1 6 A u g u s t Q RESULTS

Transcription

1 1 6 A u g u s t Q RESULTS

2 SAFE HARBOR STATEMENT Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and statements other than statements of historical facts. The words believe, anticipate, intend, estimate, forecast, project, plan, potential, may, should, expect, pending and similar expressions generally identify forward-looking statements. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management s examination of historical operating trends, data contained in our records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, the Company cannot guarantee that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward- looking statements include the strength of the world economy and currencies, changes in charter hire rates and vessel values, changes in demand for ton miles of oil carried by oil tankers, the effect of changes in OPEC s petroleum production levels and worldwide oil consumption and storage, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry-docking, changes in TORM s operating expenses, including bunker prices, dry-docking and insurance costs, changes in the regulation of shipping operations, including requirements for double hull tankers or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents, political events or acts by terrorists. In light of these risks and uncertainties, you should not place undue reliance on forwardlooking statements contained in this release because they are statements about events that are not certain to occur as described or at all. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. 2

3 AGENDA Highlights Product Tanker Market Overview and Outlook Financial and Operating Performance 3

4 HIGHLIGHTS FOR THE SECOND QUARTER OF 2016 Q Results Product tanker market Sales & Purchase Corporate events 2016 guidance EBITDA of USD 57m (H1 2016: USD 126m) and Profit before tax of USD 15m (H1 2016: USD 46m) RoIC of 6% (H1 2016: 8%) and Earnings per share of USD 0.2 or DKK 1.6 (H1 2016: USD 0.7 or DKK 4.9) Net Asset Value estimated at USD 873m, corresponding to a NAV/share of USD 14.0 or DKK 93.9 TORM s achieved product tanker freight rates across segments have been at USD/day ~17,500, which is a decrease of USD/day ~2,000 compared to the last two quarters. Looking ahead, the third quarter market looks challenging, but profitable, with current rates below the levels seen in H1 Fundamental oil demand was high during the second quarter of However, the product tanker market was negatively impacted by primarily high gasoline and diesel stocks causing most regions to cover own consumption by drawing down on inventories In the East, the market has been negatively impacted by weak naphtha imports due to maintenance at production facilities and usage of substitution products such as LPG Product tanker ordering was very limited in the first half of By the end of July 2016, the order book stands at 15% of the total fleet which is a decrease of 5 percentage points from the end of 2015 Second-hand values have continued to be under pressure due to limited available financing and a high number of sale candidates Contracting of newbuildings has been historically low in all segments resulting in reduced prices which has been further impacted by the restructuring of the Korean yard industry The value of TORM s product tanker fleet has decreased by USD 198m (~11%) in the second quarter of 2016 New corporate structure of the TORM Group has been established including the insertion of a UK parent company, TORM plc, a delisting of TORM A/S and a listing of TORM plc on Nasdaq Copenhagen TORM will distribute USD 25m in dividends in September 2016 and intends to subsequently distribute 25 to 50% of Net Income going forward Since May 2016 TORM has conducted share repurchase for a total of USD 20m from the squeeze-out process (USD 19m), and general market purchases (USD 1m) For the full-year 2016, TORM has specified its guidance to: EBITDA in the range of USD m Profit before tax in the range of USD 50-90m 4

5 EBITDA OF USD 57M AND A POSITIVE PBT OF USD 15M FOR Q USDm P&L Q Pro forma Q2 2015* H Pro forma H1 2015* Pro forma 2015* TCE Earnings Gross profit Sale of vessels EBITDA Profit before tax Balance sheet Equity NIBD Cash and cash equivalents Key figures Earnings per share (USD) Returm on Invested Capital (RoIC) 6.2% 14.0% 8.2% 14.2% 14.1% Net Asset Value (NAV) ,169 Number of vessels (#) Tanker TCE/day (USD) 17,594 22,469 18,713 22,672 22,879 Tanker OPEX/day (USD) 6,914 7,289 7,155 7,318 7,193 * Pro forma figures for 2015 presented as though the Restructuring occurred as of 1 January 2015 and include the combined TORM and Njord fleet EBITDA of USD 57m and a positive profit before tax of USD 15m for Q Q Equity of USD 985m and cash and cash equivalents of USD 117m Q RoIC of 6.2% and Earnings per share of USD 0.2 (or DKK 1.3) Q Tanker freight rates of USD/day 17,594, which is very competitive compared to peers 5

6 AGENDA Highlights Product Tanker Market Overview and Outlook Financial and Operating Performance 6

7 PRODUCT TANKER FREIGHT RATES SOFTENED DURING Q2 FREIGHT RATES IN 000 USD/DAY West Despite high product stockpiles, the transatlantic trade volumes were at a healthy level driven by high gasoline demand in the US US exports of clean petroleum products increased compared to last quarter Naphtha arbitrage trade from West to East declined Economic and political issues in West Africa reduced imports to the region These negative factors kept freight rates at lower levels compared to previous quarters despite the fundamentally strong US gasoline imports and clean product exports East Far East naphtha imports weakened due to maintenance in the petrochemical sector and an increase in the use of liquefied petroleum gas as substitution for naphtha In addition, the markets were negatively impacted by lower exports out of India due to increased domestic consumption as a result of strong economic growth and drought reducing available hydro power Source: Clarksons. Spot earnings: LR2: TC1 Ras Tanura-> Chiba, LR1: TC5 Ras Tanura-> Chiba and MR: average basket of Rotterdam->NY, Bombay->Chiba, Mina Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sidney 7

8 DEMAND FUNDAMENTALS FOR PRODUCT TANKERS REMAIN SOLID ASIAN NAPHTHA AND LPG DEMAND* m b/d REFINERY NET EXPANSIONS AND OIL DEMAND GROWTH m b/d m b/d Overall, refinery utilization in Q2 was at a lower level compared to Q1 due to seasonal maintenance, high product stocks and lower margins. Refineries continued to shift yields towards gasoline and away from middle distillates After stronger-than-expected oil demand growth in Q1 and Q2, the IEA has upgraded growth for FY2016 to 1.4 mb/d, well above the long-term average of just below 1 mb/d US gasoline demand grew by 1.4% y-o-y in Q2 to the highest level for Q2 since Despite higher USAC refinery output and elevated inventory levels, USAC gasoline imports increased 16% y-o-y in Q2 China continues to gain position as a key exporter of oil products during the first half of 2016, China s CPP exports grew by 65% y-o-y, and the latest data suggests this trend has continued into Q3 New petrochemical complexes coming online, and ramping up runs in the Middle East and India towards the end of the year, are expected to lower naphtha exports to Asia, potentially being replaced by supplies from longer distance producers in the West. Additionally, increasing LPG demand for heating towards the end of the year will lead to a shift back to naphtha in the Asian petrochemical sector Over longer term, refinery rationalization will continue in Europe and the Pacific, while more capacity will be added in Asia and the Middle East supporting long-haul trade Note: * Includes China, Japan, South Korea and Taiwan Sources: WoodMackenzie, IEA, TORM Research 8

9 SUPPLY OUTLOOK FOR THE PRODUCT TANKER FLEET VARIES BY SEGMENT NET FLEET GROWTH Y-O-Y (NO. OF VESSELS)* % MR ORDER BOOK AS PERCENTAGE OF THE FLEET (DWT) m dwt average fleet growth for LR2, LR1, MR and Handysize Ordering of product tanker newbuildings has remained very limited, so far, this year Consequently, the product tanker order book to fleet ratio has fallen to 15%, the lowest since mid For the MR segment, the order book to fleet ratio is just below 12%, the lowest level for at least 20 years Product tanker deliveries totaled 2.8m dwt during Q2 which combined with limited scrapping activity resulted in a 1.6% net fleet growth in Q2 In the first half of the year, the total product tanker fleet grew by 3.6%, and for the total year, the fleet is expected to grow by slightly more than 6% The LR2 and LR1 segments are set to lead the growth, while the MR growth is expected to slow down from the 2015 level Notes: * The number of vessels at the beginning of 2016 was: LR2 284, LR1 325, MR 1,488, Handy 680 (includes chemical vessels). Net fleet growth: gross order book adjusted for expected scrapping, delivery slippage and TORM assumptions on additional ordering. Currently confirmed orders account on average for 48% of forecast deliveries in Source: TORM Research 9

10 PRODUCT TANKER VESSEL PRICES VESSEL PRICE DEVELOPMENT USDm LR2 - Newbuilding LR1 - Newbuilding MR - Newbuilding Second-hand market activity increased from Q1, but remained at low levels In spite of some activity, the second-hand tanker prices continued to slide throughout Q2 The newbuilding sector experienced historically low activity across all segments and with the negative sentiment, prices came under renewed pressure The restructuring of the Korean yard industry initiated by the Korean government further reduced the activity USDm MR - 5 yr. Second-Hand USDk/day Cancellation of orders in Korea at distressed yards has not, so far, materialized in replacement orders elsewhere MR 1Yr T/C Lack of financing remained an important factor throughout the quarter Source: Clarksons 10

11 AGENDA Highlights Product Tanker Market Overview and Outlook Financial and Operating Performance 11

12 TORM HAS SIGNIFICANT OPERATING LEVERAGE IN THE PRODUCT TANKER MARKET Unfixed days # of days LR2 LR1 MR Handy 12,258 1, ,350 26,401 2,637 2,510 17,265 27,659 3,569 2,555 17,520 1,848 Q3 Q ,990 4, Of total earning days 84% 92% 93% USDm Illustrative change in cash flow generation potential for the TORM fleet Average TCE/day Q3 Q USD 2, USD 1, USD (1,000) (12.3) (26.4) (27.6) USD (2,000) (24.6) (52.8) (55.1) 12

13 PEER COMPARISON SHOWS THAT TORM HAS CONTINUED TO PERFORM COMMERCIALLY DESPITE AN OLDER FLEET USD/day Notes: Peer group is based on Ardmore (split by ECO and ECO-modified), d Amico (composite of MR and Handy), Frontline 2012, BW, Norden, Teekay Tankers and Scorpio, OSG Q figures are missing for Norden and Frontline BW reporting include for Q1 and Q (based on prospectus in 2015) 13

14 PRO FORMA OPEX HAS SHOWN A FLAT TREND USD/operating day 9,000 8,000 7,000 OPEX 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q

15 TORM HAS A FULLY INTEGRATED BUSINESS MODEL AND ADMIN EXPENSES ARE TRENDING SIGNIFICANTLY DOWN TORM operates on a fully integrated commercial and technical platform TORM s operational platform handles all commercial and technical operation The integrated business model provides TORM with the highest possible trading flexibility and earning power TORM manages ~80 vessels commercially ~75 vessels technically TORM has a global reach with offices in Denmark, India, the Philippines, Singapore, the UK and the US Average admin cost per earning day for Q2 of USD/day 1,550 Outsourced technical and commercial management would affect other line items of the P&L TORM has trimmed administration expenses significantly Admin. expenses (quarterly avg. in USDm) % * 1H 2016 * Pro forma figures for 2015 presented as though the Restructuring occurred as of 1 January 2015 and include the combined TORM and Njord fleet 15

16 TORM S NET ASSET VALUE ESTIMATED AT USD 873M 30 June figures, USDm LTV of 55% 1, , Based on broker values, TORM s vessels including newbuildings were estimated at USD 1,614m as of 30 June With an outstanding debt of USD 720m and committed CAPEX of USD 168m, TORM s Loan-to-Value was at 55% ensuring a strong capital structure Adjusting for cash and working capital, TORM s Net Asset Value (NAV) was estimated at USD 873m On a per share basis*, the NAV was estimated at USD 14.0 or DKK 93.9 Value of vessels on water Value of Total vessel newbuildings value Outstanding debt Committed CAPEX Cash Working Capital Net Asset Value * Calculated based on 62,232,097 shares (excluding 66,749 treasury shares) and USD/DKK fx rate of

17 TORM HAS A FAVOURABLE FINANCING PROFILE AND STRONG LIQUIDITY POSITION CAPEX and liquidity as of 30 June 2016 (USDm) CAPEX commitments Total Available liquidity 117 Cash position 75 Available debt facility Total available liquidity Financing of LR2 newbuildings TORM is well-positioned to service future CAPEX and debt commitments On 8 July TORM finalized financing of the LR2 newbuildings of up to USD 115m (up to 60% financing) with 12 years maturity at attractive terms Strong operational cash flows expected in 2016 Scheduled debt repayments (USDm) 720 Debt as of 30 Jun ROY 2016 repayment repayment * Of which USD 20m must be cash or cash equivalent repayment repayment repayment 304 Hereafter 100% 9% 10% 10% 21% 8% 42% TORM has, in order to allow for dividend payments, terminated the cash sweep mechanism under the term facility and will start to pay fixed amortization from Q Ample headroom under our attractive covenant package: Minimum liquidity: USD 75m* Minimum book equity ratio: 25% (adjusted for market value of vessels) 17

18 FORECASTED EBITDA IN THE RANGE OF USD 210M TO USD 250M FOR FY full-year result USD/day 1,000 freight rate change USD/day 2,000 freight rate change EBITDA (USDm) /- 12 +/- 24 Profit before tax (USDm) /- 12 +/- 24 Earnings per Share (USD) / /- 0.4 Earnings per Share* (DKK) / /- 2.6 With 12,258 unfixed earning days as of 30 June 2016, TORM s financial result is highly exposed to freight rate fluctuations. * Earning per Share in DKK is calculated assuming an USD/DKK fx rate of 6.7 and 62.2m shares 18

19 TORM HAS DISTRIBUTED A TOTAL OF USD 45M TO SHAREHOLDERS FOLLOWING THE SEPTEMBER DIVIDEND 2016 distribution to shareholders (USDm) Potential further distributions Yield of 8% * 50-90% of 2016 Net Income In connection with the Corporate Restructuring TORM plc has made accretive share repurchases for an amount of USD 19m covering 2.4% of the outstanding TORM A/S shares 25 During June and July 2016 TORM plc has repurchased 113,347 shares on Nasdaq Copenhagen for a total consideration of USD 1m, at a significant discount to NAV, TORM may from time to time continue to conduct limited share purchase in the market In line with the announcement in connection with TORM s Q1 report on 12 May 2016, TORM plc will pay a USD 25m dividend on 15 September 2016, with ex-dividend date on 24 August 2016 The USD 25m in dividend corresponds to a dividend per share of USD 0.41 or DKK 2.74* Repurchase from Corporate Reorganization Market purchase September dividend Total distribution During 2016 TORM has distributed a total of USD 45m to shareholders, in addition to any further purchase in the market, corresponding to a yield of 8% * TORM s distribution policy from to 50% of Net Income Semi-annual distribution Dividend and/or share repurchase Policy reviewed periodically * Based on share price as of 12 August and a USD/DKK fx rate of

20 APPENDIX

21 TORM AIMS TO BE REGARDED AS THE REFERENCE COMPANY IN THE PRODUCT TANKER SEGMENT Pure-play product tanker owner Active in all large segments to meet customer demands ~80 owned product tankers Primarily spot-oriented Limited T/C-in (off-balance sheet) commitments Global scale One TORM Superior integrated operating platform In-house technical and commercial management (preferred by customers) One TORM Enhanced responsiveness to customers and higher TCEs Cost-efficient without leakages Moderate debt levels with attractive debt profile Financial strength to pursue growth Financial flexibility Strong balance sheet gives a competitive advantage when pursuing vessel acquisitions from lenders and yards Focused on profitability Growth May serve as consolidator Selective growth based on projected financial returns In-house S&P team with relationships with brokers, yards, banks and shipowners Semi-annual distribution policy of 25 to 50% of net income (after fixed payment of USD 25m in September 2016) Strong capital structure Selective fleet growth 21

22 FLEET UPDATE Per # of vessels Q Changes Q Changes EoY 2016 Changes EoY 2017 Changes EoY 2018 Owned vessels LR LR MR Handysize Total Charter-in vessels LR LR MR Handysize Total Total fleet Please note: TORM has the option to purchase up to six additional vessels within the LR2, LR1 and MR segment with expected delivery in 2018 and

23 TORM AT A GLANCE Key facts Global footprint based on regional power and presence A world-leading product tanker company 125+ years of history A leading product tanker owner Listed on Nasdaq Copenhagen TORM employees: TORM offices: ~270 Seafarers: ~3,000 1,300 Filipino seafarers 1,100 Indian seafarers 170 Danish seafarers 200 Croatian seafarers 30 Polish seafarers 23

24 PRODUCT TANKERS HAVE COATED TANKS AND HAVE SPECIALLY DESIGNED CARGO SYSTEMS WITH FLEXIBILITY TO TRANSPORT A WIDE RANGE OF DIFFERENT PRODUCTS Oil product supply chain Exploration Transportation Refining Transportation Storage/distribution Typical refined oil products carried on TORM s vessels Crude oil Fuel oil Condensate Diesel/ gasoil Jet fuel/ kerosene Naphtha Gasoline MTBE Ethanol Vegetable oil Biofuel Dirty products Clean products 24

25 MANAGEMENT TEAM WITH AN INTERNATIONAL OUTLOOK AND MANY YEARS OF SHIPPING EXPERIENCE Executive Director Jacob Meldgaard Executive Director in TORM plc CEO of TORM A/S since April 2010 Previously Executive Vice President of the Danish shipping company NORDEN where he was in charge of the company s dry cargo division Prior to that, he held various positions with J. Lauritzen and A.P. Møller-Mærsk More than 20 years of shipping experience Senior Management Christian Søgaard-Christensen Acting Chief Financial Officer Lars Christensen Head of Projects Jesper S. Jensen Head of Technical Division 25

26 OAKTREE IS THE MAJORITY SHAREHOLDER AND OWNERSHIP HAS BECOME MORE DISPERSED Share information Ownership has become more dispersed TORM s shares are listed on Nasdaq Copenhagen under the ticker TRMD A Shares 62.3m A shares, one B share and one C share The B and C shares have certain voting rights A Share has a nominal value of USD/share 0.01 Shareholdings as at Restructuring 2015, % Estimated shareholdings as at August 2016, % For further company information, visit TORM at Oaktree DW Participants Institutional Retail unknown in Restructuring Total 26

27 REPORTED KEY FIGURES USDm* Q Q H H Revenue EBITDA Profit/(loss) before tax Balance sheet Total assets 1, , ,867 Equity NIBD Cash and cash equivalents Cash flow statement Operating cash flow Investment cash flow Financing cash flow Financial related key figures EBITDA margin 32% 39% 34% 38% 39% Equity ratio 54% 78% 54% 78% 52% Return on invested capital (RoIC) 6.2% 14.0% 8.2% 12.5% 13.1% * The financial results for 2015 will reflect Oaktree activities in the period from January 2015 until completion of TORM s Restructuring (13 July 2015), and the combined entity from completion of TORM s Restructuring until 31 December

28 TORM TANKER SPOT RATES VERSUS INDUSTRY BENCHMARK TORM spot vs. industry benchmark Q (USD/day) 30,000 25,000 20,000 15,000 10,000 5, % LR2 TORM Benchmark +45% +35% +40% LR1 MR Handysize TORM spot vs. industry benchmark last 12 months (USD/day) 30,000 25,000 20,000 0% +12% +10% TORM Benchmark +25% 15,000 10,000 5,000 0 LR2 LR1 MR Handysize Note: Benchmarks are not one-to-one comparisons as they do not take broker commission, armed guards and low sulphur fuel costs into account. Source: Clarksons, Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba), MR: average basket of Rotterdam->NY, Bombay->Chiba, Mina Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sidney, Handysize: average basket of Augusta->Lavera, Tuapse->Agioi Theodoroi. 28

29 TORM HAS A SPOT-ORIENTED PROFILE IN A FUNDAMENTALLY STRONG MARKET PER Owned days T/C-in days at fixed rate T/C-in days at floating rate Total physical days Coverage Owned days LR2 1,448 2,979 4,321 LR1 1,281 2,510 2,555 MR 9,247 18,289 18,615 Handysize 1,929 3,990 4,015 Total 13,905 27,767 29,506 Charter-in days at fixed rate T/C-in costs, USD/day LR LR MR ,250 16,250 - Handysize Total ,250 16,250 - Charter-in days at floating rate LR LR MR Handysize Total Total physical days Covered days LR2 1,814 3,706 4, ,070 1,092 LR1 1,281 2,510 2, MR 9,614 18,574 18,615 1,263 1,310 1,095 Handysize 1,929 3,990 4, Total 14,638 28,780 29,846 2,380 2,379 2,187 Covered, % Coverage rates, USD/day LR2 51.9% 29% 23% 22,890 24,200 24,192 LR1 7.3% 0% 0% 16, MR 13.1% 7% 6% 18,565 19,239 17,572 Handysize 4.2% 0% 0% 15, Total 16% 8% 7% 20,094 21,469 20,878 29

30 INDUSTRY COOPERATION AND TRANSPARENCY IS KEY TO TORM S CORPORATE SOCIAL RESPONSIBILITY TORM is actively participating in TORM has set and communicated on climate targets UN Global Compact TORM became signatory to the UNGC in 2009 as the first Danish shipping company Maritime Anti-Corruption Network TORM is founding member of a global business network working towards a maritime industry free of corruption that enables fair trade Danish Shipowners Association As part of DSA,TORM is pushing for international regulation and standards on e.g. emissions through the International Maritime Organization Set climate targets: 20% reduction of CO 2 emissions per vessel by 2020 (starting point in 2008), in g/ton-km */** % reduction of CO 2 emissions from offices per employee by 2020 (starting point in 2008), ton/employee * Target: 6.4 Target: * This figure has been revised compared to previous CSR reporting because TORM has changed the system used for generating emissions data in 2015 ** Given that TORM has met its CO2 emission per vessel target for 2020, the Company will introduce a new target in the 2016 CSR Highlights 30