The Great Eastern Shipping Co. Ltd.

Transcription

1 The Great Eastern Shipping Co. Ltd. Investor Conference,Goa February, 2007

2 Forward Looking Statements Except for historical information, the statements made in this presentation constitute forward looking statements. These include statements regarding the intent, belief or current expectations of GE Shipping and its management regarding the Company s operations, strategic directions, prospects and future results which in turn involve certain risks and uncertainties. Certain factors may cause actual results to differ materially from those contained in the forward looking statements; including changes in freight rates; global economic and business conditions; effects of competition and technological developments; changes in laws and regulations;difficulties in achieving cost savings; currency, fuel price and interest rate fluctuations etc. The Company assumes no responsibility with regard to publicly amending, modifying or revising the statements based on any subsequent developments, information or events that may occur. 2

3 Corporate Profile The Great Eastern Shipping Co. Ltd Incorporated in 1948 Shipping Business Offshore Business Crude Tankers Wet bulk Through wholly owned subsidiary Greatship (India) Ltd Dry bulk Product Tankers Offshore oil field Support & Logistics Services Asia s 3 rd most profitable company 3

4 Committed Capex G E Shipping CAPEX plans Of US$ 450 Mn Committed Equity Participation Of US$ 110 Mn Already infused US$ 50 Mn (@ a premium of Rs.90/ share) Greatship (I) Ltd CAPEX plans Of US$ 380 Mn Total committed CAPEX of US$ 830 Mn Spread over next two & half years 4

5 Asset Profile Shipping business 40 ships aggregating 2.91 Mn dwt 31 Tankers (48% double hull) 14 Crude oil carriers (1 VLCC, 5 Suezmax, 8 Aframax) 15 Product tanker (2 Panamax, 7 MR, 6 GP) 2 LPG carriers 9 Dry bulk carriers 1 Panamax 5 Handymax 3 Handysize Committed Capex of around USD 450 Mn 3 secondhand acquisitions 1 Capesize, 1 Panamax & 1 Product tanker all to be delivered during Q4 of FY new building contracts 4 LR1 & 4 MRs Product tanker aggregating 0.47 mn. dwt. Deliveries from Q4 FY onwards 5

6 Asset Profile Offshore business - Greatship (I) Ltd. (wholly owned subsidiary) 1 Platform Supply Vessel (PSV) currently operating in Egypt Committed Capex of around USD 380 Mn 2 Secondhand PSVs to be delivered in Q4 FY and Q2 FY resp. 2 New Building PSVs delivery during Q2 and Q3 FY New Building 80T AHTSVs to be delivered one each in Q3 and Q4 FY , two in Q4 FY and one each in Q1 and Q2 FY A New Building 350 ft Jack Up Rig to be delivered in Q3 FY

7 Cumulative fleet position* March end Shipping Business Offshore Business (cumulative Mn dwt) through subsidiary Greatship (I) Ltd (Cumulative No of Assets) FY 07 Q FY 08 Q Q Q3 4 Q4 5 FY 09 Q1 Q2 6 Q Q4 9 FY 10 Q Q2 11 Q3 * basis committed capex & no asset sale 12 7

8 Financial Snapshot 8

9 Historical performance (in Rs. Cr.) Rs/ Share mn dwt 0.00 FY01 FY 02 FY03 FY04 FY 05 FY06 Earnings Per Share (Rs) Dividend Per Share (Rs) Tonnage (Mn Dwt) * 0 *relates to shipping business post demerger 9

10 Financial Overview FY Balance Sheet as on Share Capital (Rs Cr) 152 Reserves (Rs Cr) 2234 Debt (Rs Cr) 1869 Total (Rs Cr) 4255 Ratios for FY NAV/ Share (Rs /Share) 335 BV/ Share (Rs /Share) 157 Gearing 0.78 ROCE 23.96% 10

11 Historical NAV per share (only shipping business) As on 31-March December March June September December-2006 Rs/Share

12 Shipping Markets in Q3 FY07 Tanker spot rates was unseasonably soft: High inventory build up during previous quarter Warmer than expected winter Series of OPEC production cuts Demand for dry bulk commodities continued to remain firm: Strong demand for steel and iron-ore supported by port delays in Australia Draught in Australia provided seasonal boost to grain trade Asset Prices continued to be firm 12

13 Company Performance during Q3 FY07 vs. Q3 FY 06 Continuing period contracts Increased dry bulk earnings Higher treasury income Lower repair & maintenance expenses Operating Profit rose by 11 % 13

14 Financial Comparison Quarter on Quarter (in Rs Cr) Q3 Q3 FY (Reviewed) FY (Unauditied ) % Change Income from Operations % Other Income Operating Profit** % Interest Depreciation Impairment Loss - 88 PAT* % * Includes prior period adjustments ** Operating Profit excl. gain on sale of ships 14

15 Financial Comparison Nine months ended (in Rs Cr) Nine months ended (Reviewed) Nine months ended (Unauditied ) % Change Income from Operations % Other Income Operating Profit** % Interest Depreciation Impairment Loss - 88 PAT* (2%) * Includes prior period adjustments ** Operating Profit excl. gain on sale of ships 15

16 Industry Overview

17 Global Shipbuilding Status Contract value of consolidated orderbook $298 billion Highest ever orderbook close to 1/3 rd of active fleet Since 2002 orderbook jumped from 115.5m dwt to 300 m dwt From $30 billion investment in 2003 to $104.1 billion in 2005 and in 2006 it touched whopping $135 billion Source : Clarksons 17

18 Ship ordering catches frenzy Regulations getting stringer as per MARPOL single hull tankers to move out of trade by 2010 Caveat : Flag States and Port States can accept single hull tankers to 25 years or up to 2015 whichever is earlier Some of the Countries accepting single hulls after 2010 Flag State Singapore Japan India Panama Port States (few are) Singapore Japan India Panama Appreciating Won, firming up of interest rates keeping asset prices firm 18

19 Asset Prices in the spotlight U S $ M n Newbuilding Prices US$ Mn VLCC Capes i z e Secondhand Prices VLCC - 5 yr Old C a p e s i ze - 5 Yr Old Source : Clarksons 19

20 Oil Markets Chicken & Egg situation SUPPLY DISTRUPTIONS STRONG DEMAND GEOPOLITICAL RISKS MARKET TIGHTENING Storage constraints Reduction in spare capacities Financial Flows Contago Market High demand for inventory High oil prices 20

21 Characteristics of Energy demand Growth in energy demand emanating from emerging markets 60% of developed nations demand is attributed to: Residential i.e 25% Road Transportation i.e 10% Commercial i.e 10% Air Transportation i.e 2% Demand for energy expected to grow by 2.2% annually over next 15 years against 1.6% growth over past decade Consumerism has replaced the conventional energy demand driven by Industrial growth Energy intensity on the rise Source : Mckinsey 21

22 Shift in Refining Base New capacity focused close to crude source Refining capacity additions require long lead times Two-thirds of new Greenfield capacity built for strategic reasons; rather than refining economics Capacity Additions (kbpd) E 2008E 2009E 2010E 2011E+ Product markets expected to remain relatively tight Source : Mckinsey 22

23 Sector Fundamentals -Shipping

24 Tanker Fundamentals Continuing robust economic growth Growth in non OPEC supply envisaged; OPEC cutbacks expected Oil demand as per IEA estimates at 85.8 m b/d i.e 1.6% annual growth for 2007 Mn dwt E D e l i v e r i e s Scrapping A c t i v e F l e e t Mn dwt Source : Clarksons Ship supplies continue to be high, conversions expected to rise Supply demand tightly balanced vulnerable to shocks 24

25 (million tonnes) Product Tankers : Trade on the rise Demand 16.0 mn.dwt shortfall in orderbook 34.4 Supply Orderbook = 37% of present fleet Replacing of Anticipated Scrapping Additional Demand Growth million tonnes 3,000 2,500 2,000 1,500 1, CAGR 448 1, % 1.5% 460 1, ,656 1,850 1, Crude Oil 5.6% 2.2% Oil Products Oil Products Crude Oil Product Tanker Supply / Demand Dynamic ( )* Oil & Oil Product Trade* Shortage of refining capacity in consuming regions Volatile product prices create arbitrage opportunities, resulting in increased transportation *Source : Clarksons 25

26 Dry Bulk Scenario Major ore miners have expanded capacities Australia and Brazil to account for >80% of announced increase in seaborne supply by 2010 China exporting steel to developed markets Material growth envisaged in industrialized China Port congestion continue to strain the infrastructure Source : CVRD 26

27 China gulping Iron Ore CY Import in Mn tons % Net Fleet Additions* m.dwt ,972 92, , , , , ,330 32% 20% 33% 40% 32% 18% Changing trade patterns ** Australia 46.8% India 15.7% Brazil 21.2% South Africa 15.5% * Capesize Source : Clarksons Australia 38.9% India 22.9% Brazil 23.4% South Africa 3.85% ** at a larger base Dry bulk ships traveling longer distances 27

28 World Steel Production Steel Production (M Tons) Country E 2007 F 06\05 07\06 China % 13% Japan % 1% S Korea % 1% India % 15% EU % 1% N America % 2% World % 6% World Excl China % 3% Source :Abare/IISI ASIA Steel hub 28

29 Supply constraints. Ageing fleet - 28% of tonnage > 20 yrs old, 10% of tonnage between 15 & 19 yrs old Supply as a percentage of existing fleet is relatively lower Dry bulk supply position mn. dwt E 2008E 2009+E Supply as 22% of fleet Source : Clarksons 29

30 Sector Fundamentals -Offshore Oil field services

31 An Introduction Buoyancy in the sector is resultant of prediction flaws that, supply of oil & gas would be as big an issue as demand difficult to increase production capability, quickly enough to relieve tightness in demand- supply Creating most favorable business environment since 1970s 31

32 E&P viewed independently 85% of world energy demand growth since 2000 has been from emerging economies accounting for >50% of consumption Exploration budgets surged from 2004 onwards with 50%+ rise in spending surveys Additional investments attributed to inflation & not necessarily representing enhancement in production capacities 32

33 Sustainability of buoyancy in E&P Hydrocarbon a global need Energy basket constituents would continue to be skewed towards oil &/ or gas Cycle expected to remain intact Capacity cannot be developed fast enough to influence the scenario Dramatic slow down in world economy could upset business dynamics 33

34 Business Dynamics Game of tight asset supply Aging fleet with limited life; threat to safety New building deliveries to replace asset extinction Age distribution AHTSV fleet Source : Clarksons Day rates expected to be remunerative 34

35 Day rates scaling new highs North Sea spot market form benchmark to other global markets but with a lag Source : Pareto 35

36 Outlook

37 Tanker Market Outlook World oil demand to grow at a depleting rate Downside risks to economic growth increasing Non-OECD production could curb tonne-mile Demand vulnerable to shocks Refinery capacity to increase Upgrading capacity increases beyond 2010 New refineries planned in emerging economies Supply/ Demand balance to continue to remain tight 37

38 Dry bulk Market Outlook Emerging economies make up for half of world GDP (PPP basis) Strong steel demand will continue to put pressure on Iron Ore production Inadequate port infrastructure & hinterland support creating congestion Chinese demand is expected to remain strong with the 2008 Olympics acting as a catalyst Strong coal demand for power starved economies of Asia Sustained growth driving seaborne trade 38

39 Offshore Services Market Outlook Increased offshore activity in deeper and harsher waters New building capacity fully exploited forcing refurbishment of mothballed rigs Losses due to hurricanes add to impending problem of rig availability; limited rig building infrastructure continue to depend on OEM suppliers Increased demand for large specialized vessels Chartering of OSVs in development, repair, construction and decommissioning contracts envisaged Day rates, utilization to be high Longer term contracts on the anvil 39

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