Slide 1: Q2 2019 Results
15 AUGUST 2019 Q2 2019 RESULTS 1
Slide 2: Safe Harbor Statement
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
Slide 3: Agenda
AGENDA 1 Introduction to TORM and Q2 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 3
Slide 4: TORM at a Glance
TORM AT A GLANCE A world-leading product tanker company Fleet overview* 74 Owned 10 On order • A leading pure-play product tanker owner • Large commercial footprint with presence in all key product tanker segments 12 ⚫⚫⚫⚫⚫⚫⚫⚫⚫⚫ • Strong capital structure to support disciplined growth strategy LR2 ⚫⚫
Slide 5: Q2 2019 Financial Highlights
Q2 2019 FINANCIAL HIGHLIGHTS 5
Slide 6: The Reference Company in the Product Tanker Segment
THE REFERENCE COMPANY IN THE PRODUCT TANKER SEGMENT TORM is a large-scale, pure-play TORM’s superior integrated product tanker owner, active in all operating platform includes key product tanker segments in order in-house technical and commercial management to meet customer needs (preferred by custo
Slide 7: TORM Commercially Outperforms Peers in Its Key MR Segment
TORM COMMERCIALLY OUTPERFORMS PEERS IN ITS KEY MR SEGMENT High (incl. TORM) Low (incl. TORM) Peer avg. (excl. TORM) TORM 30,000 Q2 2019 performance: 25,000 • TORM: USD/day 15,163 • Peer average: USD/day 13,327 MR reported TCE, USD/day 20,000 15,000 10,000 5,000 - Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16
Slide 8: TORM's Commercial Capabilities Focused on Optimizing Geographical Positioning
TORM’S COMMERCIAL CAPABILITIES ARE FOCUSED ON OPTIMIZING GEOGRAPHICAL POSITIONING USD/day (%) 6,000 70 West outperformance Majority of TORM’s MRs West of Suez 5,000 4,000 3,000 60 2,000 1,000 0 50 East outperformance 1,000 Majority of TORM’s MRs East of Suez 2,000 3,000 40 4,000 5,000 6,000 30 Q1 -
Slide 9: Fully Integrated Business Model with Competitive Cost Structure
FULLY INTEGRATED BUSINESS MODEL WITH COMPETITIVE COST STRUCTURE Significant reduction in OPEX TORM has trimmed administration expenses OPEX per day (yearly, weighted avg. in USD/day) Admin. expenses (quarterly avg. in USDm) Compared to 2014, -15% 2008 TORM has reduced 7,655 2009 the annual OPEX 7,19
Slide 10: Corporate Transactions and Scrubber Update
CORPORATE TRANSACTIONS AND SCRUBBER UPDATE • The purchase of four 2011-built MR second-hand vessels for a total consideration of USD 83m with expected delivery in August 2019. The vessels are financed through a sale and leaseback transaction with USD 66m in proceeds • Two sale and leaseback agreemen
Slide 11: Investment Highlights
INVESTMENT HIGHLIGHTS Pure-play product ~75 vessels deployed in the spot market across all four larger product tanker tanker exposure segments Superior commercial One TORM approach with in-house commercial and technical management provides superior earnings while maintaining a balanced cost structur
Slide 12: Agenda
AGENDA 1 Introduction to TORM and Q2 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 12
Slide 13: Elevated Refinery Maintenance Ahead of IMO 2020 Driving Softer Rates
ELEVATED REFINERY MAINTENANCE AHEAD OF IMO 2020 DRIVING SOFTER RATES Q2 2019 USD/day • Particularly heavy refinery maintenance in Asia (+47% y-o-y) limited westbound diesel movements • Naphtha flows from the West to the East were under pressure due to petrochemical maintenance and competition from L
Slide 14: Heavy and Prolonged Spring Refinery Maintenance
HEAVY AND PROLONGED SPRING REFINERY MAINTENANCE COUPLED WITH A SERIES OF UNPLANNED OUTAGES Global CDU maintenance and unplanned outages* Mb/d • Spring maintenance (coupled with unplanned outages) ahead of IMO 2020 has been heavier and longer than in recent years (y-o-y, +17% in Q1 and +23% in Q2) •
Slide 15: Vessel Values Continue to Improve as Newbuilding Activity Remains Low
VESSEL VALUES HAVE CONTINUED TO IMPROVE AS NEWBUILDING ACTIVITY REMAINS LOW USDm LR2 ‘000 USD/day USDm MR ‘000 USD/day 60 35 40 25 55 30 35 20 25 50 20 45 15 30 15 40 10 10 25 35 5 0 0 0 5 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18
Slide 16: Medium to Long-Term Market Drivers Remain Positive
MEDIUM TO LONG-TERM MARKET DRIVERS REMAIN POSITIVE Key medium to long-term market drivers • Global oil demand growth remains positive albeit slower than in previous years • Global CPP stockpiles have returned to normal levels • Refinery capacity addition in the Middle East potentially increasing sai
Slide 17: Product Inventories Back to Normal Levels
PRODUCT INVENTORIES BACK TO NORMAL LEVELS Aggregated global CPP inventories* Inventories compared to 5-year average levels Billion bbl • Global CPP inventories are back to 5-year average levels • Diesel inventories in main import areas have stabilized at around historical levels • Low gasoline inven
Slide 18: Middle East Refinery Capacity Additions Set to Increase Significantly in 2021
MIDDLE EAST REFINERY CAPACITY ADDITIONS SET TO INCREASE SIGNIFICANTLY IN 2021 Middle East refinery capacity net additions (m b/d) Forecasted Realized 0.82 0.84 0.47 0.18 0.12 0.12 0.06 0.12 -0.03 2015 2016 2017 2018 2019F 2020F 2021F • As oil product demand increases, the ton-mile demand is positive
Slide 19: Product Tanker Order Book Continues to Shrink
PRODUCT TANKER ORDER BOOK CONTINUES TO SHRINK Product tanker order book as percentage of the fleet M dwt • The product tanker order book to fleet ratio is at a historically low level of 7.4% (10% for MRs, 3% for LR1s and 8% for LR2s) • In H1 2019, the product tanker fleet grew by 2.8% with 4.3% grow
Slide 20: IMO 2020 Sulfur Cap Will Lead to ~5% Incremental Trade Growth
IMO 2020 SULFUR CAP WILL POTENTIALLY LEAD TO ~5% INCREMENTAL GROWTH IN THE PRODUCT TANKER TRADE Global consumption of marine bunkers* Distillates M b/d Additional compliant fuels* VLSFO 6 HSFO 5 4 Potential TORM’s current new trade estimate of for clean product tankers additional diesel demand 3 2 1
Slide 21: Net Exporting Regions Have More Flexibility to Produce Additional Diesel
NET EXPORTING REGIONS HAVE MORE FLEXIBILITY TO PRODUCE ADDITIONAL DIESEL Exporting regions increase diesel production capacity… …while IMO 2020 will increase the deficit in importing regions M b/d +0.4 m b/d additional M b/d +0.3 m b/d additional 1.2 export capacity 1.2 import requirement 0.8 0.8 0.
Slide 22: Medium-Haul and Long-Haul Trade Supported by IMO 2020
BOTH MEDIUM-HAUL REGIONAL TRADE AND LONG-HAUL TRADE WILL BE SUPPORTED BY THE IMO 2020 REGULATION Examples of trade routes enforced by the IMO 2020 sulfur regulation • Increased flexibility to produce additional diesel in net exporting regions and refinery expansion support long-haul and medium-haul
Slide 23: Agenda
AGENDA 1 Introduction to TORM and Q2 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 23
Slide 24: TORM Committed to 34 Scrubber Installations, Close to 50% of Fleet
TORM HAS COMMITTED TO 34 SCRUBBER INSTALLATIONS, OR CLOSE TO 50% OF THE TOTAL FLEET IMO 2020 sulfur regulation compliance options Significant number of vessels committed to scrubbers1) Installed newbuildings and scrubber-ready Committed retrofit Newbuildings and Committed newbuildings and scrubber-r
Slide 25: Majority of Scrubber Installations Delivered Ahead of 2020 Deadline
MAJORITY OF 34 SCRUBBER INSTALLATIONS WILL BE DELIVERED AHEAD OF THE 2020 DEADLINE SUPPORTED BY TORM’S SCRUBBER JV TORM’s scrubber JV, ME Production China Ownership share: 27.5% • One of the largest risks with scrubber installations is the potential delay during both ME Production the production and
Slide 26: IMO 2020 Sulfur Regulation Expected Towards End of Q3 2019
THE IMO 2020 SULFUR REGULATION IS EXPECTED TO KICK IN TOWARDS THE END OF THE THIRD QUARTER OF 2019 Q3 2019 Q4 2019 Prepare vessels for implementation • TORM plans to preparations (plans, documentation, etc.) gradually change TORM bunkers on board vessels during the Bunker planning and replenishment
Slide 27: Agenda
AGENDA 1 Introduction to TORM and Q2 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 27
Slide 28: Profitable in Q2 2019
PROFITABLE IN Q2 2019 USDm Q2 2019 Q2 2018 2018 P&L TCE earnings 98 90 352 Gross profit 55 42 169 Sale of vessels 0 0 1 EBITDA 41 29 121 Profit before tax 5 -9 -33 Balance sheet Equity 864 882 847 NIBD 623 598 627 Cash and cash equivalents 106 159 127 Key figures 0.07 -0.12 -0.48 Earnings per share
Slide 29: Spot-Orientation Provides Significant Operating Leverage
SPOT-ORIENTATION PROVIDES SIGNIFICANT OPERATING LEVERAGE Unfixed days # of days as of 30 June 2019 LR2 LR1 MR Handy (% of total days) 28,894 (97%) 30,064 (100%) 3,589 4,231 3,274 3,265 11,855 (89%) 1,544 20,246 20,753 1,161 8,335 816 1,785 1,815 2019 2020 2021 Illustrative change in cash flow genera
Slide 30: Net Asset Value Estimated at USD 897m
NET ASSET VALUE ESTIMATED AT USD 897M 30 June 2019 figures, USDm Net LTV of 51% 1,736 720 897 271 43 4 106 Value of vessels Outstanding debt Committed Cash Working Capital Other* Net Asset Value (incl. newbuildings) CAPEX • Net Loan-to-Value was 51% ensuring a strong capital structure • Net Asset Va
Slide 31: Well-Positioned to Service Future CAPEX Commitments
WELL-POSITIONED TO SERVICE FUTURE CAPEX COMMITMENTS CAPEX and liquidity as of 30 June 2019 USDm CAPEX commitments Available liquidity Retrofit scrubbers Newbuildings incl. scrubber 4 x S&Ls on 2011-built MRs (new debt) 99 466 2011-built MR vessels 2 x S&Ls (net of debt repayment) 66 367 33 81 304 3
Slide 32: Favourable Financing Profile with No New Near-Term Maturities
FAVOURABLE FINANCING PROFILE WITH NO NEW NEAR- TERM MATURITIES Scheduled debt repayments as of 30 June 2019 USDm 87 87 696 374 148 Debt as of 30 June 2019* Falling due within one year Falling due between Falling due between Hereafter one and two years two and three years Ample headroom under our att
Slide 33: Appendix
OOD AT SHIPPING. APPENDIX TORM
Slide 34: Management Team with International Outlook and Shipping Experience
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 and Head of Tanker Division since 2015 ▪ Chairman of the Board of Danish Shipping and member of the Board of Dani
Slide 35: Key Figures
KEY FIGURES USDm Q2 2019 Q2 2018 Q1-Q2 2019 Q1-Q2 2018 2018 Revenue 166 163 353 326 635 EBITDA 41 29 102 67 121 Profit/(loss) before tax 5 -9 29 -8 -33 Net profit/(loss) 5 -9 28 -8 -35 Balance sheet Total assets 1,718 1,744 1,718 1,744 1,714 Equity 864 882 864 882 847 NIBD 623 598 623 598 627 Cash a
Slide 36: Fleet Overview
FLEET OVERVIEW # of LR2 LR1 MR Handy As of 15 August 2019 vessels 90 82 82 80 79 74 12 12 12 70 12 8 9 9 60 7 50 40 55 57 57 30 50 20 10 5 4 4 4 0 15 August End 2019 End 2020 End 2021 Graph includes sale and leaseback 4 9 9 9 vessels 36
Slide 37: Industry Cooperation and Transparency Key to TORM's CSR
INDUSTRY COOPERATION AND TRANSPARENCY ARE KEY TO TORM’S CORPORATE SOCIAL RESPONSIBILITY AND INDUSTRY INITIATIVES TORM is committed to support… UN Sustainable TORM supports the SDGs based on an assessment of our CSR activities Development Goals and areas of impact. Corporate Social Responsibility UN
Slide 38: Supporting Education and Climate Action
SUPPORTING EDUCATION AND CLIMATE ACTION • In 2018, TORM extended its support to the UN Sustainable Development Goals (SDGs) as a natural progression of its commitment to the UN Global Compact • TORM focuses on two specific SDGs, which are linked to the Company’s current CSR activities. Activities an
Slide 39: Strong Start to the Year Followed by Seasonal Softening
STRONG START TO THE YEAR FOLLOWED BY SEASONAL SOFTENING LR2 (TC1) MR (average) USD ‘000/day USD ‘000/day Source: Clarksons. Spot earnings: LR2: TC1 Ras Tanura-> Chiba, MR: average basket of Rotterdam->NY, Bombay->Chiba, Mina Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->
Slide 40: TORM Monitors Geopolitical Situation in the Middle East
TORM MONITORS THE GEOPOLITICAL SITUATION IN KEY PRODUCT TANKER SEGMENT AREAS IN THE MIDDLE EAST Prior events in the Persian Gulf region Impact of less trade in the Middle East area • 5 November 2018: US reinstates all sanctions against • More than 40% of global crude oil flows stem from the Iran Mid
Slide 41: Oaktree Is Majority Shareholder with Free Float of 36%
OAKTREE IS THE MAJORITY SHAREHOLDER WITH A REMAINING FREE FLOAT OF 36% Share information Estimated shareholdings as of August 2019 (%)* TORM’s shares are listed on Nasdaq in Copenhagen and Nasdaq in New York under 100 the tickers TRMD A and TRMD, respectively. 12 Shares 20 • 74.2m A-shares, one B-sh
Slide 42: Positive TCE Impact Expected from Scrubber Investments
TORM EXPECTS A POSITIVE TCE IMPACT FOR THE TORM FLEET DUE TO THE SCRUBBER INVESTMENTS Avg. fuel Compliant HSFO fuel TCE impact per Annual TCE impact Vessel type consumption, spread assumption, vessel, USD/day2) per vessel, USDm tons/day1) USD/t MR Eco vessel ~11 × 200 = ~2,200 0.8 MR Non-eco vessel