Earnings call transcript: Wallenius Wilhelmsen Q1 2026 sees modest profit amid challenges

Wallenius Wilhelmsen Logistics ASA reported its Q1 2026 financial results, highlighting a solid performance despite geopolitical headwinds. The company posted an adjusted EBITDA of $389 million, a slight decline from the previous quarter, and a net profit of $177 million, translating to earnings per share (EPS) of $0.40. The stock reacted negatively, with a 3.12% decrease, closing at $118.7, reflecting investor concerns over the company’s lowered guidance amid rising fuel costs.

Wallenius Wilhelmsen sustained its operational strength in Q1 2026 despite a modest 1% revenue decline, attributed to seasonal softness in shipping volumes. The logistics segment, however, saw a robust 50% increase in adjusted EBITDA, driven by strong U.S. market performance and operational efficiencies. The company continues to navigate geopolitical challenges, particularly in the Middle East, impacting fuel costs and logistics operations.

Following the earnings announcement, Wallenius Wilhelmsen’s stock declined, closing at $12.49. This pullback reflects investor apprehension about the company’s revised guidance and the impact of rising fuel costs on future profitability. Despite near-term concerns, the stock has delivered exceptional returns with a 90% gain over the past year and a 55% surge in the last six months. Trading at a P/E ratio of just 5.28, the stock appears attractively valued. According to InvestingPro analysis, the company is currently undervalued relative to its Fair Value, suggesting potential upside for patient investors. The platform identifies Wallenius Wilhelmsen among opportunities on its most undervalued stocks list.

The company revised its full-year 2026 EBITDA guidance downward to approximately $1.6 billion, citing expected substantial fuel cost increases in Q2 2026 due to Middle East tensions. Wallenius Wilhelmsen anticipates a normalization of fuel costs by Q3-Q4 2026, which should alleviate some pressure on margins. The company maintains strong fundamentals with a return on assets of 13.6% and offers shareholders an attractive dividend yield of 15.3%. InvestingPro assigns the company a "GREAT" financial health score of 3.37 out of 5, reflecting solid operational performance. For deeper insights, investors can access the comprehensive Pro Research Report, available for Wallenius Wilhelmsen and 1,400+ other stocks, which transforms complex data into actionable intelligence.

CEO Lasse Kristoffersen emphasized the strategic importance of the Shaper Class vessel program, stating, "The Shaper program is designed to improve cost competitiveness through enhanced economies of scale and support our decarbonization objectives." He also highlighted the company’s competitive advantage in offering green shipping solutions, with 70% of cargo volume carried with reduced emissions by March 2026.

During the earnings call, analysts inquired about the impact of fuel price fluctuations on profitability and the company’s strategy to mitigate these effects. Executives reassured stakeholders of their proactive fuel inventory management and the expected recovery through bunker adjustment factors later in the year.

Anette, Moderator, Wallenius Wilhelmsen: Good morning, good evening, and good afternoon to everyone watching us online. A very warm welcome and good morning to everyone here in the audience. Q1 2026, what can we expect today, Anders?

Anders, Moderator, Wallenius Wilhelmsen: Well, there has been some geopolitical turmoil, so I think we’ll hear about the impacts from that.

Anette, Moderator, Wallenius Wilhelmsen: Good. As usual, our CEO, Lasse Kristoffersen, will take the market and the business, followed by our CFO, Bjørnar Bukholm, who will take the financial review. Then Lasse will take the prospects, and as usual, the Q&A.

Anders, Moderator, Wallenius Wilhelmsen: The Q&A. We’ll open for Q&A here in the audience, but we’ll also open up for Q&A via our webcast. Please, fill in your questions, and we’ll try to respond to them as best as we can. Do remember there might be a little bit of a lag between when you post the questions and when they arrive here, even in a digital age. You know, please be patient, and we’ll try to respond to all of them.

Anette, Moderator, Wallenius Wilhelmsen: I think we’re ready.

Anders, Moderator, Wallenius Wilhelmsen: Yeah, we’re ready.

Anette, Moderator, Wallenius Wilhelmsen: Good. Lasse, please take it away.

Lasse Kristoffersen, Chief Executive Officer (CEO), Wallenius Wilhelmsen: Thank you, Anders and Anette, and good morning. Welcome to people in the audience and online, I can see we have both friends and family and partners in the room. Thank you and welcome. When I stood here in front of you and where we were online last time was on February 11th, when we looked at the future, we thought it was pretty good. Again, we made the mistake of thinking it’s linear. On February 28th, there was a escalation of the situation in the Middle East with an attack on Iran, affecting both business, but certainly oil markets. What we have seen in this quarter is really, and when we are now updating our full year expectation, is pretty much effects of that event.

If we go back 1 or 2 years, and you would ask anyone, I think, in our industry, probably us included, if we saw somewhat weaker Q1 2026, why would that be? All would say because there are too many vessels, the market will be softer and the demand will be softer. That is not the case. We are very positively surprised by the demand. We are sold out. As you will see, our activity in the logistics area is picking up. The reason why we are adjusting our forecast somewhat is purely because we see a different cost situation, of which we believe we will recoup most of the cost over time. I want to start with saying very clear that we are positively surprised by the strength and the demand in the market.

As you will see later, this is very much driven by the enormous success of Chinese exports. Let’s jump to the highlights. For Q1, we delivered an EBITDA, or adjusted EBITDA, more precisely, of $389 million. That’s down 3% quarter-on-quarter. Given the global events, we believe that is a relatively minor softening quarter-on-quarter. It is in the Shipping services that we have seen higher costs, while we have seen improved performance in Logistics Services. I just want to reiterate the demand, the utilization, the tightness in the shipping market is very high. We are sold out, and we will need to say no to business as we speak.

This has put pressure on the charter rates, meaning that it’s much tougher to get access to more tonnage, more capacity, and prices have increased. We have for a while worked with improving the performance of logistics. I’m very proud of what the team has done last year, but also into this year. The Q1 improvement is partly due to better volumes, but also because we have been better at managing our costs and really implemented measures so that we have a good and well-adjusted cost base. The impact directly to us from the Middle East conflict, and I’ll come back to some more number, is rather limited. The indirect effect is what hits us, and that is through the oil price and through that, the fuel price.

We have only seen the start of that, so we expect Q2 to be substantially affected by increased fuel costs. Bjornar will come back to explain to you exactly how that works, but in or over time, we are recouping our fuel price. If the fuel price goes up, our earnings goes up, but with a lag. What we are saying is that within Q2, and maybe also within 2026, we will not be able to recoup that increased fuel cost fully. Over time, we do recoup it. This is more of a periodization. Due to that, we have adjusted our full year outlook.

We now believe that that will be about $1.6 billion, and I will then add still being a very strong result and cash flow for a company, putting us in a very strong position for future growth and development. All in all, we believe another solid quarter, and we still believe a very solid year for Wallenius Wilhelmsen. I’ll tell you a little bit of why. Starting with the Middle East, in everything we do, we start with safety. Also, with the Middle East, we are happy to report that we have 1 vessel, not happy that the vessel is there, but happy to report that the people are safe. Of course, it’s not a good situation to be in, but they are safe, they feel safe.

We have an operation with Logistics in the Middle East, and also they, you know, given the circumstances, feel and are safe. We have normally 2 monthly sailings into the region, and we have a processing center and a Logistics operation in Dubai. All in all, maybe 2% of our revenue in Shipping annually is linked to the Middle East, and this is fully replaced by other volumes of revenues from other trades. The direct impact from the demand into the Middle East is not really hitting us. Exposure is more or less $2 million of revenues on our Logistics per month. Right now, there’s hardly any equipment moving or vehicles moving in the area, meaning that we are seeing negative numbers on our Logistics operation.

Our focus now is to make sure that their people are safe. To the market, and I’d like to talk to you about three things. One, the Middle East and how does that affect our market. As always, and I probably will do for many quarters to come, talk about China. Also on the shipping market and the tightness of tonnage. Starting with the Middle East, if you look at the left, the total sales, global total sales is around 90 million cars. Out of those, roughly 3 million are sold in the Middle East. 3% of the global sales are in the Middle East. However, if you don’t look at Iran, where they are producing cars for themselves, the import, the region is importing their cars.

Even though it’s only 3% of the volumes, it’s actually 10% of the global demand for shipping. Whereof Saudi Arabia is by far the biggest. You have UAE, Kuwait, and these are n