
226.1
-4.5
-290.7
993.1
-3.2
18.4
-4.6
-321.4
660.6
-5.6
39.9
-4.6
-171.7
1,006.4
Fair value adjustments on freight and bunker derivatives
Adjusted TCE earnings
Available earning days
TCE per earning day (USD)
2023
2022
2021
1,491.4
1,440.4
619.5
-407.6
1,083.8
-1.5
1,082.3
29,152
37,124
-458.9
-240.9
981.5
0.6
982.1
28,756
34,154
378.6
-0.2
378.4
27,614
13,703
Loan-to-value (LTV) ratio
27.6 %
24.8 %
51.2 %
TORM ANNUAL REPORT 2023
GLOSSARY
225