Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — Investor Day (September 2020)
83 slides from Pacific Basin Shipping's investor day presentation, Sep 22, 2020
Slide 1: 2020 Investor Day
2020 Investor Day
Slide 2: Investor Day agenda and speakers
22 September 2020, Tuesday 3.30pm-6.30pm HKT 3.30pm Mats Berglund, CEO – Introduction ~5.20pm ~4.05pm Morten Ingebrigtsen, Director, Asset Management – Resilient Demand and Improving Supply Surinder Brrar, Director, Chartering (Pacific) – Outperforming in all markets ~5.55pm ~4.30pm Peter Schulz, CF
Slide 3: 2020 Investor Day
2020 Investor Day
Slide 4: Pacific Basin Overview
Pacific Basin Overview World’s largest owner and operator of modern Handysize & Supramax ships Cargo system business model – consistently outperforming market rates About 230 ships on the water, including 117 owned, serving major industrial customers around the world Hong Kong headquartered
Slide 5: Understanding Our Core Market
Understanding Our Core Market 2020 Investor Day 4 From Annual Report 2019
Slide 6: Experienced Board & Management Team
Experienced Board & Management Team Chairman & BOD Numbers Indicate Years in Company / Years in Shipping CEO Mats Berglund Asset Management 8/34 Morten Ingebrigtsen 31/34 Finance & Accounting, CFO Daigoro Oyama 16/21 Peter Schulz 3/5 (+20 years in finance) HR P.B. Subbiah Company Secretary & Risk 17
Slide 7: Pacific Basin Values
Pacific Basin Values We target excellence and We are passionate about success through dedication and our customers, our people, teamwork, and see everyone in our business and our brand Pacific Basin as a corporate ambassador We are caring, good Everyone in Pacific Basin is a humoured and fair, and t
Slide 8: Shipping Terminology
Shipping Terminology Bunker Port Voyage Costs Canal = Commercial Operation KPI: TCE*/day Spot / Crew Voyage Opex Costs Maintenance & Repairs Charter / Insurance COA** = Chartering = Ship Management Time charter Capital Costs Bareboat Depreciation Interest charter 2020 Investor Day 7 * TCE = Time Cha
Slide 9: Key Components of our Business Model
Key Components of our Business Model Our business model has been refined over many years. We are able to generate a TCE earnings premium over market rates because of our high laden percentage (minimum ballast legs), which is made possible by a combination of: Versatile ships and diverse trades in
Slide 10: Pacific Basin Continues to Outperform on Every Level
Pacific Basin Continues to Outperform on Every Level TCE Handysize Performance vs Market Supramax Performance vs Market TCE US$/day US$1,920/day average TCE premium US$1,530/day average TCE premium US$/day 14,000 in last 5 years 14,000 in last 5 years PB Performance $11,720 12,000 12,000 BSI $9,630
Slide 11: Market Rates have Improved Significantly since May
Market Rates have Improved Significantly since May Baltic Handysize Index (BHSI) 1 Baltic Supramax Index (BSI) 2 Market Spot Rates in 2016-2020 Market Spot Rates in 2016-2020 US$/day net* US$/day net* 10,000 2017 15,000 8,000 2018 12,000 2018 2019 2017 6,000 9,000 2016 4,000 21 Sep 2020 6,000 2019 2
Slide 12: Improved Rates Supports Vessel Values
Improved Rates Supports Vessel Values Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 70 50 60 40 Newbuilding (38,000 dwt): 50 US$23.0m 30 40 Newbuilding (62,000 dwt): US$24.0m 30 20 20 10 10 5 years (58,000 dwt): US$15.5m 5 years (37,000 dwt): US$14.75m 0 0 05 06 07 08
Slide 13: Our Strategic Direction and Priorities
Our Strategic Direction and Priorities Maintain and grow our cargo focus and scale as both a fully integrated owner and operator – Both asset heavy and asset light Empowered local chartering and operations teams close to customers – With best in class centralised support and systems Continue o
Slide 14: Q&A
Q&A 2020 Investor Day 13
Slide 15: Outperforming in all markets
in all markets 2020 Investor Day
Slide 16: Outperforming in All Markets: Overview
Outperforming in All Markets: Overview Our Vision Total global dry bulk trade volumes of 5.4B MT pa What choices have we made in the cargo “To be a leading ship owner/operator in segments? dry bulk shipping, and the first choice partner Total global dry bulk fleet of 11,500 ships for customers
Slide 17: Why Handysize and Supramax?
Why Handysize and Supramax? Global Dry Bulk Trade (Volume) = 5.4 Billion Tonnes 29% 24% 9% 39% Iron Ore Coal Grain & Minor Bulk Soybean Minor Bulks & Grain is ~48% of total Dry Bulk demand Pacific Basin focuses on these growing markets Why we choose this segment More diverse customer, cargo an
Slide 18: Diverse Cargoes, Customers and Geographically
Diverse Cargoes, Customers and Geographically Our Cargo Volumes in 1H 2020 2/3rds of our cargo volumes Diverse range of commodities reduces cargo risk Diverse customers reduces counterparty risk Diverse geographically increases resilience and improves our capability to keep our ships laden % h
Slide 19: Minor Bulk Ships: Our Strategic Focus
Minor Bulk Ships: Our Strategic Focus 2020 Investor Day 18
Slide 20: Fleet List – 30 June 2020
Fleet List – 30 June 2020 117Vessels 20 LT 98 ST 235 Total owned Chartered * Chartered * Total Handysize 81 15 42 138 Supramax 35 4 56 95 Post-Panamax 1 1 0 2 Average age of core fleet: 9.6 years old 2020 Investor Day 19
Slide 21: Our Worldwide Network: Our People
Our Worldwide Network Our People Close to our customers 12 local dry 24/7 bulk offices support Strong local relationships with customers Experienced commercial and operations staff around the world Being local facilitates clear understanding of and response to customers’ needs and first-rate p
Slide 22: Our People
Our People Diverse backgrounds - 28 nationalities Well established trainee program since 2008 Staff given global exposure Emphasis on shipping as a career, not just a job Preference for internal promotions and succession Lateral hires at mid-management level bringing fresh knowledge, new
Slide 23: Optimising Cargo Systems
Optimising Cargo Systems A normal cargo system comprises 1 empty ballast leg + 1 laden fronthaul leg By combining backhaul and fronthaul cargoes, we achieve higher utilisation and outperform the market (Baltic Exchange indices) Operating activity also contributes to our profitability 2020 Inve
Slide 24: Continued Strong Outperformance
Continued Strong Outperformance Core Business 1H20 Last 12 months (US$) (US$) Handysize outperformance vs index per day 2,270 2,290 Supramax outperformance vs index per day 4,250 2,550 Operating Activity 1H20 Last 12 months Operating Margin per day 1,790 1,400 Strong outperformance in Supramax is
Slide 25: Q&A
Q&A 2020 Investor Day 24
Slide 26: 2020 Investor Day
2020 Investor Day
Slide 27: Functions of Commercial Operations
Functions of Commercial Operations Cargo Engagement Voyage Voyage Closing Vessel Engagement Management Chartering Commercial Operations Commercial Operations / Voyage Accounts Fix Cargoes A. Efficiently execute Management of Voyage Use Owned Ships every voyage Accounts Use Charter-in Ships B.
Slide 28: Commercial Operations
Commercial Operations Voyage Accounts Chartering Dept and Corporate Cargo Brokers Accounts Insurance and Cargo Legal Dept Commercial Customers Operations Ship Agents, Brokers between Stevedores, PB & 3rd Party Towage Providers, Ship Owners Fuel Suppliers Ship Masters & 3rd Party Ship Owners / In-hou
Slide 29: Voyage Optimization: Best Practice
Voyage Optimization: Best Practice Motivated Staff Proficient Fuel Management Good Cost Control Cargo Hold Preparation Handling Complex Cargoes and Trades Voyage Optimization Effective use of Technology 2020 Investor Day 28
Slide 30: Voyage Optimization: Energy Efficiency Measures
Voyage Optimization: Energy Efficiency Measures 1% reduction in Speed achieves 2~3% reduction in Fuel consumption 2020 Investor Day 29
Slide 31: Major Cargoes we Transport: Grain
Major Cargoes we Transport: Grain Discharging Wheat: San Antonio, Chile Discharging Corn: Bangladesh Loading Wheat: Vancouver, Canada 2020 Investor Day 30
Slide 32: Major Cargoes we Transport: Construction Material
Major Cargoes we Transport: Construction Material Loading Cement: Kanda, Japan to Timaru, New Zealand Discharging Cement : Hong Kong Loading Slag: Kimitsu, Japan to Brisbane, Australia 2020 Investor Day 31
Slide 33: Major Cargoes we Transport: Logs
Major Cargoes we Transport: Logs Loading Logs: BC, Canada Loading Logs: New Zealand 2020 Investor Day 32
Slide 34: We also Transport: Minor Bulk Cargoes
We also Transport: Minor Bulk Cargoes Loading Potash: Vancouver, Canada Loading Salt: Chile Discharging Soda Ash: Malaysia Loading Armour Stone: Indonesia to Japan 2020 Investor Day 33
Slide 35: We also Transport: Steel Products
We also Transport: Steel Products Loading Pipes on deck: China to Vancouver BC, Canada Loading Cold Rolled Coils and Tubes: China to Central/South America 2020 Investor Day 34
Slide 36: We also Transport: Project & Bagged Cargoes
We also Transport: Project & Bagged Cargoes Loading Mobile Homes: Loading Containers: China to Long Beach, USA China to Port Hedland, Australia Loading Bagged Rice: Rio Grande, Brazil to Dakar, Senegal 2020 Investor Day 35
Slide 37: We also Transport: Project Cargoes
We also Transport: Project Cargoes Loading Diesel Oil Tanks: China to Australia Loading Coal Wagons: China to Gladstone, Australia Loading Windmill Blades: China to Peru 2020 Investor Day 36
Slide 38: Cargo Hold Preparation: From Dirty to Clean cargoes
Cargo Hold Preparation: From Dirty to Clean cargoes Cargo hold cleaning by Ship’s Crew stationed on Manlifts to remove Cement residues by using high pressure washers 2020 Investor Day 37
Slide 39: Cargo Hold Preparation: From Dirty to Clean cargoes
Cargo Hold Preparation: From Dirty to Clean cargoes Ship’s Crew removing hardened Cement in cargo holds 2020 Investor Day 38
Slide 40: Cargo Hold Preparation: From Dirty to Clean cargoes
Cargo Hold Preparation: From Dirty to Clean cargoes Cargo hold cleaning by Ship’s Crew to remove Coal stains 2020 Investor Day 39
Slide 41: Cargo Hold Preparation: From Dirty to Clean cargoes
Cargo Hold Preparation: From Dirty to Clean cargoes Green Delayed Petcoke stains: Condition of Cargo Holds BEFORE cleaning Cargo Hold condition AFTER completion of cleaning by Ship’s Crew 2020 Investor Day 40
Slide 42: Rough Seas are One of Many Challenges Faced by Crew
Rough Seas are One of Many Challenges Faced by Crew 2020 Investor Day 41
Slide 43: Commercial Operations: Contribution to Out Performance
Commercial Operations: Contribution to Out Performance In Summary, our Commercial Operations team hugely contributes to our Out Performance through, An experienced team of dedicated and motivated professionals spread across our global office network Outstanding Fuel Management Good attention t
Slide 44: Q&A
Q&A 2020 Investor Day 43
Slide 45: 2020 Investor Day
2020 Investor Day
Slide 46: Ship Management of PB Owned Fleet
Ship Management of PB Owned Fleet Our vision: to be a leading ship owner/operator in dry bulk shipping, and to be the first choice partner for customers and other stakeholders Our mission: to be the best in our field by continuously refining our business model, our service and our conduct in everyth
Slide 47: In-House Ship Management of Owned Fleet
Overview of Ship Management Function In- House Ship Management of Owned Fleet We manage and inspire over 4,000 People at sea and on shore to manage our owned fleet with focus on safe & efficient operation of Owned Fleet Tailor-made solutions to complement our commercial operations and trading Ex
Slide 48: Techno-Commercial Approach
Techno- Commercial Approach Close interdepartmental co-operation to facilitate business Modification of ships to carry more diverse cargos Proactive measures for specific trades such as USWC log loading Careful risk assessment to ensure safety on challenging routes Speed Reduction Program to
Slide 49: Crewing Management
Crewing Management Employer of Choice for our ship crew as a reliable Ship Owner with clear focus on their safety and well-being Crew Pools Selection and retention of competent PRC Officers + PRC Ratings 44 and capable officers and ratings to PRC officers + FIL ratings 18 operate the ships Fil/ FS
Slide 50: Crew Retention
Crew Retention Senior Officers Junior Officers Ratings Overall Crew Retention Rate % 95 95 80 87 Leisure on Board Indoor sports, games entertainment equipment Entertainment budget to buy welfare items Free mail to/from vessel Free e-mail computer accessible to all crew Free daily news serv
Slide 51: Safe Operation
Safe Operation What can go wrong? Development of effective policies 3W What factors can cause it to go and procedures for safe operation wrong? Comprehensive programs for What shall I do to prevent it going seafarer training and development wrong? on board and ashore Continuous review of polic
Slide 52: Health & Safety Standards
Health & Safety Standards Loss Time Injury Frequency/ Port State Inspections Total Recordable Case Frequency Pacific Basin Industry* Port State Control Inspections Pacific Basin Hong Kong** LTIF 0.6 0.89 Deficiencies/ inspection 0.60 1.23 TRCF 1.2 2.55 Nil deficiency inspections 76.79% 64.63% Hong
Slide 53: Cost Efficient Operation
Cost Efficient Operation Industry PB PB PB 2020 Opex average* 2018 2019 June Handysize 4,358 3,877 4,101 3,944 Supramax 4,634 3,778 4,009 3,955 * Source BDO Opcost 2018 Optimized Engine crew on UMS ships Utilization of commonalities across the fleet as in-house manager for single owner Procure
Slide 54: High Maintenance Standards
High Maintenance Standards Operate vessels till 25 years age Maintain vessels to ‘five year old standard’ Planned maintenance system and proactive repairs during docking Block Island (built 2012) Champion Bay(built 2000) Port Kenny (built 2004) Otago Harbour (built 2004) 2020 Investor Day 53
Slide 55: Projects
Projects Ballast Water Treatment System 11 ships delivered with BWTS installed, 55 ships retrofit and 50 remaining BWTS based on filtration & disinfection selected due to one time treatment during uptake only and low power requirement Scrubbers (IMO 2020 Sulphur Cap compliance) Retro-fitted on
Slide 56: Environment friendly operation
Environment friendly operation IMO Goals for GHG reduction Reduce CO2 emissions by 40% per transport work in 2030 compared to 2008 Reduce total CO2 emissions by 50% in 2050 compared to 2008 Pacific Basin activities Low emission per transport work due to efficient operation with high laden rati
Slide 57: Award-winning Safety Culture & Performance
Award-winning Safety Culture & Performance Top global & regional industry awards in 2019 Notable other awards in recent years Dry Bulk Operator of the Year at Lloyd’s Lloyd’s List Asia Pacific Awards 2019 List Global Awards 2018 Excellence in Dry Bulk Shipping Company of the Year at Lloyd’s
Slide 58: Q&A
Q&A 2020 Investor Day 57
Slide 59: 2020 Investor Day
2020 Investor Day
Slide 60: Dry Bulk Market Overview
Dry Bulk Market Overview Handysize and Supramax average index earnings represent the lowest Q2 on record The dry bulk market has in 2H 2020 proven to be remarkably resilient in light of strong supply pressure and COVID19 headwind plus the ongoing trade war Fleet growth was at a multi-year high
Slide 61: 2020 in a Nutshell
2020 in a Nutshell Avg monthly Average Supra & Handy Spot Market Earnings Despite high fleet growth US$/day 10000 (peaking in 1H) plus increased vessel speed 9307 9000 adding to supply as well 8642 as COVID19 continuing to 8000 depress economic activity, 7682 the market balance has 7000 improved in
Slide 62: Net Fleet Growth Peaked at a Multi-Year High in May 2020
Net Fleet Growth Peaked at a Multi-Year High in May 2020 and is Now in Decline Year-on-Year Net BC Fleet Growth 6.0% +4.7% in May-2020 was a multi-year high 5.0% Latest +4.3% 4.3% (as of start Sept) 4.0% 3.1% Clarksons forecast 3.0% +3.1% for full year 2020 2.0% Clarksons forecast 1.0% +1.9% in Nov-
Slide 63: Dry Bulk Orderbook is at a Multi-Decade Low
Dry Bulk Orderbook is at a Multi-Decade Low and Set to Decline Further 10% Total dry bulk orderbook % of fleet Dry Bulk Orderbook 8.9% overall 7% of the fleet 9% smaller vessels are less 90% 8% 6.8% 7% 80% 6% 5.5% 5% 3.8% 70% 4% 3% 2% 60% 1% 0% 50% Cape Pmax Supra Handy Current dry bulk orderbook 40
Slide 64: Dry Bulk Contracting is Declining
Dry Bulk Contracting is Declining while There is Uncertainty Over Future Design Concepts % of fleet by year Dry Bulk Contracting 50% This has in the past tended to peak every 3-4 2007 years but uncertainty over future compliant 45% propulsion technology will limit appetite for new contracting until
Slide 65: Scrapping has Increased from Last Year But Remains Low
Scrapping has Increased from Last Year But Remains Low in a Long-Term Perspective % of fleet by year Dry Bulk Scrapping 6.0% The pace of scrapping is primarily driven by market strength so works as a safety valve for earnings 5.0% 4.0% 3.0% 2020 annualised 1.5% (year-to-date as of start 2.0% Sept is
Slide 66: Global demand: Only Coal Shows a Significant COVID19 Decline
Global demand: Out of the Four Main Cargo Groups Only Coal Shows a Significant COVID19 Related Decline Mill tonnes Mill tonnes annualised Grain Trade Loadings annualised Minor Bulk Loadings 600 1700 550 1600 500 1500 1400 450 1300 400 1200 350 1100 300 1000 250 900 200 800 2013 2014 2015 2016 2017 2
Slide 67: China Demand: Dry Commodity Imports Up 8% YTD
China Demand: Dry Commodity Imports Up 8% YTD Plus 81 Mill Tonnes Covering 12 Commodities 200 China dry bulk imports Jan-Jul 2020 Jul = 183Mt 180 vs the same period last year YoY change 160 mill tonnes 140 120 100 80 60 40 China dry bulk imports since 2009 20 covering 12 dry commodities Mill tonnes
Slide 68: Dry Bulk Market Risks and Opportunities
Dry Bulk Market Risks and Opportunities Risk: Opportunities: COVID19 flare-up Vaccine/normalisation Economic decline Economic recovery / catch-up effect De-globalisation Trade War de-escalation Trade War escalation Economic stimulus Shift away from coal Reduced NB deliveries Ch
Slide 69: Summary
Summary As a starting point, the dry bulk freight market today is better balanced than expected - given unusual and difficult circumstances for supply as well as for demand We believe the worst is behind us in terms of COVID19 effect on vessel demand and with upside from a normalisation We bel
Slide 70: Q&A
Q&A 2020 Investor Day 69
Slide 71: 2020 Investor Day
2020 Investor Day
Slide 72: Our Two Main Activities
Our Two Main Activities Core Business Operating Activity Contract and spot cargoes Spot cargoes Owned and long-term chartered ships Short-term ships carrying spot cargoes Short-term ships carrying contract cargoes Costs largely fixed and disclosed Costs fluctuate with freight market Key KPI = TCE pe
Slide 73: Our Key Performance Indicators (KPIs)
Our Key Performance Indicators (KPIs) Deriving our Core Business Daily TCE Deriving our Operating Activity Daily Margin Owned + Long-Term Chartered TCE Revenue + Short-Term Chartered (excl. Operating) Margin Operating Margin Owned + Long-Term Chartered Revenue Days Operating Days *** *** Daily TCE r
Slide 74: How to Forecast Our Earnings
Interim 2020 How to Forecast Our Earnings US$m Handysize contribution Core TCE1 x owned & LTC 2 revenue days + 122.1 $7,190 x (14,330+2,650) days Blended cost x owned & LTC cost days 3 - 138.1 $7,920 x (14,330+2,650+460) days = (16.0) Supramax contribution Core TCE x owned & LTC revenue days + 69.4
Slide 75: Handysize – Est. Breakeven Level 2H20
Handysize – Est. Breakeven Level 2H20 Costs 1H20 Est. Cost 2H20 US$/day (net) Blended 1H20 7,920 Opex 12,000 Depreciation Depreciation * - 600 Finance Cost 10,090 10,000 Opex + 300 7,530 7,920 8,000 670 Est. 2H20 cost = 7,620 6,000 G&A + 950 2,920 4,000 Est. 2H20 b/e = ~8,600 2,000 3,940 2H20 Cover
Slide 76: Supramax – Est. Breakeven Level 2H20
Supramax – Est. Breakeven Level 2H20 Costs 1H20 Est. Cost 2H20 US$/day (net) Blended 1H20 8,960 14,000 Opex Depreciation Opex + 300 11,940 12,000 Finance Cost 10,000 8,960 Est. 2H20 cost = 9,260 8,540 8,000 1,000 G&A + 950 6,000 3,590 Est. 2H20 b/e = ~10,200 4,000 2,000 3,950 2H20 Cover Level* 10,80
Slide 77: How to Forecast Our Cash Flow
How to Forecast Our Cash Flow US$m 1H20 2H20 2021 Opening Cash 200.2 316.0 Operating Cash Inflow 1 77.5 Improving Drawdowns on Borrowings 212.7 33.5 3 Repayments of Borrowings (59.0) ~(65.0) ~(135.0) Repayments of Unsecured Facility (50.0) Net Interest (14.0) ~(15.0) ~(30.0) Capital Expenditure (90.
Slide 78: Q&A
Q&A 2020 Investor Day 77
Slide 79: Closing Remarks
Closing Remarks Mats Berglund, CEO
Slide 80: Well Positioned for the Future
Well Positioned for the Future Our TCE More Owned Efficient Cost Sensitivity toward Outperform Vessels with Structure Market Rates* Market Fixed Costs Annual Group 3 117 G&A Overheads Market Rate 111 106 US$75.7m Average PB premium 92 +/- 86 over market indices in 75 80 US$60.0m US$1,000 last 5 year
Slide 81: Disclaimer
Disclaimer This presentation contains certain forward looking statements with respect to the financial condition, results of operations and business of Pacific Basin and certain plans and objectives of the management of Pacific Basin. Such forward looking statements involve known and unknown risks,
Slide 82: Speed Optimization – The IMO Effect Did Not Happen, Yet!
Speed Optimization – The IMO Effect Did Not Happen, Yet! Higher fuel oil prices allow freight rates to increase without increasing speed and hence supply Optimal speed for typical Handysize vessel (Hakodate 32,000 dwt) Freight rate in US$/ton 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 3
Slide 83: Bulk Carrier Speed Bottomed in 2020
Bulk Carrier Speed Bottomed in 2020 and has Increased 1.9% Since the Start of the Year Bulk Carrier Average Speed Since 2012 12.25 12.00 11.75 11.50 11.25 11.00 10.75 2012 2013 2014 2015 2016 2017 2018 2019 2020 2020 Investor Day 82 Source: Clarksons Research – by month from Jan 2012 to Aug 2020
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