NORDEN RESULTS Annual Report 217 Copenhagen, Denmark 14 March 218 1 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
AGENDA The NORDEN DNA Business update Market Review Latest developments Outlook Final words In addition to the agile management of cyclical exposure to shipping industry, NORDEN also delivers additional value through operator activities all in a company you can trust 2 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
The NORDEN DNA 3 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
NORDEN DNA FOR THE LONG-TERM SHIPPING INVESTOR Full scale operational setup direct customer contact Agile portfolio management Midsize vessel types where operator skills are most valuable Strong track record of maintaining financial strength through the cycles Healthy balance sheet, transparency and clear corporate governance Stock listed in 1871 4 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
NORDEN DNA NORDEN S 3 BUSINESS UNITS Dry Operator Dry Owner Product Tankers Global transport solutions to dry cargo customers Cyclical market exposure to dry cargo market Transport services and cyclical market exposure in product tanker market Generate a margin by: Logistical and operatorial optimisation, matching cargoes and vessels Taking short-term market positions Generate superior long-term returns by: Timing and negotiating transactions of owned and long-term charter contracts Generate superior long-term returns by: Maximising earnings through positioning and voyage optimisation Timing and transactions of own vessels and long-term charter contracts 5 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
Business Update 6 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
A PARTY AND A HANGOVER Rates and orderbook 6, 9% 5, 8% 7% 4, 6% 3, 5% 4% 2, 3% 1, 2% 1% 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 % Panamax earnings Dry Cargo orderbook as % of fleet 7 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
USD million USD million BUSINESS UPDATE - OVERALL POSITIVE ANNUAL RESULT - STRONG END TO 217 Financial highlights Annual results Full year Adjusted Result USD 28.4 million Dry Cargo USD 14 million in improving markets Tankers USD 14 million in difficult market Q4 217 Adjusted result USD 27.1 million 1-1 -2-61 -35 28-3 -4-263 -35 213 214* 215* 216 217 Business highlights Dry Cargo split in Dry Operator and Dry Owner mid- 217 creating increased transparency Dry Operator and Dry Owner off to a good start Continued strong performance in tankers and increased long term exposure USD 2 million annual savings achieved through Cost-drive Quarterly results 3 27 2 1 1 4-1 -3-2 -14 Q4 216 Q1 217 Q2 217 Q3 217 Q4 217 8 Annual report 217 * A total of USD -57 million included in impairments and provisions CUSTODIANS OF SMARTER GLOBAL TRADE
Market Review 9 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Index MARKET REVIEW DRY CARGO 217 CLEAR IMPROVEMENTS DRIVEN BY HIGH DEMAND GROWTH Key developments TonMile demand growth Improvement in rates Panamax up 5% vs 216 Supramax up 46% vs 216 Total demand growth 4.8% Supply growth 3% Positive macro environment supporting demand for coal and minor bulks Source: GTT and NORDEN Baltic Dry Index Strong increase in Chinese steel consumption led to increasing imports of iron ore 1,8 1,6 1,4 1,2 1, 8 6 4 2 1 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
Q1-212 Q2-212 Q3-212 Q4-212 Q1-213 Q2-213 Q3-213 Q4-213 Q1-214 Q2-214 Q3-214 Q4-214 Q1-215 Q2-215 Q3-215 Q4-215 Q1-216 Q2-216 Q3-216 Q4-216 Q1-217 Q2-217 Q3-217 Q4-217 mdwt % of fleet MARKET REVIEW DRY CARGO OUTLOOK MARKET EXPECTED TO CONTINUE TO STRENGTHEN Lowest supply growth since 1999 Strong global economic growth Support from Chinese activity expected to be lower than in 217 resulting in lower overall demand growth Ordering still at manageable levels Risk of trade wars creating downside, but limited impact expected from recently announced trade barriers from US Supply 8 8% Ordering (% of fleet) 7% 6 4 2-2 -4 Source: Clarkson and NORDEN 213 214 215 216 217 218e 219e Realised deliveries Expected deliveries Realised Scrapping Expected scrapping Growth % (RHS) 6% 4% 2% % -2% -4% 11 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE 6% 5% 4% 3% 2% 1% % Source: Clarkson
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 YoY% USD/Day MARKET REVIEW TANKERS 217 MARKET IN 217 CHALLENGING AS EXPECTED Freight rates at 5 year low Seasonal rate increase limited in Q4 Supply overhang pressuring rates Healthy oil demand growth of 1.6% (IEA) but inventories used instead of imports ACM MR Product Tanker earnings [usd/day] Oil Demand Growth 3, 25, 2, 15, 1, 5, - 2.5% 2.% 1.5% 1.%.5%.% MR EAST CPP MR WEST CPP MR DPP 213 214 215 216 217 218 Source: ACM Braemar Source: IEA 12 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
mb mb YoY% MARKET REVIEW TANKERS OUTLOOK MARKET TO GRADUALLY IMPROVE THROUGH 218 Very poor start to the year in January and February but market expected to improve Positive macro environment adding to demand upside Oil inventories normalizing Lack of refinery additions compared to oil demand will increase movement of oil products Fleet growth slowing and scrapping increasing European Distillate stocks (mbbl] US Total Gasoline Stocks Tanker fleet growth (YoY%) 48 46 44 42 4 38 36 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 27 26 25 24 23 22 21 2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 8% 7% 6% 5% 4% 3% 2% 1% % 213 214 215 216 217 218 219 218 217 216 215 218 217 216 215 Product Tankers Source: Euroilstock Source: EIA Source: SSY and NORDEN Total Tanker Fleet 13 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
Final words 14 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
FINAL WORDS CAPTURING VALUE POTENTIAL OF DRY OPERATOR New setup from mid 217 with 3 business units Significant growth opportunity for the Dry Operator, 218 focus on building a track record and enabling growth Dry Owner well positioned for improving market Excellent upside to improved future market in Product Tanker after adding considerable long-term exposure in 217 Positive market outlook in both Dry Cargo and Tankers 15 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
DISCLAIMER FORWARD LOOKING STATEMENTS This presentation contains certain forward-looking statements reflecting the management s present judgment of future events and financial results. Statements relating to the remainder of 218 and subsequent years are subject to uncertainty, and NORDEN s actual results may therefore differ from the projections. Factors that may cause such variance include, but are not limited to, changes in macroeconomic and political conditions, particularly in the Company s principal markets; changes to the Company s rate assumptions and operating costs; volatility in rates and tonnage prices; regulatory changes; any disruptions to traffic and operations as a result of external events, etc. 16 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
THANK YOU FOR YOUR ATTENTION Dampskibsselskabet NORDEN A/S 52, Strandvejen DK-29 Hellerup Denmark Phone: +45 3315 451 www.ds-norden.com dampskibsselskabetnorden ds-norden ds_norden dsnorden ds_norden 17 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
Back-up slides 18 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
USD Million BUSINESS UPDATE - GUIDANCE POSITIVE RESULTS EXPECTED TO CONTINUE Guidance Adjusted Result Guidance Improvement in underlying profitability expected 45 Significantly less support in 218 from reversal of provisions 35 25 15 5 1 to 2 15 to 25 1 to 5 Dry Operator expected to generate USD 5 to 6 million in Contribution Margin Dry cargo market expected to continue to improve in 218 Product Tanker rates has started the year at considerably lower levels than last year but are expected to improve -5-15 to 5-15 Dry Operator Dry Owner Tankers Group 19 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
BUSINESS UPDATE DRY OPERATOR OFF TO A GOOD START Dry Operator initiated July 217 In Q4 USD 24 million was generated in contribution margin equal to an adjusted result of USD 14 million after O&A Q4 performance based on strong execution of logistical optimization and regional positioning Net result per vessel day of USD 253 USD per day since initiation In 218, focus is on improving profitability and ensuring platform is scalable Dry Operator key figures (USD million) Q4 217 USD million Q3 Q4 Total Contribution Margin 3. 23.7 26.7 Overhead and admin -7.6-9.6-17.2 Adjusted Result -2.1 13.9 11.8 Vessel days 23,187 23,487 46,674 CM per vessel day 129 1,9 572 Net result per vessel day -91 592 253 Contribution margin 24 USD million Adjusted result 14 USD million 2 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
USD million BUSINESS UPDATE DRY OWNER BENEFITTING FROM IMPROVING MARKETS Q4 217 Adjusted Result of USD 11.7 million Increased focus on the Panamax and Supramax segments Agreed early re-delivery of Post Panamax time charter contracts Secured two long term Supramax charters delivering 219 Sale of 1 Handysize vessel to be delivered in January With only 44% cover for 218, well positioned to benefit from improving markets Broker estimated fleet value of USD 474 million Results since 1.July 217 Baltic 5y second hand asset values USD million Q3 Q4 Total Contribution Margin 12. 17.2 29.2 Overhead and admin -1.9-2.4-4.3 Adjusted Result 6.8 11.7 18.5 Vessel days 4,987 4,853 9,84 3 25 2 15 1 5 Panamax Handymax Source: Baltic Exchange 21 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
USD million USD Million USD / day BUSINESS UPDATE TANKERS INCREASED EXPOSURE FOR COMING YEARS Full year adjusted result USD 14 million in a depressed Tanker market Q4 217 adjusted result of USD 2 million Strong performance and increased activity in short term TC-in market key to delivering positive results Increased Tanker TC-in exposure of more than 7 vessel years and purchased two second hand vessels Broker estimated fleet value of USD 418 million Quarterly adjusted result MR 5y second hand asset values NORDEN TCE over benchmark 14 12 1 1 8 6 4 3 2 2 3 25 2 15 1 5-2 -1-1 Q4 216 Q1 217 Q2 217 Q3 217 Q4 217 Source: Baltic Exchange 5, 457 4, 3, 2, 1494 93 1, 868 957 213 214 215 216 217 22 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
VALUATION OF NORDEN Dry Operator H2 217 Valutation of assets Contribution Margin USD 27 million 572 USD / vessel day Adjusted Result USD 12 million 253 USD / vessel day Vessel days 46,674 Own vessels (ex. CP) 892 Dry Cargo 474 Tankers 418 TC Cover / Dry Portfolio 12, 1, 8, 6, 4, 2, Dry Cargo Capacity Cover 218 219 22 221 222 223 224 225 226 227 Tankers For TC portfolio MtM calculation please see NORDEN webpage (www.ds-norden.com\valuation\) Purchase and extension options 29 12, 1, 8, 6, 4, 2, Capacity Cover 218 219 22 221 222 223 224 225 226 227 Financial input for valuation Net Debt -2 Securities 8 Cash and equivalents 211 Current bank debt -26 Non current bank debt -195 NB installments -22 Other Working Capital 145 Property and equipment 5 Investments in JV 9 Inventories 68 Freight Receivables 124 Other receivables 34 Trade payables -63 Other payables -75 Debt to joint ventures -2 Number of shares (ex. treasury shares) 4,467,615 23 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
DS NORDEN - DRY OPERATOR DRY OPERATOR: LOGISTICAL OPTIMISATION AND POSITIONS Value levers Regional exposure Overall market exposure Clip deals Employment arbitrage Vessel selection Options Vessel operation Minimising ballast Taking a view on regional rate developments Taking a view on the short-term market direction Securing margin on a Choosing between single voyage cargoes, T/C-out and performed on a third FFAs to fix income party vessel with a minimum of market risk Evaluating earnings capacity of available T/C-in tonnage Securing and realising value of option periods on T/C vessels using FFAs, cargoes and COAs or T/C options Speed setting, cargo handling and port operations Matching COA and market cargoes with own and market vessels Success levers People Relationships Scale Processes and systems 24 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
TC-in and cover Owned DS NORDEN DRY OWNER DRY OWNER: CYCLICAL EXPOSURE TO DRY CARGO Generate superior long-term returns by: Timing and negotiating transactions of owned and long-term charter contracts Utilising access to off-market deals through long-term relationships with shipyards and ship owners Eenabling portfolio of long term contracts 16 12 Current To be delivered Capacity Income 8 4 12, 8, 8 1 4 5.5 7 Panamax Supramax Handysize Capacity Cover Owned vessels 25.5 Long Term Chartered vessels 4.5 ~57, vessel days Internal transfer to Dry Operator at fixed rate based on long term COAs Internal transfer to Dry Opeartor at Market rates Fixed rate from external TC-out 4, 218 219 22 221 222 223 224 225 226 227 25 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
TC-in and cover Owned DS NORDEN TANKERS TANKERS: CYCLICAL EXPOSURE AND OPERATOR VALUE Generate superior long-term returns by: Maximising earnings through positioning and voyage optimisation Timing and transactions of own vessels and long-term charter contracts Short term TC-in activity All short term chartering out conducted via Norient Product Pool (NPP) of which NORDEN owns 5% 15 1 Current To be delivered Capacity Income 5 11 1 MR Handysize Owned vessels 21 Spot 1, 8, 6, 4, Capacity Cover Chartered vessels 41 ~34, vessel days TC-Out 2, 218 219 22 221 222 223 224 225 226 227 26 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
CONNECTION BETWEEN OPERATOR AND OWNER Q4 217 (USD Million) Dry Owner Dry Operator Eliminations Dry Cargo Revenue services rendered external 9 418 427 Revenue services rendered internal 44-44 Revenue 54 418-44 427 Voyage costs -174-174 T/C equivalent revenue 54 244-44 254 Other operating income 2 2 Charter hire for vessels -29-223 44-28 The Dry Owner charters out most of its capacity to the Dry Operator Parts of this at fixed rate and parts are at market rates Other vessel opearting costs -7-7 Staff costs, onshore employees -2-1 -12 EBITDA 15 14 29 27 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
1871 1874 1877 188 1883 1886 1889 1892 1895 1898 191 194 197 191 1913 1916 1919 1922 1925 1928 1931 1934 1937 194 1943 1946 1949 1953 1956 1959 1962 1965 1968 1971 1974 1977 198 1983 1986 1989 1992 1995 1998 21 24 27 21 212 215 216 Number of active vessels DEVELOPMENT HIGHLIGHTS 1871 Mads C. Holm founds NORDEN; first vessel delivered in 1872 1875-76 First vessel calls China & Japan 1932 13 of 14 vessels layed up 1998-1999 New growth strategy chartered vessels with purchase options 25 Norient Product Pool 1996-25 Offices in Singapore, Annapolis, Shanghai, Rio de Janeiro and Mumbai 215- Strategy: Focus & Simplicity Offices in Melbourne and Santiago 28 Financial crisis begins 3 275 25 225 2 175 15 125 1 1884 Mads C. Holm co-founds Danish Shipowners Association 194-1945 4 vessels sunk 4 vessels layed up 1973 First of 5 standard bulk carriers delivered from Mitsui 199 Tanker Department is established 75 5 25 28 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
THE SHARE (DNORD) Master data Shareholder capital DKK 42,2, Number of shares and denomination 42,2, shares of DKK 1 Classes of shares 1 Composition of shareholders 16,86 registered shareholders owning 87.4% Approx. 31% international ownership Voting and ownership restrictions None 12.4% A/S Motortramp, Stensved, Denmark Stock exchange NASDAQ Copenhagen 3.7% NORDEN (treasury shares) Ticker symbol ISIN code DNORD DK68321 34.2% 4.1% Other top 2 shareholders Other registred Bloomberg code DNORD.DC 18.6% Non-registred Reuters code DNORD.CO 29 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
FINANCIAL STRENGTH Capital structure Cash in low-risk deposit accounts and securities Outstanding yard payments (incl. joint ventures (5%)) 218: USD 142 million 219: USD 26 million 22: USD 34 million Total: USD 22 million Payments to NORDEN for assets held for sale: USD 38 million Net commited cash (ultimo) USDm Q4 217 Q3 217 Q2 217 Q1 217 Q4 216 Adjusted net interest bearing assets* -59-69 -9 12 12 T/C obligations ** -1,226-1,267-1,229-1,22-1,143 Payments for newbuilding less proceeds from vessel sales** -149-169 -224-175 -163 Revenue from coverage** 676 629 623 652 672 Net commitments -758-877 -84-714 -62 *Adjusted for prepayments on vessel sales and currency swaps **Present values 3 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE
Jan-76 Jan-78 Jan-8 Jan-82 Jan-84 Jan-86 Jan-88 Jan-9 Jan-92 Jan-94 Jan-96 Jan-98 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 Jan-18 Jan-76 Jan-78 Jan-8 Jan-82 Jan-84 Jan-86 Jan-88 Jan-9 Jan-92 Jan-94 Jan-96 Jan-98 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 Jan-18 Million USD Million USD NEWBUILDING PRICES Panamax (Dry) 6 MR (Tank) 6 5 5 4 4 3 3 2 2 1 1 31 Annual report 217 CUSTODIANS OF SMARTER GLOBAL TRADE