Presentation of Q4 21 results
Safe Harbour Statement Matters discussed in this presentation may constitute forward-looking statements. Such statements reflect TORM's current expectations and are subject to certain risks and uncertainties that could negatively impact TORM's business. To understand these risks and uncertainties, please read TORM's announcements and filings with The US Securities and Exchange Commission. The presentation may include statements and illustrations concerning risks, plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, TORM's examination of historical operating trends, data contained in our records and other data available from third parties. As many of these factors are subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, TORM makes no warranties or representations about accuracy, sequence, timeliness or completeness of the content of this presentation. 2
Highlights Q4 21 Highlights Summary Result Q4 loss before tax of USD 37m, before USD 35m impairment charge and USD 16m vessel sale adjustment Full year 21 loss before tax of USD 85m, before impairment charge and vessel sale adjustment, in line with latest forecast Tanker Continued difficult trading conditions - ample supply Only periodic arbitrage oppor rtunities Dry Bulk Weaker rates following Australian flooding Orderbook concern Forecast TORM forecasts a loss beforee tax of USD 1 125 million for 211 Maintain long-term positive view on the product tank segment 3 3
Financial highlights Q4 21 Highlights Summary Financials USD million Q4 21 Q4 29 21 29 P&L Gross profit 33 52 18 Sale of vessels -16-2 EBITDA -5 32 97 Impairment loss on FR8 stake -35-2 -35 Profit before tax -88-3 -136 Profit before tax excl. impairment charge -53-1 -11 Balance Equity 1,115 1,247 1,115 NIBD 1,875 1,683 1,875 243 33 23-2 -19 1,247 1,683 Q4 21 loss before tax of USD 88m, and USD 37m excl. impairment loss on FR8 stake and vessel sale adjustment, in line with latest expectations 1 Q4 21 EBITDA of USD -5m, compared to USD 32m in Q4 29 primarily due to lower coverage in Q4 21 relative to Q4 29 and USD - 16m from vessel sale adjustment Cash and cash equivalents 12 122 12 Cash flow statement Operating cash flow -43 21-1 Investment cash flow -93-21 -187 122 116-199 Development in NIBD primarily driven by investments in the newbuilding programme 4
TORM s strategy Changing Trim Highlights Summary Customer Leadership Resilience Sophistication Tank Build on strength as global leader to benefit from a market recovery Consistently outperforming spot market benchmarks Two long-term MR vessels T/Cin Reorganisation of Technical division Transformation of pool set-up to strategic partnerships Bulk Expand profitably in all markets conditions Ensuring a positive profit margin under all market conditio ons Five year COA with China Nickel Resources Holdings Company Ltd. Three long-term Panamax (new eco design) T/C-in, two with purchase options One long-term Handymax T/C-in A number of short term T/C-in deals in the Bulker segment Ship owning and S&P Leverage relations & experience to become a leading asset player Creating value through optionality Sale of two Kamsarmaxes in Q4 21 for a total consideration of USD 9m Sale of one old MR vessel for a consideration of USD 12m Development of Customer value proposition Establishment of office in Brasil 5 ote: Includes activities up to March 21
The product tankers freight rates Freight rates (MR, LR1 and LR2) in USDt/day 9 LR2 (TC1) 8 7 6 5 4 3 2 1 jan feb mar apr apr may june july aug sep oct nov dec 7 29 21 LR1 (TC5) 211 6 5 4 3 2 1 jan feb mar apr apr may june july aug sep oct nov dec 5 29 21 MR (TC2) 211 4 3 2 1 TORM continue to outperform the benchmarks Q4: LR2 +48%, LR1 +38% and MR +52% 21: LR2 +14%, LR1 +22% and MR +46% Highlights Summary Q4 21 positive impacts: Support to the LR from west to east Naphtha arbitrage in November and December Transatlantic MR strength from Gasoline arbitrage opportunity Chinese diesel demand Cold weather stimulating heating oil demand Q4 21 negative impacts: High influx of tonnage, 8% net fleet growth for 21 Declining US gasoline import Continued low level of floating storage Weak dirty market Into Q1 211 Ample tonnage Non fundamental demand from oil price volatility jan feb mar apr apr may june july aug sep oct nov dec Source: Clarksons, until 4. March 211 25-29 range 29 21 211 LR2 vessel size (Long Range): Aframax tanker 8-12, dwt LR1 vessel size (Long Range): Panamax tanker 6-8, dwt MR vessel size (Medium Range):Handymax tanker 3-6, dwt 6
Flourishing trading routes as dislocation continues Highlights Summary Net refinery capacity 1, barrels USA 6 4 2-2 29 21 211 212 213 214 215-4 Brazil 5 4 3 2 1 29 21 211 212 213 214 215-5 -1-15 -2-25 -3 Europe 1 29 21 211 212 213 214 215 8 6 4 2 Middle East 1 8 6 4 2 29 21 211 212 213 214 215 India 4 3 2 1 China 29 21 211 212 213 214 215 Japan 29 21 211 212 213 214 215-5 29 21 211 212 213 214 215-1 -15-2 -25-3 Source: JBC Energy New refineries in the Middle East and India are producing at high utilization rates driven by cost advantages Increasing US product exports South America relying on import to satisfy growing demand 7 China remains a positive swingfactor
Supply continues to be affected by significant slippage Slippage is continuing Highlights Summary No. of vessels 12 Newbuildings (LR2, LR1, MR & SR) 1 8 6 4 51% 54% 27% 42% Significant slippage continues Q4 21, slippage of 42% In 21 delivery of 174 vessels, 44% less than planned 21 net fleet growth of 8% 2 Q1 Q2 Q3 Q4 Expected decliveries Actual deliveries Source: Inge Steensland and TORM and net fleet growth is declining No 3 25 1% 2 8% 15 1 5% 5 4% 4% -5 29 21 211 212 213 % yoy 12% 1% 8% 6% 4% 2% % Orderbook stands at 19% of the fleet on water Slippage expected to continue 3% in 211 and 212 No slippage from 213 as there is free yard capacity compared to orders this year TORM estimates 1% cancellations Limited cancellations Assumed new ordering of 4 MR (213 delivery) LR2 MR New ordering est. LR1 SR Total by MR equivalent ote: Net fleet growth: Gross order book adjusted for scrapping, slippage, phase out of ingle hulls and new ordering ource: Inge Steensland and TORM Total net growth in the fleet declines from 8% in 21 to app. 4% in 213 8
Product - demand will outgrow supply from 211 to 213 Demand and supply development (211-213) Highlights Summary Number of vessels* 75 5 25 Demand 26 Refinery and tr ransportation 54 Growth in oil demand 68 Inc creasing port days 75 itrage/cross / triangulation Arbi trade/ 43 Total demand increase Swing factors 258 Total supply increase 72 Phase out & Scrapping 74 LR into dirty market 4 Cancellations Supply 4 44 New ordering Orde er book gross Swing factors: Order book delays Delays in refineries Floating storage Slow steaming Changes in transport patterns Embargoes & strikes Blockage of water ways and ports Disruptions to refinery production Hurricanes Source: Torm research *All effects are recalculated into MR equivalents to enable comparision based on their volume relative to MR Demand primarily driven by Refinery expansions in the Middle East and India & changes in transport patterns Increased oil demand Increasing port days due to increased activity/bottlenecks Arbitrage Improving US exports Supply primarily driven by LR into dirty Some LR1 vessels are replacing Panamax phase outs in crude 3% of LR2 vessels are trading in the crude Phase-out of single hulls and scrapping of old tonnage Additional new ordering of 213 deliveries 9
Product tanker vessel prices stable but limited S&P activity Highlights Summary Vessel price development MR newbuilding and second-hand prices USDm 6 5 4 3 2 1 Jan/8 Jul/8 Jan/9 Jul/9 Jan/1 Jul/1 Jan/11 Stable and second-hand prices in Q4 21 S&P activity continued in Q4 21, but limited concluded deals. Increased spread willing buyer / seller TORM have in Q1, in line with strategy of operating a young fleet, sold Faja De Oro (MR, 1995 build) for USD 12m (USD 6m loss), delivered in Q1 211 MR DWT Products Tanker Newbuilding Prices MR 5 year old second-hand prices 3 25 USDt/day MR - 1 year T/C and second-hand prices USDm 6 5 2 15 1 5 Jan/8 Jul/8 Jan/9 Jul/9 Jan/1 Jul/1 Jan/11 4 3 2 1 T/C rates and second-hand prices are relatively well correlated 1 Year Time charter Rate 47-48, Modern Products Tanker MR 5 year old second-hand prices (right axis) 1 ource: Clarksons
Freight rate development in USDt/day Panamax 1 9 8 7 6 5 4 3 2 1 jan feb mar apr may june july sep oct nov dec Dry bulk rates have decreased in Q4 21. High influx of new tonnage Infrastructure disruptions in Australia Highlights Summary TORM relatively unaffected by rate volatility At the end of September 21, TORM had covered 87% of the remaining earning days in 21 25-29 range 29 21 211 Vessel price development USDm 1 8 Panamax newbuilding and second-hand prices Continued high S&P activity Decreasing resale and second-hand prices 6 4 2 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Continued new ordering in Q4 in China, though less volume than in Q3 TORM sold two Kamsarmax newbuildings (Q1 211 delivery) in Q4 21 at USD 45m a piece 75-77. DWT Panamax Bulkcarrier Newbuilding Prices Panamax 76K bulk carrier 5 Year Old Secondhand Prices 11 Source: Clarksons
dependant on China and high supply Chinese coal and ore import mio tons 8 7 6 5 4 3 2 1 25 26 27 28 29 21 China the dominant importer of iron ore and coal. Produce 5% of the world steel production Strong import in December 21; 58m tons Iron ore; +7% from Dec 28 17m tons coal; +55% from Dec 28 Highlights Summary Iron ore & concentrate Coal Dry bulk orderbook mdwt 1 8 6 4 2-2 29 21 211 212 213 Deletions Deliveries Increase in total fleet (right axis) % y-o-y 16 14 12 1 8 6 4 2 The total dry bulk fleet increased by 15% in 21 Expected to grow by 14% in 211. Lower orderbook in TORMs core fleet segment For dry bulk in total - constitute 5% of the fleet For Panamax - constitute 21% of fleet Cancellation and slippage is expected to continue Cancellation of 15-2% Slippage of 3-4% 12 Source: EcoWin and Drewry
Continued efficiency focus Highlights Summary Development in OPEX and admin expenses 9. Development in operating cost per day (USD/day) 8. 2% 26% 19% 7. 6. 5. 4. 3. USD m 1 9 8 7 6 5 LR2 LR1 MR 28 29 21 Annual administrative expenses 26% SR 11% 29% Pana amax The Greater Efficiency Power programme launched by the end of 28 delivered total annual savings of app. USD 5m going forward as planned: Average Opex reduction of approximately 2% Reduced administrative expenses of 26% New efficiency savings of USD 1m from optimization of processes and procedures identified: Standardization and best practice sharing between vessels Strategic procurement spare parts Reduction in port expenses Bunker procurement Process efficiency 4 3 2 1 28 29 21 21 excl. one offs 13
TORMs financial position Highlights Summary Status Total cash and unused credit facilities USD 351m as per 31 December 21 Remaining capex of USD 258m relating to the newbuilding program as per 31 December 21 In Q4 TORM sold two Kamsarmax newbuildings (delivery in Q1 211) for a total consideration of USD 9m In Q1 211 TORM has sold one MR vessel (delivery in Q1 211) for a total consideration of USD 12m Net debt* USD 1,875m by the end of Q4 21 compared to USD 1,738m by the end of Q3 21 TORM has no loan to value covenants TORM s main debt covenants: Minimum book equity ratio of 25% Minimum book value of equity of DKK 1.25bn (app. USD 25m) No less than USD 6m in liquidity USDm 5 45 4 35 3 25 2 15 1 5 - USDm 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 165 211 213 211 85 Remaining capex and liquidity 9 258 12 Vessel sales 351 212 213 214 Total CAPEX Cash and unused credit facilities 21 Repayment profile 836 194 541 212 213 214 215 and after 1,995 Total debt* 14 * Including financial leases
TORMs forecast for 211 Highlights Summary 211 Guidance TORM forecasts a loss before tax of USD 1 125 m for 211 Considerable uncertainty as only 24% of the earning days are covered by end 21 (over 3, days are uncovered) USDm Change in freight rates (USD/day) Sensitivity change in profit with change in freight rates Segment -2, -1, 1, 2, Tankers -59-29 29 59 Bulk -3-2 2 3 Total -62-31 31 62 Coverage (% and USD/day) 8% 6% 4% 2% % 16,13 16,896 73% 16% 3% 18% 1% 1% 211 Tanker division 15,69 17,,272 18,794 17, 212 213 Bulk division 15
Appendix 16
Introduction to TORM Strategy and key facts A world leading product tanker company Among leading owners in size 12 years of history Strategy TORM is one of the world s leading carriers of refined oil products as well as a significant player in the dry bulk market. The Company runs a fleet of modern vessels in cooperation with other respected shipping companies sharing TORM s commitment to safety, environmental responsibility and customer service Global footprint based on regional power and presence Company facts Large and modern fleet (31/12-21) 71.5 owned vessels with an avg. age of 6 years 69.5 product tankers 2 dry bulkers 38 vessels on longer T/C-in (12 months or more at entering): : 25 product tankers 13 dry bulkers Pools/com mngt. 25 product tankers Orderbook of 8 newbuildings (fully financed) 6 product tankers (MR tankers) 2 bulk carriers (Kamsarmax) Listings NASDAQ OMX Copenhagen & NASDAQ in New York Market cap ~USD 5m Key financials USD million 21 29 28 27 Revenue 856 862 1,184 774 EBITDA 97 23 572 288 Net income -135-17 361 792 Equity 1,115 1,247 1,279 1,81 NIBD 1,875 1,683 1,55 1,548 Offices app. 3: 17 in Copenhagen 2 in Singapore 2 in Manilaa 8 in Mumbai 1 in USA (Stamford) TBA Brasil (Rio de Janerio) Seafarers app. 2,9: 35 Danish seafarers 1 Croatian/Italian seafarers 1,4 Indian seafarers 1,5 Philippine seafarers 17
Large and modern fleet (as per 31 December 21) Company facts On water Newbuildings / Deliveries Total 211 212 Owned Product tankers LR2 13 LR1 8 MR 38 4 2 SR 11 Total product tankers 7 4 2 Bulk Handymax - - - Panamax 2-1 Total bulk 2-1 TC in (contracts above 12 months) Product tankers LR2 - - - LR1 16 2 - MR 9 1 - SR - - - Total product tankers 25 3 - Bulk Handymax 1 - - Panamax 12 3 2 Total bulk 13 3 2 Owned and TC in Product tankers LR2 13 - - LR1 24 2 - MR 47 5 2 SR 11 - - Total product tankers 95 7 2 Bulk Handymax 1 - - Panamax 14 3 3 Total bulk 15 3 3 Pools/Commercial managment Product tankers 25 213 After 213 13 8 - - 44 11 - - 76 - - - 1-4 1-4 - - - - - 18 - - 1 - - - - - 28 - - 1 1 1 19 1 1 2 - - 13 - - 26 - - 54 - - 11 - - 14 - - 1 2 1 23 2 1 24 18
Detailed key figures overview Key figures overview USD million 21 29 Revenue 856 862 EBITDA 97 23 Net income -135-17 28 27 26 25 1,184 774 64 586 572 288 31 351 361 792 235 299 Balance Total assets 3,286 3,227 Long term assets 2,984 2,944 Equity 1,115 1,247 NIBD 1,875 1,683 Cash and cash equivalents 12 122 3,317 2,959 2,89 1,81 2,913 2,73 1,97 1,528 1,279 1,81 1,281 95 1,55 1,548 663 632 168 15 32 157 Cash flow statement Operating cash flow -1 116 Investment cash flow -187-199 Financing cash flow 186 37 385 188 232 261-262 -357-118 -473-59 242-239 33 Financial related key figures EBITDA margin 11% 24% Equity ratio 34% 39% Return on invested capital (ROIC) -3% 2% 48% 37% 5% 6% 39% 37% 61% 5% 16% 1% 2% 34% 19
Earning days, TC cost and coverage for 211, 212 and 213 Earning days, TC cost and coverage 211 212 213 211 Ow ned days LR2 4.679 4.732 4.719 LR1 2.543 2.55 2.543 MR 14.324 15.24 15.613 SR 3.951 4.4 3.993 Tanker division 25.497 26.526 26.868 Panamax 728 769 1.423 Handymax - - - Bulk division 728 769 1.423 Total 26.225 27.295 28.291 212 213 At 31 December 21, TORM had covered 16% of the earning days for 211 in the Tanker Division at USD 16,13/day and 73% of the earning days in the Bulk Division at USD 16,896/day T/C in days T/C in costs (USD/day) LR2 - - - - - - LR1 6.42 4.819 2.978 21.496 21.99 23.882 MR 3.455 3.92 2.849 16.74 16.165 15.928 SR - - - - - - Tanker division 9.497 7.911 5.827 19.766 19.664 19.993 Panamax 4.344 4.34 4.142 15.436 15.894 16.2 Handymax 742 694 363 16.756 16.859 15.995 Bulk division 5.86 5.34 4.55 15.629 16.27 16.184 Total 14.583 12.945 1.332 18.323 18.25 18.332 Total physical days LR2 4.679 4.732 4.719 767 LR1 8.585 7.369 5.521 1.241 MR 17.779 18.332 18.462 2.543 SR 3.951 4.4 3.993 1.63 Tanker division 34.994 34.437 32.695 5.614 Panamax 5.72 5.19 5.565 3.45 Handymax 742 694 363 1.2 Bulk division 5.814 5.83 5.928 4.245 Total 4.88 4.24 38.623 9.859 Covered % LR2 16% 3% % 22.961 LR1 14% 7% 7% 16.652 MR 14% 2% % 14.42 SR 27% 1% % 14.54 Tanker division 16% 3% 1% 16.13 Panamax 6% 8% % 16.934 Handymax 162% 87% 167% 16.81 Bulk division 73% 18% 1% 16.896 Total 24% 5% 3% 16.444 Covered days 13-532 365 43-4 - 1.16 365 43-66 66 1.36 66 2.142 971 Coverage rates (USD/day) 22.962-17.495 15.69 15.353-15.112-17.272 15.69 21.322-17. 17. 18.794 17. 18.8 16.58 Fair value of freight rate contracts that are mark-to-market in the income statement (USD m): Contracts not included above, Contracts included above -,2 Notes Actual no of days can vary from projected no of days primarily due to vessel sales and delays of vessel deliveries. T/C in costs do no include potential extra payments from profit split arrangements. 2
Achieved spot rates Financials 17, 15, 13, 11, 9, 7, 5, 3, TORM spot versus benchmark Q421 (USD/day) 48% 52% 38% Achieved spot rates exceed benchmarks Large and high quality fleet Strong worldwide customer base Cooperation on key functions Demonstrating organisational strengths LR2 LR1 MR TORM spot Benchmark 19, 17, 15, 13, 11, 9, 7, 5, 3, TORM spot versus benchmark last 12 months (USD/day) 14% 22% 46% In Q4 outperformance across segments Following Q3 below benchmark on LR2 and LR1 LR2 LR1 MR TORM spot Benchmark *Benchmarks are based on spot earnings from Clarksons: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MR: Avg. of TC2 (Rotterdam->NY), TC4 (Singapore-> Chiba) and Curacao->NY 21
Major trading routes in Q4 21 % out of total fixtures (last quarter) with major cargo group North America Trading 7% (9%) (Fuel oil) USA Europe 4% (6%) (Diesel) Europe USA 3% (5%) (Unl. Gasoline) South America world 3% (2%) (Vegoils) North Africa Italy & France 14% (11%) (Crude Oil) Europe Nigeria & other 3% (5%) (Unl. Gasoline) Intra-AG trading 3% (6%) (Gasoil/fuel oil) Saudi Arabia, Kuwait & UAE Taiwan, South Korea & Japan 15% (14%) (Naphtha) Intra-Asia Trading 9% (7%) (Gasoil/fuel oil) Source: Torm 22
Strong management team in place Company facts Executive management Jacob Meldgaard CEO of TORM since April 21 Previously Executive Vice President of 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 2 years of shipping experience Roland M. Andersen CFO of TORM since May 28 Previously CFO of Danish mobile and broadband operator Sonofon and prior to that CFO of private-equity-owned Cybercity Prior to that he held various positions with A.P. Mølle er-mærsk, the latest one as CFO for A.P. Møller-Mærsk Singapore More than 1 years of shipping experience Management with a international outlook and many years of shipping experience Senior management Tina Revsbech Head of Tanker Division Alex Christiansen Head of Bulk Division Claus U. Jensen Head of Technical Division Jesper Bo Hansen Regional Managing Director Americas Jan Nørgaard Lauridsen Regional Managing Director Asia-Pacific Christian Riber Head of Human Resources Organization demonstrated strength and effectiveness during the recent transition period 23
The TORM share Company facts The share Listings On NASDAQ OMX Copenhagen, ticker TORM ADR program on NASDAQ,(USA) ticker TRMD Ownership structure (31 December 21) Market cap USD ~5m (1. march 211) Shares One class of shares, each carrying one vote Share capital of 72.8m shares of DKK 5 each 33.6% 32.2% Investor relations contact Sune S. Mikkelsen Tuborg Havnevej 18 29 Hellerup, Denmark Phone (+45) 3917 9343 E-mail: ssm@torm.com 3.1% 4.8% 6.3% 2.% For futher company information visit TORM at www.torm.com Beltest Shipping Company Ltd. (Cyprus) Menfield Navigation Company Limited (Cyprus) A/S Dampskibsselskabet TORMs Understøttelsesfond Own shares ADR Other 24 24
Corporate Social Responsibility Company facts Focus on environment..torm has Increasing political focus on environmental regulation globally and regionally TORM as part of the Shipowners association is pushing for regulation in the International Maritime Organisation, which works to set standards for the sector TORM became signatory to the UN Global Compact in 29 as the 1st Danish shipping company TORM regards high environmental standards as a business opportunity and an integral part of risk management (e.g. controlling number of incidents and being ahead of legislation) TORM founding member of the World Ocean Council, an organisation that works for sustainable use of the Ocean across sectors CSR integrated in Changing Trim strategy : Customers - bringing the customer in focus: engaging our customers in dialogue about CSR to make sure we perform beyond their expectations Sophistication an accelerated approach to structure and processes: defining CSR Key Performance Indicators (CO2 emissions, safety and facilitation payment) and following up th hrough performance dialogue, is a sophistication of our CSR work Set climate targets: Reduction of CO2 emissions pr. vessel by 2% in 22 compared to 28 Reduction of CO2 emissions from offices by 25% pr. employee in 22 compared to 28 TORM published its 2 nd CSR Report in March 211 Available on www.torm.com/csr TORM participates in the Carbon Disclosure Project (CDP) 25 25
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