Gaztransport & Technigaz SA (GTT) Earnings Call Transcript

Welcome, and thank you for joining the GTT Third Quarter 2026 Activity Update Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Francois Michel, CEO of GTT. Please go ahead, sir.

Thank you. Good evening, everyone. I am pleased to welcome you all today online. I am sitting here in Paris with Thierry Hochoa, our CFO. And together, as usual, we will walk you through our key business highlights and our revenue for the first 9 months of this year. As usual, after I share the key highlights, I will provide you with an activity update on our 2 divisions, GTT Energy and GTT. Thierry will walk you through the 9-month revenue, and I will share with you my closing remarks before we open the floor to your questions. Over the first 9 months of the year, we have received, which is a very good level, 18 new orders, including 71 orders for new LNG carriers, which can be compared with 27 over the first 9 months of 2025. This is very much in line with the expectations that I had shared with you all at the beginning of the year. This sustained commercial momentum led to a good level of order book amounting at the end of Q3 to EUR 1.85 billion, again amongst the very highest level in the history of the companies. Our revenue stood at EUR 570 million for the first 9 months of 2026 which is a 4.9% decrease compared with 2025. This is primarily reflecting the lower level of LNG carrier under construction some of which is, in fact, related to the quite low level of order intake during the first month of -- and we have also noted over the past few months that a couple of ship delivery dates, which used to be accelerated in the first part of the year are reversing back to initial contractual milestones. This is a slight shift. It has small consequences on our revenues, representing less than 2% of our 9-month 2026 revenues. Again, this effect is small, and it is temporary. On the market side, the signing of 51 million tonnes per annum of new liquefaction capacities over the period brings to 135 million tonnes per annum the total of investment decisions signed for new liquefaction units since January 2025, which is a record level which bodes very well for the activity of our group for the coming years. We have also reached a major milestone in September at Gastech where as promised, we introduced our new service platform dedicated to the LNG industry the LNG performance center, which I will elaborate on later in this presentation. It is also during gate that GTT Energy released several new designs and developments. I will come back to this. Our GTT Marine division also sustained commercial momentum during the first 9 months of this year. reflected in the signing of very good contracts, key contracts with major players. And as you all know, the integration of Dynamic is progressing very well. We are now ready to launch our integrated software platform in early 2027. Now a couple of comments on FIDs. As you know, the FID level is very important for us, it's a leading indicator of our future order intake. On this front, the positive momentum continues. After the 84 million tonnes per annum last year, we have registered 51 million tonnes per annum of new projects that have reached FID by end September. In addition to this, we still have 15 million tonne per annum of projects which are in limited notice to proceed and which should go quite quickly. So all this bodes very well for future orders. And another good point on that is that the vast majority of the ships for this recent FIDs 2025 and 2026 have not been ordered yet, and those orders will come shortly. Now a couple of comments on the Middle East situation, which we are following closely. Together with our partners, we are, of course, monitoring the situation, which remains volatile. So it remains a volatile situation. The developments in the region are such that it's hard to predict the state of the transit in the Strait of Hormuz, which is not totally closed, as you can see on the top right chart. What we -- our reading is that this transit remains highly uncertain. And that secondly, we saw that the spot charter rate has declined to a very low level, in part due to higher level -- higher number of vessels now available on the spot market. Having said that, these disruptions are having a very limited impact on our activity. In particular, we have seen a couple of ships delivery dates returning to initial contractual milestones. But again, we don't see more than that, and this effect is small and topic. -- this is having, in total, a slight impact of less -- of 2% on our turnover for the first 9 months of 2026. Over the long run, we believe that even if these disruptions were to last, the effects on our business will be limited as the fundamentals of the LNG market remains strong. Turning now to significant development on -- for GTT Energy, I am happy, and I would say, proud to share that we have successfully presented our service offer, the fully new service offer, the LNG performance center at Gastech in September, as I had announced before. It is a new service ecosystem, fully new service ecosystem developed by GTT in record time which will support ship owners and charters in optimizing LNG carrier fleet performance and their cargo management performance. This service offer will consist of 3 modules: cargo management, voyage optimization and containment system performance and maintenance optimization. I will come back to this maintenance optimization part. The offering will combine advice from experts and seasoned fears and captains available 24/7 with a suite of digital solutions underpinned by GTT's proprietary data and advanced models. We are the only ones to be able to offer this. Cargo Insights is the very first module of this offer. It will be -- it will focus on cargo management as this is what our customers, charters and ship owners have asked us to address as a priority, and it will be rolled out with a couple of key partners over the coming months and quarters. Coming back to innovation. We have kept in addition to this service offer, we have kept a very high pace on innovation on our core business and we have focused on the priorities that I had been sharing before. First, we continue to enhance the LNG carriers overall performance by demonstrating the fact that the most advanced designs, in particular here, the 200,000 cubic meter design can be used in the vast majority of existing LNG carriers, LNG terminals. Second, we provide more and more services to operations. You know that services is one of my major focus by here by reducing maintenance costs. And we are able here to extend the interval between 2 inspections, supporting preventive maintenance from 5 years to 7.5 years, which, of course, reduces the costs associated with Tonin. This service will be included in the LNG performance center offer in the third pillar that I just mentioned. Third, to expand the use case of our membrane technology, we have improved a lot our LNG as a fuel offer by launching 2 barge offer, and that will create a platform to gain and -- regain and gain market share on this business. These recent developments demonstrate that we are keeping our innovation effort at a very high pace, which, as you know, is one of our priorities. Now a couple of comments on GTT Marine before I leave the mic to [ Thierry Oswal ]. The GTT Marine division performs well. We continue to see gains in commercial traction with contracts secured from leading market players, which confirm the attractiveness of our integrated offering. The integration of Danelec is well advanced. A lot of focus in this integration was dedicated not only to, let's say, revenue synergies, but also to innovation over the period. We have announced, as you know, the launch of integrated software platform at the trade fair SMM in September. We have also released a very innovative software software, [indiscernible] which opens new perspectives on the safety market. As you know, DDR can be used for regulatory compliance today, but we can turn them into an incident investigation tools and an active component of the shipowners digital safety ecosystem. As you can also notice on the right side of the slide, our installed base continues to increase plus 4% since the start of the year, and we can confirm that our revenue synergies are well on track to reach EUR 25 million to EUR 30 million by 2030. Thierry, the floor is yours.

Thank you, Francois. Good evening, everyone. Now let's move to the financial part of the presentation. Let's start with our order book for the 9 months which evolved as follows: as mentioned by Francois, we benefit from a very high order intake with 80 orders, of which 71 LNG carriers and 5 onshore tanks. Deliveries amounted to 69 with 66 LGCs, 2 BLC and 1 FSRU. This results in a strong core business order book of 299 units at the end of September 2026. Regarding LNG fuel with the delivery of 8 units in the first 9 months of 2026, we have 40 units to deliver in the coming years. As outlined in our key highlights, our order book amounts to a very high level of EUR 1.85 of revenue secured among the highest levels in the history of the company. This give us a very strong visibility for the years to come. Now moving to more details on revenue by activity for the first 9 months of 2026. Consolidated revenues stand at EUR 570 million for the first 9 months of 2026, down 5% compared to last year. Two main drivers to explain the revenue variation. The first driver is new build revenue of GTC Energy at EUR 505 million are down minus 9.4% compared to last year. This decrease is consistent with the decline in the number of LNG carriers under construction, reflecting the low level of orders recorded during the first 9 months of 2025. This decrease also takes into account a lower level of accelerated deliveries at certain shipyards reversing back to initial contractual milestones. This decrease is, however, partially offset by royalties from FSRU and FNG, which increased by 84% and 22%, respectively, due to the higher number of units under construction compared with last year. It should also be noted in GTT Energy that revenue from services to operations decreased slightly to EUR 16.4 million in the first 9 months of 2026, compared with EUR 17.7 million last year, mainly due to the slowdown in certification activities partly compensated by a higher level of assistance to vessels in operation. Second driver is revenue from GTT Marine at EUR 47 million, up 138% compared to last year, driven by the contribution of Danelec, which was not contributing to the group review until August last year. One comment on Elogen. Revenue amounted to EUR 0.7 million, reflecting the refocusing on research and development. I now hand back to Francois for the outlook and the key takeaways.

Thank you, Thierry. The group in this environment confirms its 2026 objectives. As a reminder, we expect revenues to be in the range of EUR 740 million to EUR 780 million. EBITDA will be in the range between EUR 490 million and EUR 530 million. And our dividend policy of at least 80% of payout ratio is, of course, maintained. Now a couple of takeaways before taking your questions. As you have seen throughout the year, our order intake is very robust. The current order book stands at almost record level EUR 1.85 billion. The LNG market is dynamic, I would say, very dynamic and strong and 2026 is already the third best year in terms of FIDs taken after 2022 and 2025. On the innovation front, which is so important for our companies for all aspects. We have unveiled our new DTT Energy Services offering at Gastech, this September with Cargo Insights, the first module of the newly created LNG performance center. It will be rolled out over the next few quarters. We have also received several important AIPs which will further strengthen our membrane performance. GTT Marine has presented our new unified software platform, which will be rolled out in Q1 next year. As I was telling you, overall, the LNG dynamics remain strong, and the fundamentals of this market are very positive. Looking further ahead, the group will benefit from a couple of factors. First, of course, the very strong order book level, which we have mentioned. Secondly, the sustained order intake momentum, which keeps building up this order. And third, the very high level of FIDs for new liquefaction projects, the vast majority of the ships for those FIDs have not been ordered yet. And all of this provides very strong visibility for a good number of years. This concludes our presentation, and Thierry and I are happy to answer your questions. Thank you.

[Operator Instructions] The first question comes from Matt Smith with Bank of America.

I have a couple, please. The first one, I think one of the sort of most common debates I'm having at the moment is around the long-term outlook for LNG demand and whether that's been influenced by current events, given the supply disruption and corresponding high prices. I'm inclined to think that supply will likely meet demands, but just to get your takes what you're hearing from your customers and your stakeholders as it relates to the resilience of demand at the moment, but also where you sort of see the industry heading across the next decade. So that would be the first one on long-term question. And then second question, focusing on comments around 2026. So I think in the first half of the year, cost control was very strong. And I guess in the release, you've talked to dedicating additional resources to develop new services around digital marine. I just wanted to pick up on those comments, whether that represented any sort of step change from what you had planned at the start of the year and where those investments are going?

Thank you. So let me thank you for your question. I will take them in turn. So regarding the long-term outlook for demand, we have absolutely no, let's say, information or no, let's say, discussions, which would lead us to believe that there is a slowdown in demand. And of course, we have taken in the 550 assumptions, which we have released after the first half of the year, a number of let's say, cautious assumptions. So it's possible to have more aggressive -- more aggressive targets, but that's not the choice that we have made. So it depends on how aggressive people want to be regarding this. But for the moment, we don't see any slowdown in demand whatsoever. Regarding the -- your second question, perhaps Thierry, do you want to take this?

Yes, thank you for this question. And you're right to underline that we have a very strong cost control even if we launch different initiatives to protect our core business and expand our company, definitely. And we will do it in the same way for the rest of the year because to absorb these new initiatives and the costs, definitely, we have a strong and stronger cost control and to maintain the high margin for 2026.

The next question is from Guilherme Levy with Morgan Stanley.

Firstly, on the ship delivery dates, which appear to be reversing after an acceleration in recent months, could you provide more details behind the dynamic? Are these postponements a customer decision? Or is the equipment that is necessary for construction to advance just not getting where it should get. Perhaps another way to ask that, in what stage of construction are the vessels in which you are seeing this changing delivery dates? And then the second one, could you -- when discussing your guidance, could you walk us through the building blocks between your bear and bull cases at this point? And why you couldn't narrow guidance at this point of the year very close to year-end.

Thank you for your question. So what we have seen is for ships in the later phases of delivery and for a limited number of situations. So in total, the effect is small, and we believe is very temporary. It's not a dynamic effect. It's a stock effect, if you want. We have seen that ships that were about to be delivered have been kept for a variety of reasons by the yard, primarily because of ship owners reverting to the contractual milestones that they wanted to -- that they wanted to receive. So they just revert to initial contracts. So no one is talking about renegotiations, postponements or anything like this. It's a small, I would say, almost a statistical effect. But we are explaining this because this is information that we have. And in total, in stock, it's less than 2% of our turnover for the first 9 months of this year. Regarding your question on the guidance, today, well, the environment remains in general volatile. We have decided to keep the guidance as it is now, but we are solidly focused on the execution. The geopolitical context is highly uncertain. And so we prefer to keep the 2026 objectives today.

The next question comes from Richard Dawson with Berenberg.

I've got 2, please. First one, you mentioned that the majority of the vessel requirements for the LNG, FIDs have occurred since 2025 are still to be audited. Of the vessel orders you've received year-to-date, are you able to provide how many of those are related to those 2025 and beyond FIDs? I'm just trying to understand how many of those are still to come? And then secondly, and I appreciate it's only been a month since you released the LNG performance center. But -- is there any early indication from customers on how that's being received? You mentioned during the release that is in relation to what customers were demanding. So just wondering what sort of the uptake and the initial uptick has been?

Okay. So from the ships related that we have recorded the LNGC that we have orders that we have received so far this year, we have received 21 out of 71, which we can relate to FIDs from 2025 and 2026. If I want to be even more specific, it's 19 for 2025 and 2 for 2026. So if I take this overall assumption that we make on the number of ships that are needed for the FID level for 2025 and 2026, it's a very, very small share. And this is very good for us. It's a very good news for us. The -- your second question was related to the LNG performance center and whether or how much it was pulled by customers. The LNG Performance Center is a response to our customers asking us to help us reduce operating costs for the ships in particular with regards to the boil-off reduction. So it's a natural expansion of our business. And of course, we have started by launching the part of the Performance Center, which is a priority for them. But it would be an overall offer. It will be developed and rolled out over the full year of 2027 and generate a significant business, I would say, gradually from either the end of 2027 or 2028.

The next question comes from Henri Patricot with UBS.

Thank you for the update. I wonder just on the near term, it's been a little bit of a slowdown in new orders in the third quarter. I was interested in hearing all the discussions are going at the moment? And how much of rebound we could expect in the fourth quarter and in '27. I mean you flagged that it's been quite a few orders linked to the FIDs over the past couple of years, we are interested in hearing [indiscernible] think these orders could come through? And then following up on the question on the LNG performance center. It sounded like we shouldn't expect too much of a financial impact yet in '27. Do you have any indication to give at this stage of how much of a contribution we could expect over the next couple of years perhaps?

Thank you for your question. It's very difficult for us to give specific guidance on orders to be received in 1 quarter at the scale of our business because just because of the time length that when FIDs are taken, investors have up to 3 years to order the ships technically. So we don't know when those orders are happening. And there are a number of reasons that can influence -- factors that can influence the, let's say, the timing of these orders. We could have 100 or we could have 0. It doesn't -- it's very difficult for us to predict this. So that I cannot say. What I can absolutely say is that the number of FIDs, the amount of FIDs that we have recorded last year and this year will translate into a good level of orders according to the standard calculations that we have. Your second question related to the LNG performance center. My priority is to establish a very high level of quality in this service offer. And so in the trade-off between launching from in very quickly and something that can really deliver good quality, good growth and good value over a sustained -- good number of years, I prefer taking a little bit my time. So I don't want to be too bullish on the 2027 perspective on that and to focus on quality and have a very strong business for the, I would say, next couple of years and even for the long run.