2 1 S e p t e m b e r HANDELSBANKEN TRANSPORT SEMINAR

Transcription

1 2 1 S e p t e m b e r HANDELSBANKEN TRANSPORT SEMINAR

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 Orion purchase price considerations AGENDA 1 Fully integrated and transparent business model 2 Complex and volatile shipping niche with attractive fundamentals 3 Interesting key metrics 3

4 TORM AT A GLANCE Key Facts Global footprint with presence in all major segments A world-leading pure product tanker company One of the largest owners and operators of product tankers in the world More than 125 years of track record Customers consist of major independent oil companies, state owned oil companies, oil traders and refiners 3,000 seafarers and 270 land-office employees LR World fleet 300 TORM plc is listed on Nasdaq Copenhagen LR1 MR ,524 On-the-water Newbuildings Handysize

5 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 5

6 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 BW reporting include for Q1 and Q (based on prospectus in 2015) 6

7 Orion purchase price considerations AGENDA 1 Fully integrated and transparent business model 2 Complex and volatile shipping niche with attractive fundamentals 3 Interesting key metrics 7

8 PRODUCT TANKER FREIGHT RATES ARE CURRENTLY CLOSE TO 5 YEAR LOWS 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 8

9 Mill. b/d SOLID LONG-TERM FUNDAMENTALS FOR PRODUCT TANKERS REFINERY NET EXPANSIONS AND OIL DEMAND GROWTH Increasing Oil Demand IEA forecasts future global oil demand to be above the longterm average of just below 1 mb/d US gasoline demand grew by 1.9% y-o-y in Q2 to the highest level for Q2 since f 2017f 2018f 2019f 2020f 2021f North America Europe Latin America Middle East OECD Pacific Asia Other Total CDU net additions Global oil demand growth Refinery Dislocation Over the 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 Sources: IEA, TORM Research 9

10 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 10

11 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 11

12 INTERESTING INDICATORS FOR PRODUCT TANKER TRADES Sources: EIA 12

13 LPG-NAPHTHA PRICE RATIO, AN INDICATOR FOR PRODUCT TANKER TRADES LPG-naphtha price ratio below 95% incentivizes Asian petrochemical industry to shift part of feedstock to LPG Source: Reuters LPG spot: PRO-TYO, LPG Forward: PVFEPROMswc1 Naphtha spot: NACFRJPSWMc1, Naphtha Forward: NACFRJPSWMc2, NACFRJPSWMc3, NACFRJPSWMc4 13

14 A RECENT EXAMPLE OF PRODUCT TANKER MARKET VOLATILITY The Colonial Pipeline (depicted to the left) moves an average daily volume of 2.6m barrels to the Northeast US Line 1 was closed on September 9 for unscheduled repairs, thus creating an immediate need to transport ~1.3m b/d by other means of transportation The Colonial Pipeline s reduced capacity made an instant impact on the the product tanker market as shown below 14

15 Orion purchase price considerations AGENDA 1 Fully integrated and transparent business model 2 Complex and volatile shipping niche with attractive fundamentals 3 Interesting key metrics 15

16 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) Return 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 16

17 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) 17

18 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 exchange rate of

19 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) 19

20 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 On 15 September 2016 TORM plc paid a USD 25m dividend, 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 exchange rate of

21 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 exchange rate of 6.7 and 62.2m shares 21

22 Orion purchase price considerations KEY TAKE-AWAYS 1 Fully integrated and transparent business model 2 Complex and volatile shipping niche with attractive fundamentals 3 Interesting key metrics 22