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Marco Polo Marine Profits Skyrocketed By 170% In FY2025 · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome to the Deep Dive. Today, we're looking at the full year financial results
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  for Marco Polo Marine Limited or MPML.
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  They're a big player in ship chartering, shipbuilding and repair.
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  And if you just glance at their FY 2025 report, it looks absolutely incredible.
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  Profit just surged. I mean, we're talking 170% jump year on year.
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  Our mission here is to be financial detectives. We need to figure out what's
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  real sustainable business growth and what's, you know, maybe some accounting
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  noise that's making those headline numbers look so good.
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  That's the perfect way to put it, because anytime you see profit explode like
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  that while revenue stays, well, basically flat, you have to ask questions.
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  Your financial alarm bell should be ringing.
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  If you just look at that big S71.4 million dollar profit number.
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  Yeah. You'd miss the really interesting strategic story happening just beneath the surface.
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  We got to dig into the footnotes. Okay, so let's start with those explosive headlines.
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  Profit before tax, it went from S25.7 million dollars in FY 2024,
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  all the way up to 71.4 million dollars.
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  That's 178% surge. Net profit was just as dramatic, hitting 58.5 million dollars.
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  It's a jaw-dropping number, but you're saying this isn't all about business booming.
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  Not in the traditional sense, no. The source documents are actually very clear
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  on this. The vast majority of that huge jump comes from games that are not part
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  of the regular business, not from chartering a ship or repairing one.
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  These are what we call extraordinary or sort of one-time items.
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  Okay, so let's unpack the biggest one because it sounds like it's a huge piece of the puzzle.
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  It is. The single largest item was a F$22.4 million reversal of impairment loss.
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  It's on their property, plant, and equipment, which, you know,
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  for them mostly means their fleet of vessels.
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  Right. And what does that actually mean, reversal of impairment?
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  Well, think of it this way.
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  A few years ago, the shipping market was in a tough spot. So they likely had
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  to write down the value of their ships on paper saying, hey,
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  these assets aren't worth what we thought. That's an impairment loss.
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  Now, in FY 2025, the market for these vessels has recovered strongly.
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  So they did a revaluation and could basically say, actually, you know what?
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  These ships are worth S-22.4 million dollars more than we had them on the books
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  for. Ah, so it's a huge boost to the profit line, but it's not actual cash they
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  earn from a customer this year. Exactly.
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  It's an accounting gain, not an operational one. It's like finding money in
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  an old coat pocket that you thought you'd lost.
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  It's great, but you didn't earn it this week. A very valuable coat pocket.
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  A very valuable one. And that wasn't the only boost.
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  There were two other gains from selling off a joint venture.
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  They got an S3.2 million dollar gain from the sale itself, plus another S5.9
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  million dollars because that joint venture paid back some money it owed them.
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  Okay, so if I'm adding this up, you've got the S22.4 million dollars,
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  the S3.2 million dollars, and the S5.9 million dollars.
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  That's over S31 million dollars right there. It is.
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  That's almost the entire jump in profit we were talking about.
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  It accounts for almost all of it.
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  And that really puts that headline number into context. But here's the really
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  good news for anyone watching this company. Even if you strip all of that noise
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  away, the core business is genuinely healthier.
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  And we can see that because, as you said, revenue barely moved.
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  It dipped just 1%, which is basically flat. Right.
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  The metric you want to look at here is something called normalized EBITDA.
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  It's a bit of jargon, but it basically shows you the operating cash flow before
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  you account for all those one-time events and financing costs.
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  And that number, the normalized EBITDA, still had a really strong increase.
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  It went from $32.7 million last year up to $50.1 million this year.
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  So that tells us their day-to-day business is actually performing much better.
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  That underlying growth of, what, almost $7.5 million is the real signal here. That's the signal.
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  So let's get into that. Where did that operational success actually come from?
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  Well, you have to look at their two main business lines, ship chartering and
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  then ship building and repair.
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  And the sources show a very, very clear story of one driving growth and the other, not so much.
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  The real engine was definitely the ship chartering operations.
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  Revenue there was up a solid 12%, hitting $80.2 million.
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  And this wasn't just luck, right? This was driven by specific investments they
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  made. Completely. It was all about expanding their fleet with very specific High Martian assets.
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  They deployed their first CSOV, the MP Wind Archer, and also three new CTVs. Okay, jargon alert.
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  CSOV and CTV. What are we talking about here? So think of a CSOV.
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  Commissioning service operation vessel as a kind of specialized floating hotel
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  and workshop for giant offshore wind farms. It's a very advanced, very valuable asset.
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  And the CTVs? Crew transfer vessels. They're basically fast boats,
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  catamarans usually, that shuttle technicians and gear back and forth.
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  They're both critical pieces of infrastructure for building and maintaining
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  these huge wind projects out at sea.
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  And because they're so specialized and in demand for this green energy transition,
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  they command much higher prices.
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  Much higher, more stable charter rates than, say, a traditional vessel serving oil and gas.
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  And that higher income is the direct reason for that 12% revenue growth.
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  It's a strategic investment paying off. Okay, so that's the engine.
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  Now, what about the other side of the business that you said was a drag?
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  Right, the shipbuilding and repair operations.
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  Revenue there actually fell pretty significantly. It was down 17% to S42.6 million dollars.
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  That's a big drop. What happened? It was mainly because they had fewer big third-party
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  shipbuilding projects on the go.
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  Shipbuilding can be a very lumpy business. You know, you get a big contract
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  one year and maybe not the next.
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  The silver lining, though, was that their ship repair business actually did better.
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  They had more repair jobs, and those jobs had higher contract values,
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  which helped cushion the blow a bit.
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  So if you put those two things together, the high margin chartering business
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  growing and the lower margin shipbuilding business shrinking.
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  That has to be good for overall profitability.
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  Exactly. And you see it in the numbers. The overall gross profit was up 12 percent,
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  but the really key number is the gross profit margin.
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  It jumped from 39 percent all the way to 44 percent.
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  Wow. A five-point jump in margin is huge.
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  That confirms the strategy is working. They're shifting their business mix towards
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  more profitable work. That's the story right there.
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  And that shift leads us right into the conversation about cash and capital.
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  Because, well, buying those fancy new ships isn't cheap.
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  If you look at their balance sheet, their non-current assets,
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  so their physical stuff like ships and equipment, grew by a massive $76.8 million.
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  And that was fueled by $69 million in capital expenditure, mostly for those new vessels.
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  $69 million. That is a big bet. So how did they pay for it all?
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  A combination of things.
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  Their core operations were generating good cash, about $40.8 million. That's solid.
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  But because they were investing so heavily, they actually spent $56.5 million
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  on investing activities.
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  So they spent more than they brought in from operations.
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  Right. So to make up the difference, they used some of their cash reserves.
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  Their cash pile went down from about $69 million to $52 million.
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  And they also took on a bit more debt. And the sources say the loans went up
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  from S-33 million dollars to about S-72 million dollars, mainly through subsidiaries
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  in Indonesia and Taiwan.
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  Correct. But here's the amazing part. Even after borrowing more money,
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  their balance sheet is incredibly strong.
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  Their net gearing remained at nil. Which is a powerful statement.
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  It basically means their cash
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  on hand is still more than enough to cover all of their debt. Exactly.
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  They're expanding aggressively, but without putting the company at financial
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  risk. And you can see that confidence passed on to shareholders. How so?
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  Well, the net asset value per share went up nicely.
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  5.4 to 7.0 cents. And they also proposed a 50% increase in the dividend.
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  Okay, so let's shift gears now. We've looked at the past year.
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  Let's look at the future.
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  All of this strategic investment is positioning them for what's next in offshore
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  wind and oil and gas. And that's where the story gets even more compelling.
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  The traditional offshore support vessel market is, you know, it's resilient.
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  But the real tailwind here is the global expansion of offshore wind.
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  The sources say that sector is poised for further expansion.
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  And that's driven by the global energy transition, energy security.
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  It all creates this sustained long-term demand for exactly the kind of specialized
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  vessels MPML just bought.
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  And the key thing to remember for you, the listener, is that this big investment
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  didn't even have a full year to contribute to the numbers we've been talking about, did it?
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  Not at all. And that's probably the most important takeaway.
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  The MP Wind Archer and the new CTVs, they were only deployed partway through FY 2025.
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  The company says they will contribute meaningfully to the current period,
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  but they expect a more pronounced uplift in FY 2026.
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  So in other words, the $50.1 million in normalized operating profit we saw is just the start.
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  The main event comes next year when that new fleet is working for a full 12
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  months. That's the expectation.
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  And on top of that, we're also seeing signs of strength returning to the shipyard
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  segment, the part that was a drag this year. Oh, really?
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  Yeah. They finished a new dry dock in May 2025, which should boost their repair capacity.
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  And they've also just won a big contract to build a new research vessel for
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  Taiwan's National Academy of Marine Research.
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  So it sounds like both sides of the business have some positive momentum heading
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  into the new year. It's a pretty bullish story. Are there any risks we need to watch out for?
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  Well, the main risk they flag is external. It's about supply chains.
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  Specifically, they mention potential tariffs from the U.S. on critical components
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  and raw materials. So things like steel or electronics.
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  Exactly. If the cost of those things suddenly spikes, it could eat into those
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  really nice margins they've just built up. It's something to keep an eye on.
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  Okay, let's wrap this up. To summarize, the huge headline profit number this
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  year was, let's say, flattered by some big one-time accounting games.
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  Absolutely. The real story for you to follow is the strategic one.
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  MPML poured S69 million dollars into high margin assets for the offshore wind sector.
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  And that move has already delivered a very strong 18 percent increase in their
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  real normalized operating profit.
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  So what this all means for you is that we've seen a company lay a very expensive
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  but very strategic foundation for future growth.
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  And we know those new assets have only just started to contribute.
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  Which leads to the critical question you should be thinking about.
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  Now, given that they've bet so heavily on these new vessels and those vessels
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  are now going to be operating for a full 12 months, just how much higher will
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  their operating profit in their margins climb in FY2026?
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  That's the real test. We'll see if that more pronounced uplift they're talking
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  about actually happens, that normalized operating profit number for next year.
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  That's the one to watch. That's the number that will show if this was a truly great strategic move.