Gaztransport & Technigaz SA (GTT) Earnings Call Transcript

Good morning, everyone. I am very pleased to welcome you all here in Paris and online today for GTT's activity update for the first half of 2026. I am here with Thierry Hochoa, our CFO. And together, we will walk you through, as usual, our key business highlights, our financials for the first half of the year and a couple of updates also on our 2 divisions, GTT Marine second and GTT Energy first. Thierry will elaborate on our financials for the first half of the year, and I will share with you closing remarks before we open the floor to your questions. An important figure, of course, for this first half of 2026 is the 65 new orders that we have recorded over the first half of the year, including 56 new LNG carriers, which is very much in line with what we expected the last time we spoke. Second, despite the high pace of deliveries, the sustained commercial momentum led to an increase of our order book amounting to a very high level of EUR 1.9 billion on June 30, amongst the very highest level in the history of the company. Revenue came in as expected at EUR 387 million, EBITDA at EUR 264 million. The EBITDA margin is good, 68.1% and net income is at EUR 210 million. In view of this performance, the Board of Directors has approved the payment of an interim dividend of EUR 4.30 per share. Now looking back at the commercial dynamics of GTT Energy. As I was saying, the first half of 2026 is very much in line with our expectations. It contrasts with H1 2025 in several aspects. First, of course, the 56 new LNG carrier orders in the first half versus only 10 in H1 2025. And an important point is that only 18 of those 56 orders are tied to FIDs taken in '25 and in '26. Second, another very good point, we announced orders for LNG-related infrastructure, 5 onshore tanks, 1 FLNG and 1 FSRU, I expect more, which confirms that our membrane technology is equally well suited for complex projects and onshore applications. Those are key areas for growth in the coming years, as you know, in addition to our core of LNGC construction, and I will come back to this point later in the presentation. On the FID forms, as you know, the positive momentum continues after the 84 million ton per annum of new liquefaction capacity last year, we have registered 37 million tons per annum of new projects that have reached FID this year. In addition to the 37 million, we have seen 29 million tons per annum of liquefaction projects that have been confirmed in limited notice to proceed. Some people call it -- call them pre-FID. But it means that even if FIDs have not yet been formally signed, stakeholders feel confident enough to start ordering long lead items or start some civil and preconstruction work in order to speed up the construction once the FIDs are reached. And of course, all of this bodes very well for the level of activity and orders to come. Again, the vast majority of the ships for the recent FIDs have not been ordered yet. From a geographical standpoint, the location of the liquefaction units are not the Middle East, it's mostly the U.S.A. and the Western Hemisphere. So since we talk about the Middle East, a couple of comments on the situation. Of course, since we spoke in April for the Q1 business update, the situation has remained quite volatile and highly uncertain. So we are monitoring the situation by the day. But what I can share with you confidently in line with what we said before is that the conflict has not had any impact on the LNG long-term fundamentals. That's the first part, neither any material impact on the LNGC shipbuilding business. As a reminder, today, only 3% of the global production capacity of LNG liquefaction, in fact, have been physically damaged, 2 liquefaction trains in Ras Laffan for a total of 13 million Mtpa and exports are, yes, currently constrained by the closure of the Strait. But liquefaction capacity is available in the world and will continue to increase very fast up to -- well through 2030. When we look at LNG prices, it is true that in the short run, supply disruptions have led to an increase in LNG spot price, quite moderate versus 2022, but it is worth noting that LNG long-term contracted prices have not increased at all by the same extent. And so our reading is that, yes, there have been some short-term disruptions in this market, not the construction market, but the LNG market that the mitigation measures that have been taken and implemented by countries have worked and that none of these questions the fundamentals of the LNGC demand -- the LNG demand and LNGC demand as, in fact, we can see with a good level of FIDs recorded in the first half of the year. So why is this demand growing? Of course, this is what we see with the long-term revision of -- with the upward revision of all demand forecasts released in June of this year, major forecasts such as Wood Mackenzie and Shell are pointing to sustained growth in demand for LNG well until 2035 with a CAGR of at least 5%. And demand is, in fact, driven by Asian growth. It is a point that I've been sharing several times, but also with growing concerns over energy security in Europe, and also a higher intake in the MENA region to secure LNG supply. Over the long run, the increase in LNG demand is tied to 2 things: Asian growth and the growing share of gas in the global energy mix. By 2050, as you can see on the left chart, coal and oil are expected to account for a smaller share of the energy mix, while natural gas and renewables in tandem are expected to play a larger role. And this transition towards renewable and gas is supported by several long-term factors, the abundant availability and operational flexibility of natural gas, its environmental advantages, even though it is a transition energy, it is a long-term transition energy over coal and oil, of course, including lower air pollutant emissions and it's -- the key role of gas in supporting the renewable power generation by helping managing intermittency. On the back of these drivers and after cautious, really cautious calculations and many interactions consulting with many customers. So it's not a macro view, it's a very solid work without waiting for the full year of 2026 results, we have decided to revise our 10-year estimate for LNGC orders of our technologies. We now expect that about circa 550 LNG carrier units should be ordered by 2035 to meet the LNG demand and export growing volumes primarily from the U.S.A. to Asia in particular. Second, we have also increased our estimate on onshore storage tanks to circa 30 units. We will keep revising these estimates regularly. Also, I don't see them changing in the very near future. Another question that we look at and that we regularly have relates to shipyard capacity. Shipyards have a key role to play in delivering the LNGCs that have been ordered. And what I can share with you, also here also in confidence is that the supply chain is solid and it is well positioned to meet the expected demand of new LNG carriers. Shipyards continue to expand capacity in South Korea, a lot with schedule optimization and debottlenecking in China in new investments, new docks, which leads to additional slots, at least 100 slots per year in 2028 according to our estimates. In addition to this base, a number of countries -- of important countries have expressed their interest in developing domestic LNG carrier construction capabilities, including first Japan, who has a plan to revive its shipbuilding industry, which could add a handful of ships, but also for the medium term, the U.S.A. and India and a couple of other countries and GTT is involved in this preliminary or advanced discussions. Now a couple of comments on 3 important milestones for the Energy business in H1 2026. First -- the first one is the second consecutive order for a 3-tank LNG carrier, which has been placed by the same shipowner. It's a joint development with HHI, with Hyundai. And it confirms that our pioneering design, it's really a breakthrough design is able to meet customer and end users' requirements. By redesigning completely the ship with 3-tanks, we can enhance cargo handling. We can increase the volume of the cargo for the same size of the ship by about 3,000 cubic meters. We can improve the overall performance, reduce the boil-off, reduce construction costs, reduce shipping costs and all of this through advanced engineering in good cooperation with the yard. Second important milestone, the first half of the year was also marked by the first order of FLNG infrastructure for the U.S.A in general and it's also the largest LNG production capability -- capacity in the world with a total output of 4.4 million tons per annum. It is the eighth FLNG that will be delivered with GTT technology. This is a Delfin FLNG 1 project. It will be operated off the coast of Louisiana. It will be delivered. The delivery is scheduled for mid-2030. It is also worth mentioning that among the 29 million tons per annum of projects that have been confirmed in limited notice to proceed that I was mentioning earlier, 4.4 million tons per annum are related to a second FLNG for the same project. Last comment on GTT Energy. The first half of the year was marked by 5 orders for onshore tanks. GTT will license our GST technology for the construction first of the 3 largest LNG storage onshore storage tank ever built in the world, each with a capacity of 240,000 cubic meters, all of them in China. We are the only company able to do so. We also recorded the largest onshore ethane storage tank, ever built in the world, with a capacity of 200,000 cubic meters and also in China. Our GST technology is very strong technology. It offers several advantages compared with traditional onshore solutions, which are functioning for small-scale tanks, but certainly not for large tanks. In the same concrete envelope, we can allow for up to 25% additional net volumes at the same capacity. Conversely, we can allow for 40% reduction in metal tonnage as well as a significant reduction in the concrete tonnage. We have major benefits in terms of operations and environmental performance of the tanks. And last, those infrastructures are in addition to being long lasting, they are also versatile. They can be used for different liquefaction gases -- liquefied gases such as LNG, ethane, but also ammonia as confirmed by the AiPs. We have received recently from classification societies. These recent developments further strengthen our track record and they pave the way, of course, for future opportunities, not only in China, but in the rest of the world. This is one area of focus for us. Now a couple of comments on GTT Marine. I will say here that we are well on track for the integration of Danelec, which is a success. We have presented at Posidonia 2026, our concept for a unified integrated software platform. We are receiving very good feedback from customers. In terms of operations in the second quarter of this year, we have signed a key software and hardware contract with PETRONAS, which brings solutions to PETRONAS' LNGC charter fleet ranging from data collection, performance, voyage optimization to LNG solution -- software solutions. We have signed other good contracts this first half of the year, including more than 150 Shaft Power Meters sold to various shipowners, about 50 VDRs sold to European partners. And finally, as promised, we are able to give you more color on GTT Marine's financial metrics. We will be reporting on this activity separately, even so, there are strong synergies with the core business. The revenue for this first half of the year was EUR 31.8 million, EBITDA EUR 5.7 million, and that reflects -- that represents an EBITDA margin of 17.6%, in line with our expectations, which is a good level of margin for an activity being in the scope of integration. This is -- again, this gives us a very solid base, business base and technical base to develop fast in services in general for the shipping industry, but also for the LNGC industry in particular. So let me hand over the floor to Thierry for financials.

Thank you, Francois. Good morning, everyone. Now let's move to the financial part of the presentation. And let's start with our order book for the first semester, which evolves as follows. As mentioned by Francois, we benefit from a very high order intake with 65 orders with LNGCs and 5 onshore tanks, as you can see on the screen. Deliveries amount to 47 units with 45 LNGCs for the first semester of 2026, 1 VLEC and 1 FSRU. This results in a strong core business order book with 306 units at the end of the first semester. Regarding LNG as fuel, we did delivery of only 5 units in the first semester. We have 43 units to deliver in the coming years. As mentioned just before, our core business order book reached 306 units at the end of June 2026, translate into EUR 1.9 billion of revenues for years to come, of which EUR 65 million for 2027 and EUR 603 million for 2028 of revenue already secured, as mentioned in the graph at the bottom right, where you can see the consumption and flows of our backlog in the years to come in terms of revenues. This gives us a very strong visibility and confidence on top of the commercial momentum. Now moving to more details on the revenues by activity. Revenues are almost flat year-on-year for the first semester of 2026 at EUR 387 million for the first semester. This is mainly due to a lower number of LNG carriers under construction and a high comparison base in 2025, resulting in a slight decrease of GTT Energy revenue. This is partly compensated by higher revenue of GTT Marine linked to Danelec's acquisition -- compensated -- sorry, acquisition, which not contributing last year for the revenue of the group. This division of GTT Marine now accounts for 8% of group revenue. One comment on electrolysers or hydrogen revenues, which are down as Elogen is continuing its transition and repositioning. Sorry, let's continue with the other main aggregates of the P&L, in particular with EBITDA. Our EBITDA remains very solid at EUR 264 million. This is mainly explained by our operating leverage, explained by the absence of significant delays in ship construction schedules, but explained as well by the close monitoring of our cost. As a consequence, the EBITDA margin remains at a very high level and amounts to 68% in H1 2026. Our net income at EUR 210 million. This means an improvement of 10% -- of 17%, sorry, compared to 2025. And this is mainly due to a comparison effect with our one-off cost that we booked last year for the restructuring of Elogen. One comment on our cash position. As you know, we financed the Danelec acquisition with cash and debt, and we still have EUR 90 million of financial debt in our books. This brings our net cash position to EUR 295 million at the end of June 2026. This is, of course, after the 2025 dividend balance payment for EUR 183 million. And on that subject, the Board approved yesterday the payment of 2026 interim dividend at EUR 4.30 per share to be paid later this year in December. I now hand back the floor to Francois for the 2026 outlook and the conclusion.

Thank you, Thierry. No, no. I need the next page. Yes, thank you. So a couple of comments on our outlook. We are, of course, confirming our guidance for the year 2026. As a reminder, we expect revenue to be in the range of EUR 740 million to EUR 780 million, where EBITDA will be in between EUR 490 million and EUR 530 million. And we will maintain scrupulously our dividend policy that has been a commitment since the IPO. We have no intention to change this at all. A few takeaways before taking your questions. The commercial dynamic is the one that we expected, but it is very good. 65 orders in the first half of the year. We are currently on the record level of order book. I expect more. As explained, LNG demand is solid for the medium term. It is resilient. It will keep increasing over the coming years. Of course, we are closely monitoring the situation in the Middle East. But so far and while we are cautious, we have not seen direct impact on our business or at least any material or significant impact beyond the anecdotes. The 84 million tons per annum of new liquefaction capacity decided last year, the 37 million tons decided this year, the 29 additional of pre-FID projects that we expect will drive the need for new vessels to transport new volumes that will come online for the -- in the next couple of years. We will build on this momentum and leverage our strength on this market and our track record, our 60-year track record in this industry to bring more value for our customers first, but for all shareholders and all stakeholders in general. This will be done with the 2 divisions that we have now well in place and which are working in a very synergetic manner around the priorities that I was -- that I shared with you earlier. One is accelerating the core business innovation close to our core business, close to our customers, and you have seen examples of that. Developing a service offering built around our digital offer. And third, improving our value proposition with turnkey solutions on a couple of markets for a couple of applications, including some onshore storage and LNG as a fuel. Thank you for your attention.

[Operator Instructions] Thank you.

For those of you who are online, we will take the question from the room first, and then we will take your questions.

Henri Patricot from UBS. The first question is on the long-term outlook, the 10-year forecast that you give us for LNGCs at around 550 units. Could you share some details on what underpins that number? What's your assumption around replacement, and the size of the LNG market that you use for that forecast? And then secondly, on the deliveries for 2026, I think you're now expecting slightly below 100. I think at the end of the full year results, you had a bit above 100. Just wondering if there is some slippage because of the Middle East or if you're just being a bit more conservative with deliveries for this year?

Thank you. So the 550 long-term estimate that we are releasing is a solid estimate. It consists in 3 parts. First, when we look at the ships that need to be ordered for FIDs that have already been taken, we find a total of and by doing micro work, we find a total of 250 ships that need to be ordered for existing liquefaction -- FID liquefaction capacity, liquefaction trains that are being built today. That's the first bucket. Second, we have made an estimate of new FID trains that will be most likely ordered in the coming years, that includes the 29 million tons per annum of limited notice to proceed or pre-FID projects that I spoke about earlier. And that gives me a total of, let's say, 150 to 200 ships for the second bucket, depending on how you look at it. The average shipping intensity for this, of course, we have to look at where those projects are and what is the likely customer base. But the average shipping intensity, we have taken a conservative approach of keeping it to about 2, which is around the shipping intensity today, the number of ships for 1 million tons per annum of liquification capacity is about 2. So that gives me 150 to 200. And third, we know that over the coming 10 years old ships, and we have a list of all the ships. We know very well which ones are getting old; in particular, the old steam turbines and diesel ships will need to be retired and replaced. And here, we have taken an assumption of 150 to 200 ships to be retired. So if I take 250 plus 150, plus 150 in general, I find about 550 ships to be ordered in the coming decade. That's the base for the estimate. Second, your question on the pace of delivery. We don't see any slippage in the pace of delivery. We are looking very closely at whether or not there could be an impact of the Middle East disruptions on the supply chain upstream from yards. I cannot say in general whether there could not be any impact, in particular on electronic components or anything like this that is beyond what I can say. But what we know is that from our deep engagement and direct engagement from myself with suppliers, for the moment, we don't see and we don't expect any deliveries. So there is no direct impact of the supply chain of the Middle East conflict on the ability of the yard to build and deliver ships. And when I share this with other member of the industries or other companies in the shipbuilding industry, this is also their analysis. Now there is some degree of, I would say, a lot of noise around exactly which -- how many ships can be built in a single year. So that we have not -- there is no slippage whatsoever in our forecast. It's a standard noise.

Jean-Luc Romain at CIC CIB. You had very successful orders in the services business, GTT Marine. If we would compare to the order book of EUR 1.9 billion you have for GTT Energy, how much do these orders represent in terms of turnover to be booked by you in the next few years?

You discuss about services and of the correspondence regarding our backlog. I think that today, we have EUR 11 million of services. Last year, EUR 23 million. And definitely, based on the discussion that we have with GTT Marine to have a solution on LNG or digital LNG, we expect to have more revenue. We do not discuss today this potential of revenues. But definitely, if we are working on this aspect and to have synergies with GTT Marine and the Danelec acquisition, it's not to have only EUR 23 million that we booked last year. Definitely, we expect to have more and more revenues, and we will present at the beginning of September solutions during the Gastech Exhibition, and we are working on the business plan on it, and we expect to have not a guidance, but to have some key elements to share with you when we will have this solution. But first, the product and after -- and solution and after the business plan.

Kevin Roger from Kepler Cheuvreux. I have 3 questions, if I may. The first one is on the order intake, LNG cargo. You mentioned 56 units, of which 18 are related to '25, '26 FID. The gap, the roughly 40 units, do you have a view if it's speculative replacement or even, let's say, pre-'25 FID? Just to understand the 40 units, what are they related to? The second one on GTT Marine, Thierry, is there any tools or guidance, whatever that you can share with us on the organic growth, excluding the acquisition of Danelec, just to understand the dynamic. And the third one, is there any update that you can share with us on the new strategy, if I can call it like that, on Danelec for the LNG cargo all the services that you want to create around the cargo?

You take the first and third. I take the second?

Yes.

Okay.

I will start with your question on the order intake for 56. It's hard for us to know exactly what is speculative or what could be speculative and what can be related to previous projects. What I expect is that the vast majority is related to pre-FID projects. But I don't have exactly the details. We just don't have it. But it's a good question. Of course, we ask ourselves exactly this question. But I don't expect that the speculative investments are significant in a way that it will change the overall balance between what is directly related to current FID projects and the past. It's mostly for the past. Second, I mean, your third question was about our strategy to build basically synergies between Danelec and in fact, the digital part and our LNG historic activity. We are very confident about the fact that integrating hardware and software and data collection and data handling capabilities as part of our offer, technical service offer, for the operations of the ships and for optimizing the maintenance of the ships can create a lot of value. For this, we need a number of bricks, developing a good LNG specific software platform for the full LNG fleet of LNG carriers in the world is one of such bricks. It's one important element as part of that. We will release this software or at least some of it before the end of the year. So that's one important element. And there are a number of other elements in the service strategy that we are working on very actively and that we will be releasing before the end of the year.

Kevin, regarding your second question, within GTT Marine, you know that we have 2 divisions. The first one is Data and Performance, the previous Ascenz Marorka legacy for software. And the other division is the Safety and Monitoring for Danelec with the black box, mainly the black box of the vessels. Regarding the black box and the Safety and Monitoring division, we expect the CAGR is around 5% within 5 years. That's internal studies, but external studies as well. And for the Data and Performance is around 12%, that's the CAGR, that's the percentage I can share with you. And we expect to capture a large portion of this market because as you know, and we discussed about this topic previously, the acquisition, our ambition is to be a leader on these different areas and because when you are a leader, you can monitor your price, your -- the pricing power. And definitely, we expect to have to capture a large portion of this market.

The synergy, I mean, what I was referring to on the building up the service business for LNGC comes on top of that, where that is really -- Danelec is a game changer for us because it gives us a base of activity that allows us to develop a service business. And you have seen in the accounts that for the moment, our service offer is not material enough. So that is the trigger if you want to develop over the long run, a very compelling case for the service business.

Jean-Francois Granjon, ODDO BHF. Three questions from my side. The first one, if you come back on the onshore tank business market, you mentioned an acceleration for this business, mainly in China, in Asia. Could you give us a overview on the market, the size of the market, the trend expected, the growth expected and what do you expect for your own business? This will represent a huge business in the coming years for the company. The second question concerns the margin of GTT Marine. You mentioned 7.9% EBITDA margin. You expect an improvement or do you expect, yes, potential improvement for this business to be more or less more than 20%? And the last question regarding the guidance. Despite a pretty good first half with a flat EBITDA level, why do you not improve the guidance? Do you expect a little bit decrease for the EBITDA for the full year despite the flat level for the first half?

Thank you and I'll answer you on the onshore tank dynamics. So today, it's true that the majority -- I mean, first, we have delivered about 50 onshore tanks in the world in Asia-Pacific historically, but also in Europe in a number of countries. And this over 40 years we have a long experience of onshore tanks. We have seen an acceleration for large onshore tank demand in China today, who is building up large onshore capabilities and storage capabilities. We know that the overall market for large tanks is about between -- of course, between 10 and 20 units every year. For the moment, for, I would say, industrial reasons and a question of how we structure our affairs, it's not a market that we have pursued aggressively because we have been just in the position of a licensor and we have not marketed our -- neither nor brought to the market our GST technology with the same level of activity as what we have done on the LNGC market. So we expect that we will be taking a couple of tanks every year. I look forward to taking the first orders of tanks outside China, building of the very good track record that we have recently in China and over the long run in the rest of the world as well. Of course, how much it will impact the P&L will depend on how much responsibility we take for those onshore tanks. I will never enter into an EPC. We are not in the world of an EPC, but we can take a little bit more responsibility than just licensing the technology on a case-by-case basis. We will do it cautiously. And I'm very confident about our ability to build tanks outside China in the coming years.

Jean-Francois, thank you for your question. I recognize the question. First, regarding the GTT margin EBITDA margin -- and the EBITDA margin at 18% is definitely in line with our expectation, but we expect to improve this EBITDA margin. We have this level of EBITDA margin because you need to consider integration cost because we bought this company last year, last summer, in August. And we have a significant program of integration to create only one based solution and the platform solution, sorry. So that's why we need to spend energies and time and cost and the cash on it. So that's why we have this level of EBITDA margin, and we expect to increase definitely. That's the first element. Regarding your second question and the guidance, we have very robust figures that you mentioned at the end of June. You know that we are very cautious regarding our approach of our guidance because when you have delays in ship construction schedules, definitely, we can have an impact on our figures and EBITDA. And until the last minute we don't know the situation and the evolution of the situation. And so that's why we are very cautious. If we need to revise this guidance, it will be in October. And since I arrived in GTT 3 years ago, we have revised this -- we've always revised this guidance in October and not before to consider the evolution of the situation and because we are very cautious.

Guillaume Delaby, Bernstein. Two housekeeping questions, if I may. The first one, could you shed some light about how many million euros your initiatives to drive up services could represent? And second question is on Elogen. Could you share with us what has been the loss in Elogen in H1? Or maybe can you share with us how many people are currently working on Elogen?

On services. So we are investing -- no, I will answer your question in 2 ways. One is that, of course, we want to increase our sale of services in a material manner, so in a way that will impact the P&L of the company. So I'm not talking about just small money. It will take some time. And so we have to be reasonable regarding the timing, but we are talking about something that will impact the P&L of the company, I hope in a material manner. Second, how much money we are investing right now in developing new services, I would say, in between EUR 5 million and EUR 10 million for the full year. So a sizable investment at our scale.