ARDMORE SHIPPING CORPORATION Third Quarter 2017 Earnings Presentation

Transcription

1 ARDMORE SHIPPING CORPORATION Third Quarter 2017 Earnings Presentatin

2 Disclaimer This presentatin cntains certain statements that may be deemed t be frward-lking statements within the meaning f applicable U.S. federal securities laws. All statements, ther than statements f histrical facts, that address activities, events r develpments that Ardmre Shipping Crpratin ( Ardmre r the Cmpany ) expects, prjects, believes r anticipates will r may ccur in the future, including, withut limitatin, statements abut: future perating r financial results; glbal and reginal ecnmic cnditins and trends; pending vessel acquisitins r pssible upgrades t vessels; the Cmpany s business strategy and expected capital spending r perating expenses; cmpetitin in the tanker industry; shipping market trends; the Cmpany s financial cnditin and liquidity, including ability t btain financing in the future t fund capital expenditures, acquisitins and ther general crprate activities; the Cmpany s share repurchase prgram; ability t enter int fixed-rate charters after the current charters expire and the Cmpany s ability t earn incme in the spt market; expectatins f the availability f vessels t purchase and the time it may take t cnstruct new vessels and vessels useful lives are frward-lking statements. Althugh the Cmpany believes that its expectatins stated in this presentatin are based n reasnable assumptins, actual results may differ frm thse prjected in the frward-lking statements. Factrs that might cause r cntribute t such a discrepancy include, but are nt limited t, the risk factrs described in the Cmpany's filings with the Securities and Exchange Cmmissin (the "SEC"), including the Cmpany s Annual Reprt n Frm 20-F fr the year ended December 31, This presentatin is fr infrmatin purpses nly and des nt cnstitute an ffer t buy r sell securities f the Cmpany. Fr mre cmplete infrmatin abut the Cmpany, the infrmatin in this presentatin shuld be read tgether with the Cmpany's filings with the SEC which may be accessed n the SEC website at Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 2

3 Earnings Release: Third Quarter 2017 Agenda Perfrmance and Recent Activity Prduct and Chemical Tanker Markets Recent Value-Creating Activity Fleet Update Financial Review Summary Appendix Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 3

4 Highlights Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 4

5 Perfrmance and Recent Market Activity Highlights Reprted EBITDA f $10.1 millin and net lss $4.6 millin, equating t lss f $0.14 per share in 3Q17; cmpared t net lss f $1.9 millin r $0.06 per share in 2Q17 Delivered satisfactry chartering perfrmance in a challenging perating envirnment; spt and pl MR tanker rates averaged $12,970 per day in 3Q17 vs. $13,765 per day in 2Q17 MR spt rates impacted by reduced carg vlumes resulting frm refinery utages and lw il trading activity; hwever, near term utlk psitive with recvering US Gulf refinery utput, rapidly rebalancing inventries, and seasnally strnger winter perid Cntinuing t execute n strategy; fcusing n perating perfrmance, cst efficiency, and ther steps t imprve ROIC Agreed t acquire a high-quality, 2008 Japanese-built, MR prduct tanker at a very attractive price equating t 30% belw age-adjusted newbuilding value but cmparable t NAV estimates Cmpleted an attractively priced $15 mln revlving credit facility, further enhancing ur financial flexibility Maintaining dividend plicy f paying ut 60% f earnings frm cntinuing peratins. Cnsistent with plicy, the Cmpany is declaring n dividend fr 3Q17 Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 5

6 High Quality Fleet Vessel Name Type Dwt Tnnes IMO Built Cuntry Flag Specificatin Ardmre Seavaliant Prduct/Chemical 49,998 2/3 Feb-13 Krea MI Ec-design Ardmre Seaventure Prduct/Chemical 49,998 2/3 Jun-13 Krea MI Ec-design Ardmre Seavantage Prduct/Chemical 49,997 2/3 Jan-14 Krea MI Ec-design Ardmre Seavanguard Prduct/Chemical 49,998 2/3 Feb-14 Krea MI Ec-design Ardmre Sealin Prduct/Chemical 49,999 2/3 May-15 Krea MI Ec-design Ardmre Seafx Prduct/Chemical 49,999 2/3 Jun-15 Krea MI Ec-design Ardmre Seawlf Prduct/Chemical 49,999 2/3 Aug-15 Krea MI Ec-design Ardmre Seahawk Prduct/Chemical 49,999 2/3 Nv-15 Krea MI Ec-design Ardmre Endeavur Prduct/Chemical 49,997 2/3 Jul-13 Krea MI Ec-design Ardmre Enterprise Prduct/Chemical 49,453 2/3 Sep-13 Krea MI Ec-design Ardmre Endurance Prduct/Chemical 49,466 2/3 Dec-13 Krea MI Ec-design Ardmre Explrer Prduct/Chemical 49,494 2/3 Jan-14 Krea MI Ec-design Ardmre Encunter Prduct/Chemical 49,478 2/3 Jan-14 Krea MI Ec-design Ardmre Exprter Prduct/Chemical 49,466 2/3 Feb-14 Krea MI Ec-design Ardmre Engineer Prduct/Chemical 49,420 2/3 Mar-14 Krea MI Ec-design Ardmre Seafarer Prduct/Chemical 45,744 3 Aug-04 Japan MI Ec-md Ardmre Seatrader Prduct 47,141 Dec-02 Japan MI Ec-md Ardmre Seamaster Prduct/Chemical 45,840 3 Sep-04 Japan MI Ec-md Ardmre Seamariner Prduct/Chemical 45,726 3 Oct-06 Japan MI Ec-md Ardmre Sealeader Prduct 47,463 Aug-08 Japan MI Ec-md Ardmre Sealifter Prduct 47,472 Jul-08 Japan MI Ec-md Ardmre Dauntless Prduct/Chemical 37,764 2 Feb-15 Krea MI Ec-design Ardmre Defender Prduct/Chemical 37,791 2 Feb-15 Krea MI Ec-design Ardmre Cherkee Prduct/Chemical 25,215 2 Jan-15 Japan MI Ec-design Ardmre Cheyenne Prduct/Chemical 25,217 2 Mar-15 Japan MI Ec-design Ardmre Chink Prduct/Chemical 25,217 2 Jul-15 Japan MI Ec-design Ardmre Chippewa Prduct/Chemical 25,217 2 Nv-15 Japan MI Ec-design Ttal 27 1,202, (1) 6 1. Average age as at September 30, 2017

7 Prduct and Chemical Tanker Markets Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 7

8 Millin DWT OB as % Fleet 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Prduct Tanker Market MR prduct tanker rates sftened in 3Q17; ASC MR Spt & Pl TCE averaged $12,970 vs. $13,765 in 2Q17 Nevertheless, utlk is psitive fr year end: US refinery thrughput set t increase fllwing Sept/Oct utages and remain elevated in 2018; refinery margins at widest levels since 2013, which shuld incentivize elevated runs Inventry destcking higher than expected in 3Q17 as cmmercial stcks cntinue t rebalance t 2014 levels (4) ; as a result, we expect nrmal trading activity t resume sn Prduct inventry imbalances particularly fr middle distillates shuld lead t increased activity in late 4Q17 and int 1Q18 Underlying MR tnne mile demand grwth remains strng: Glbal il demand grwth expected t be 1.6mbd in 2017 and 1.4mbd in 2018 matched with refinery capacity grwth in exprt-riented lcatins (5) Increased carg vlumes, reginal prduct slate imbalances, emissins regulatins, trading cmplexity all cntinuing t drive demand grwth at arund 5% MR supply grwth nw at histrically lw levels: 55 MRs delivered YTD; estimate 8 MRs remaining in 4Q17 (6) 14 MRs scrapped YTD; estimate fr full year Resulting in net fleet grwth f 1.8% in 2017 / 1.1% r less 2018 (7) Shipyard capacity remains cnstrained, nly 9 active MR shipyards (dwn frm 20 shipyards in 2008) Anticipated demand grwth f 5% cmbined with supply grwth f 1.1% in 2018 shuld significantly tighten the market leading twards a sustained recvery $30,000 $28,000 $26,000 $24,000 $22,000 $20,000 $18,000 $16,000 $14,000 $12,000 $10, Average MR Spt Market TCE Rates (1) TCE $25,000 / day Prduct Tanker Orderbk and Fleet Develpment (3) 4.1% ASC EPS ~$2.80 (2) EPS Breakeven 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 8 1. Surce: Hwe Rbinsn Partners - Rates quted are the average $/day rates fr TC6, TC7, TC 10, TC11/4 and TC2/14 fr a MR Ec-design vessel frm 1Q14 t 3Q17 2. Management s estimates based n a full fleet f 27 vessels perating in the spt market fr 363 revenue days / ship and MR prduct tankers earning $25,0000 / day and chemical tankers earning $18,000 / day 3. Surce: Clarksns Shipping Intelligence Netwrk and management s estimates as at Oct 18 th, PIRA Energy Grup: September Mnthly Oil Market Outlk 5. Surce: Internatinal Energy Agency, Oil Market Reprt Oct 2017 and management s estimates. IEA estimates il demand grwth will average 1.6 millin bpd per annum in 2017 and 1.4 millin bpd in Management s estimates f deliveries fr 2017 and 2018, net f estimated scrapping 7. Management estimates based n 50% f 4Q17 scheduled deliveries slipping int 2018

9 Millin DWT OB as % Fleet 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 $ / Tnne Chemical Tanker Market Chemical tanker rates remained flat in 3Q17, ASC charter rates averaging $10,768 vs $10,736 in 2Q17 ASC chemical fleet cargs split 3Q17: Recent activity: 4% CPP / 64% chemicals / 32% vegils Chemical carges generated 12% f ASC s ttal fleet revenue Market was sft verall, reflecting brader prduct tanker market Methanl vlumes declined during the third quarter as a result f cmbined impact f US Hurricane disruptins and Asia Pacific utages (3) Vegil vlumes fell; Suth America sybean exprts averaged 550k MT in Sept frm 1,000k MT in June (4) Chemical Tanker Spt Market Perfrmance (1) Average f 8 Chemical Tanker Rutes frm Clarksns (Grss Freight befre Vyage Csts) Demand utlk psitive: Imprving glbal GDP and cntinued expansin f petrchemical plants in US and ME will lead t increased exprts and tnne mile demand Imprving prduct tanker market cnditins will increase demand fr chemical tankers in CPP trade Underlying fundamentals remain strng; seabrne chemical trade grwth estimated at 5% per annum Orderbk cntinuing t decline; 9% f existing fleet (Dwt basis): Stainless steel tankers 65% f rderbk / 13.5% f stainless fleet, Cated IMO2 tankers 35% f rderbk / 5.6% f Cated IMO2 fleet Overall net fleet grwth f apprximately 4.4% in 2017 (5) / 4.9% in 2018 Chemical Tanker Orderbk and Fleet Develpment (2) 40 9% 80% 35 70% 30 60% 25 50% 20 40% 15 30% 10 20% 5 10% 0 0% 9 1. Surce: Clarksns Platu, Clarksns SIN. Management s estimates based average chemical tanker spt rates n selected trades (Hustn-F.East / Gulf-F.East / Gulf-Med / Hustn-Rtterdam / Rtterdam-Hustn / Hustn- Sants / Gulf-Rtterdam / Ulsan-Hustn) 2. Orderbk fr cated IMO2 with average tank size <3000m 3 and stainless steel ships abve 10,000 Dwt as at Oct 24 th, S&P Glbal Platts: Asia: The Week In Petrchemicals August 28 th 4. Quincannn Assciates Mnthly Market Reprt: September Management s estimates based n expected deliveries, net f estimated scrapping

10 Value-Creating Activity Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 10

11 Plicy and Recent Activity Clear plicy f putting financial strength and efficiency first: Maintaining lw leverage f 53% plus strng cash balances Recently cmpleted an attractively priced $15 millin revlving credit facility, further enhancing financial flexibility Maintaining lw breakeven rates and cst f capital Organisatin fcused n perating perfrmance, cst efficiency, and further imprvements t ROIC: Intensive fcus n perating perfrmance enhancements frm chartering and cmmercial peratins Cntinued fcus n reducing verhead csts; already lwest in ur peer grup Effective capital allcatin; June 2016 acquisitin f 6 x MRs set market lw fr ec-designs, still unmatched Mst recently - highly attractive vessel acquisitin (1) Priced at 30% discunt t newbuild equivalent; in line with currently depressed NAV estimates fr ASC Highly attractive finance terms under a Japanese Tax Lease resulting in minimal equity deplyed, lw breakevens, and high ROE Small transactin but ptential t create significant value; EPS accretin f 5% at $18,000 / day Acquisitin is subject t cmpletin f finance n terms which are acceptable t Ardmre. Vessel is expected t deliver t Ardmre in January 2018

12 Fleet Update Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 12

13 Revenue Days Fleet Update Fleet Update Revenue Days Prfile (1) Revenue days t increase by 13% t 9,761 in ,000 Drydcks: 3Q17: Ardmre Seamaster cmpleted special survey 4Q17: Expect 20 drydck days 10,000 8, % (Y--Y) 9,761 8,000 7,071 6,000 4,000 2,410 2,425 2,467 2,458 2, ACT 2016 ACT 1Q17 ACT 2Q17 ACT 3Q17 ACT 4Q17 EST 2017 EST Revenue Days based n management s estimates.

14 Financial Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 14

15 Financial Perfrmance INCOME STATEMENT DATA Three mnths ended Nine mnths ended US$ millins, unless therwise stated Sept 30, 2017 Sept 30, 2017 Results EBITDA (1) Net (lss) / incme (4.6) (8.7) Net (lss) / incme per share ($/share) (0.14) (0.26) General and Administrative expenses Crprate Cmmercial and Chartering Depreciatin & amrtizatin Interest & finance OTHER OPERATING DATA Average Number f Vessels Fleet time charter equivalent per day ($/day) (2) 12,376 12,751 Vessel perating expenses (US$ millin) Fleet perating cst per day ($/day) (3) 6,538 6,308 Ec-Design MR ($/day) (4) 6,341 6,190 Ec-Md MR ($/day) (4) 7,175 6,583 Ec-Design Chemical ($/day) (4) 6,392 6,330 Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability EBITDA is a nn-gaap measure. A recnciliatin f this measure is included in the appendix f this presentatin 2. Definitins: Time Charter Equivalent ( TCE ) daily rate is the grss charter rate r grss pl rate, as apprpriate, per revenue day plus Cmmunicatin Victualing and Entertainment Incme ( CVE ). Fr vessels emplyed n vyage charters, TCE is the net rate after deducting vyage csts incurred by cmmercial managers 3. Fleet perating csts per day are rutine perating expenses and cmprise crewing, repairs and maintenance, insurance, stres, lube ils and cmmunicatin csts. Als included are technical management fees paid t third-party managers f $381 / day 3Q17 and $385 / day in YTD 3Q17 4. Vessel perating csts per day include technical management fees

16 Charter Rates Time Charter Equivalent ($ / day) (1) AVG. FLEET MR ECO-DES MR ECO-MOD CHEM. TANKERS 12,919 12,996 12,307 12,376 12,389 13,181 13,452 12, % YY 11,910 12,260 13,959 12,534 12,502 12,907 10,736 10,768 4Q16 1Q17 2Q17 3Q17 Fr every $1,000/day increase in rates, EPS increases by $0.29 cents and Dividend by $0.17 cents (2) Time Charter Equivalent ( TCE ) daily rate is the grss charter rate r grss pl rate, as apprpriate, per revenue day plus Cmmunicatin Victualing and Entertainment Incme ( CVE ). Fr vessels emplyed n vyage charters, TCE is the net rate after deducting vyage csts incurred by cmmercial managers. Chemical tankers are full IMO2 rated vessels 2. Calculatins based n existing cst structure and assume (a) fleet f 27 vessels, (b) utilizatin f 99.45%, (c) 33.6 mln shares and (d) dividend plicy f paying ut 60% f earnings frm cntinuing peratins. Assumes n change in tax rate, cst f debt r share cunt

17 Strng Balance Sheet BALANCE SHEET DATA US$ millins, unless therwise stated As at; Sept 30, 2017 Dec 31, 2016 Cash Receivables & Inventries (1) Vessels & Drydck Ttal Assets Payables and Accruals Debt & Capital Lease Obligatins (2) Equity Ttal Liabilities and Equity Debt / Debt + Equity (3) 52.81% 53.35% Lw Financial Leverage and every $1 millin increase in vessel values = $0.80 in NAV / share (3) Excludes amunt receivable in respect f capital leases f $2.9 mln prvided t the purchasers under the sale and leaseback f the Ardmre Sealeader and Ardmre Sealifter in 2Q17 2. Debt balance includes impact f netting f deferred finance fees f $9.6 mln in 3Q17 ($11.2 mln in 4Q16) and netting f $2.9 mln receivable in respect f capital lease in 3Q17 3. Leverage calculatin based n grss debt befre netting f deferred finance fees. Grss debt f $452.7 mln 3Q17 / $473.5 mln 4Q ships x $1 millin = $27 millin / 33.6 millin shares = $0.80 / share; assumes n change in share cunt

18 Cnservative Capital Structure Bk value f vessel assets $764.4 millin and grss debt $452.7 millin ($443.1 millin net deferred finance fees) as at Sep 30, 2017 (1) Lw crprate leverage: 52.8% as at Sep 30, 2017 with significant liquidity; cash and net wrking capital $73.5 millin (2) All debt (includes capital leases) is amrtizing at apprximately $44.0 millin per year (N nn-amrtizing debt) Cmpleted an attractively priced $15 mln revlving credit facility, further enhancing ur financial flexibility Debt Prfile $73.5 $764.4 $11.0 $452.7 $441.7 $441.7 Vessel Assets, Cash & Net Wrking Capital Grss 3Q17 4Q 2017 Pr-Frma 4Q17 Grss Debt Vessel Assets Debt Repayments Cash & Net Wrking Capital Grss Debt excludes impact f netting f deferred finance fees f $9.6 mln as required under US GAAP ($452.7 mln - $9.6 mln = $443.1 mln) 2. $73.5 mln cnsists f $45.8 mln cash and net wrking capital f apprximately $27.7 mln

19 Cmpany Review and Summary Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 19

20 Summary Reprted EBITDA f $10.1 millin and net lss $4.6 millin, equating t lss f $0.14 per share in the third quarter; cmpared t net lss f $1.9 millin r $0.06 per share in secnd quarter f MR prduct tanker rates declined in 3Q17 due t significantly lwer refinery utput. Psitive utlk fr year end as nrmal trading activity gets set t resume; refined prduct inventries reaching balance and increasing refinery thrughput. Fundamentals remain strng; underlying MR tnne mile demand grwth estimated t be arund 5%, underpinned by il cnsumptin grwth, exprt riented refinery capacity grwth and increasing trade cmplexity. Supply grwth cntinues t decelerate; rderbk at histrical lws, resulting net fleet grwth apprximately 1.8% in 2017 and 1.1% r less in 2018, setting the stage fr significant rebund in charter rates. Highly attractive vessel acquisitin at a cmpelling price; 30% belw age-adjusted newbuilding equivalent which is in line with currently depressed NAV estimates fr ASC, signalling value nt just in the acquisitin but als in current cmpany valuatin Maintaining financial strength with lw leverage and healthy cash balance; cmpleted a $15 millin revlving credit facility in Octber further enhancing ur financial flexibility. Overall with Mdern ur mdern Fleet f fleet Ec-design and industry-leading and Ec-md cst built structure, at high Ardmre quality Krean is well and psitined Japanese t take shipyards advantage f a charter market recvery and with generate upgrades strng t imprve returns fuel and efficiency value accretin and cmmercial fr ur sharehlders. capability 20

21 Appendix Mdern Fleet f Ec-design and Ec-md built at high quality Krean and Japanese shipyards with upgrades t imprve fuel efficiency and cmmercial capability 21

22 Nn-GAAP Measures NON-GAAP MEASURES Three mnths ended Nine Mnths Ended expressed in US$, unless therwise stated Sept 30, 2017 Sept 30, 2017 Recnciliatin f Net (Lss) / Incme t EBITDA Net (lss) / incme (4,639,605) (8,660,943) Interest incme (136,198) (327,016) Interest expense and finance csts 5,425,243 16,029,527 Incme tax 16,500 47,839 Depreciatin 8,638,739 25,625,382 Amrtizatin f deferred dry dck expenditure 771,037 1,971,213 EBITDA (1) 10,075,716 34,686, EBITDA is defined as earnings befre interest, taxes, depreciatin and amrtizatin. This nn-gaap measure is presented in this presentatin as the Cmpany believes that it prvides investrs with a means f evaluating and understanding hw Ardmre s management evaluates perating perfrmance. This nn-gaap measure shuld nt be cnsidered in islatin frm, as substitutes fr, r superir t financial measures prepared in accrdance with US GAAP. In additin, this nn-gaap measure des nt have a standardized meaning, and is therefre unlikely t be cmparable t similar measures presented by ther cmpanies