Pacific Basin Shipping Limited · HKEX:2343

Pacific Basin Shipping — FY2017 Earnings Presentation

40 slides from Pacific Basin Shipping's earnings presentation, Feb 28, 2018

  1. Slide 1: Pacific Basin 2017 Annual Results

    2 Pacific Basin 2017 Annual Results R satin WABAR) Logase 28 Feb 2018

  2. Slide 2: Highlights

    Highlights 1

  3. Slide 3: 2017 Annual Results - Highlights

    2017 Annual Results - Highlights US$m 2017 2016 Change EBITDA 133.8 22.8 +111.0 Net profit 3.6 (86.5) +90.1 Cash 244.7 269.2 Net gearing 35% 34% Owned fleet / Total fleet * 105 / 225 92 / 226  Significantly improved dry bulk market supported a much improved EBITDA and positive net result in 2017 

  4. Slide 4: 2017 Performance and 2018 Cover

    2017 Performance and 2018 Cover US$/day Handysize Supramax Market (BHSI/BSI) index net rate 7,250 8,880 Improvement over 2016: Handysize: +25% / $1,690 PB daily TCE net rate 8,320 9,610 Supramax: PB outperformance 15% / 1,070 8% / 730 +43% / $2,870 2017 Excluding short-term operating days PB daily T

  5. Slide 5: Market Review

    2 nit “aeific. Basin “wh ett

  6. Slide 6: Market Continues to Improve Year on Year

    Market Continues to Improve Year on Year Handysize Market Spot Rates in 2016-2018 Supramax Market Spot Rates in 2016-2018 # US$/day net* US$/day net* 12,000 26 Feb 2018 12,000 2017 $9,980 26 Feb 2018 10,000 10,000 2017 $7,490 8,000 8,000 2016 2016 6,000 6,000 4,000 4,000 2,000 2,000 $0 $0 Jan Feb Ma

  7. Slide 7: 2017 Was a Demand Story

    2017 Was a Demand Story Dry Bulk Trade Volumes Key Drivers in 2017 Million Tonnes  Stronger seaborne trade growth apparent 4% across most dry bulk cargo categories – Iron Ore 1,474 Coal 1,201 5% both major and minor bulks 4%  Stronger Chinese industrial activity Major bulk total 2,675  Record Sou

  8. Slide 8: Newbuilding Deliveries Continue to Shrink

    Newbuilding Deliveries Continue to Shrink Dry Bulk Supply Development Dry Bulk Orderbook Development Mil Dwt % (Orderbook vs Existing Fleet as %) Mil Dwt 100 20 350 64% 75 15 300 50 10 38.4 250 25 3.0% 5 Primarily 200 large vessels 0 0 150 -25 -14.5 -5 100 9.8% -50 -10 50 2010 2011 2012 2013 2014 20

  9. Slide 9: Handysize and Supramax Scheduled Orderbook at Historically Low Level

    Handysize and Supramax Scheduled Orderbook at Historically Low Level Total Dry Bulk Orderbook Combined Orderbook: Handysize and Supramax Mil Dwt 70 Mil Dwt 8.6% 7.1% 24m 58m 34% 24 60 42% Shortfall Shortfall 20 50 4.7% 0.6% 5.1% 38m 4.8m 16 14m 0.7% 40 1.9m delivered 3.2% in Jan 2.7% 12 delivered 30

  10. Slide 10: Better Fundamentals for Handysize

    Better Fundamentals for Handysize Orderbook Average Over Over 2017 Scrapping as as % of Age 20 Years 15 Years % of Existing Fleet Existing as at 1 Jan 2018 Fleet Lower Handysize – 81m dwt orderbook (25,000-41,999 dwt) 6.3% 10 11% 18% 1.6% More Supramax – 194m dwt older 5.5% 9 7% 15% 1.5% (42,000-64,

  11. Slide 11: Favourable Dry Bulk Supply and Demand Outlook

    Favourable Dry Bulk Supply and Demand Outlook Dry Bulk Supply and Demand % YOY  Demand outpaced supply in 2017 8  Progressively fewer new ships will deliver from shipyards in 2018 and 2019 6  Clarkson Research estimate: 5.1% 3.7% tonne-mile demand growth and 3.7% 1.8% net fleet growth in 2018 4 (

  12. Slide 12: Improved Outlook Supports Vessel Values

    Improved Outlook 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$22.3m Newbuilding (62,000 dwt): 30 40 US$24.3m 30 20 20 10 10 5 years (32,000 dwt): US$14.0m 5 years (56,000 dwt): US$17.5m 0 0 04 05 06 07

  13. Slide 13: Financial and Operating Review

    Financial and Operating Review 12

  14. Slide 14: Significant Improvement in 2017 Financial Results

    Significant Improvement in 2017 Financial Results As at 31 Dec US$m 2017 2016 Owned vessel costs 2017 2016 Revenue 1,488.0 1,087.4 Opex (139.3) (130.9) Voyage expenses (701.5) (555.4) Depreciation (107.6) (97.1) Finance (32.3) (32.8) Time-charter equivalent earnings ("TCE") 786.5 532.0 Owned vessel

  15. Slide 15: Improvement in Both Handysize and Supramax Segments

    Improvement in Both Handysize and Supramax Segments 2017 2016 Change Handysize contribution (US$m) 31.4 (37.1) >+100% Revenue days (days) 53,360 47,590 +12% TCE earnings (US$/day) 8,320 6,630 +25% Owned + chartered costs (US$/day) 7,660 7,320 -5% Supramax contribution (US$m) 19.8 (3.3) >+100% Revenu

  16. Slide 16: Handysize – Owned Vessel Costs Reducing

    Handysize – Owned Vessel Costs Reducing As at 31 Dec US$7,660/day US$6,360/day US$600* Blended P/L Costs before Blended Cash Cost before Daily G&A Overheads G&A Overheads G&A Overheads (2016: US$660) (2016: US$7,320) (2016: US$6,090) Blended US$7,660 (FY2016: US$7,320) 2017 Daily Vessel Costs - Hand

  17. Slide 17: Supramax – More Owned Ships with Lower Daily Cost

    Supramax – More Owned Ships with Lower Daily Cost As at 31 Dec US$9,000/day US$8,310/day US$600* Blended Daily P/L Costs Blended Daily Cash Cost Daily G&A Overheads before G&A Overheads before G&A Overheads (2016: US$660) (2016: US$6,830) (2016: US$6,390) 2017 Daily Vessel Costs - Supramax US$/day O

  18. Slide 18: Competitive Owned Vessel Break-Even Levels

    Competitive Owned Vessel Break-Even Levels Handysize Supramax 2018 YTD PB TCE cover rate* US$11,400/day 2018 YTD PB TCE cover rate* US$9,280/day 2017 PB TCE rate $840 US$9,610/day G&A Overheads 2017 PB TCE rate $840 US$8,320/day Finance Cost $1,170 $810 $2,820 Depreciation $3,260 Break-even Break-ev

  19. Slide 19: Strong Balance Sheet and Liquidity

    Strong Balance Sheet and Liquidity US$m 2017 2016 Vessels & other fixed assets 1,798 1,653 Total assets 2,232 2,107 Total borrowings 881 839 Total liabilities 1,070 1,066 Total Equity 1,161 1,041 Net borrowings (total cash US$245m) 636 570 Net borrowings to net book value of vessels & other fixed as

  20. Slide 20: No Newbuilding Capex Ahead

    No Newbuilding Capex Ahead As at 31 Dec Cash Flow in 2017 Schedule of Repayments and Vessel Capital Commitments Cash and deposit balance Secured borrowings (US$763.3m) Cash inflow Vessel capital commitments (US$20.8m) Cash outflow Convertible bond (face value US$125.0m) 10 vessels* 3.9% No Newbuildi

  21. Slide 21: Outlook and Strategy

    Outlook and Strategy 20

  22. Slide 22: Our Business Model Continues to Outperform

    Our Business Model Continues to Outperform Our business model has been refined over many Our TCE Outperformance Compared to Market years. We are able to generate a TCE earnings in Last 5 Years premium over market rates because of our high laden percentage (minimum ballast legs), which US$1,860 US$1,

  23. Slide 23: Well Positioned for a Recovering Market

    Well Positioned for a Recovering Market Our TCE More Owned Efficient Cost Sensitivity toward Outperform Vessels with Structure Market Rates* Market Fixed Costs Annual Group 106 G&A Overheads Market Rate Average PB premium 92 80 86 US$75.7m +/- over market indices in 75 US$54.4m US$1,000 last 5 years

  24. Slide 24: New Regulations

    New Regulations New Regulations Content Impact on the Industry PB actions IMO Ballast Water  International Maritime  Increased capex for existing shipowners  System selected, pending US Treatment - Organization (IMO)  Increased potential scrapping Coast Guard approval Installation requires balla

  25. Slide 25: We Will Not Order More Newbuildings Today

    We Will Not Order More Newbuildings Today  Market does not need more newbuildings  Extra capacity remains in the global fleet through potentially higher operating speed  Limited efficiency benefits from newbuildings compared to good quality Japanese-built secondhand ships  The industry needs a m

  26. Slide 26: Our Outlook and Strategy

    Our Outlook and Strategy Outlook  General market improvement since early 2016 is encouraging, and supply and demand fundamentals are now more positive  Possible market drivers in the medium term: Fully Handysize & Positive economic growth and commodity demand outlook, low deliveries, Supramax focu

  27. Slide 27: 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,

  28. Slide 28: Appendix: Pacific Basin Overview

    Appendix: Pacific Basin Overview Owned Fleet Hong Kong HQ World’s largest owner and operator of Our Vision 12 modern Handysize tonnage “To be a 106 Global Offices leading ship 335 200+ Handysize and owner/operator Shore-based staff Supramax vessels in the dry bulk Handysize and Supramax Vessels 3,40

  29. Slide 29: Appendix: Business Foundation

    Appendix: Business Foundation Our People Our Record Our Fleet Trusted and Managed In-house Close to you transparent and Highly Versatile 12 local dry 24/7 Strong public Award winning Modern quality Low breakeven bulk offices support balance sheet and CSR policy and ships with the cost and track reco

  30. Slide 30: Appendix: Strategic Model

    Appendix: Strategic Model MARKET-LEADING COMPREHENSIVE GLOBAL CUSTOMER FOCUS & SERVICE OFFICE NETWORK Priority to build and sustain long-term Integrated international service enhanced by customer relationships experienced commercial and technical staff around the world Solution-driven approach ensur

  31. Slide 31: Appendix: Understanding Our Core Market

    Appendix: Understanding Our Core Market 2017 Annual Results 30

  32. Slide 32: Appendix: Why Handysize? Why Minor Bulk?

    Appendix: Why Handysize? Why Minor Bulk? Full Year 2017 Global Dry Bulk Trade (Volume) = 5.1 Billion Tonnes (+4% YOY) 29% 24% 10% 37% Iron Ore Coal Grain & Minor Bulk Soybean  Minor Bulks & Grain is 47% of total Dry Bulk demand  Pacific Basin focuses on these growing markets  More diverse custome

  33. Slide 33: Appendix: Fleet List – Jan 2018

    Appendix: Fleet List – 31 Jan 2018 Pacific Basin Dry Bulk Fleet: 222 www.pacificbasin.com Average age of core fleet: 8.2 years old Customers > Our Fleet 106 Vessels 116 Vessels owned Chartered * Total Handysize 80 59 139 Supramax 25 56 81 Post-Panamax 1 1 2 * Average number of vessels operated in Ja

  34. Slide 34: Appendix: Pacific Basin Dry Bulk – Diversified Cargo

    Appendix: Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 2017  Diverse range of commodities reduces product risk  China and North America were our largest markets  About 60% of business in Pacific and 40% in Atlantic 2017 Annual Results 33

  35. Slide 35: Appendix: Earnings Cover in 2017 and 2018

    Appendix: Earnings Cover in 2017 and 2018 Contracted Handysize Supramax Revenue Days 53,360 Days 34,510 Days 47,590 Days 29,590 Days 38,980 Days 15,860 Days 100% 100% 50% 100% 100% 69% $6,630 $8,320 $9,280 $6,740 $9,610 $11,400 2016 2017 2018 2016 2017 2018 Covered Uncovered Currency in US$, 2018 da

  36. Slide 36: Appendix: Dry Bulk Outlook in the Medium Term

    Appendix: Dry Bulk Outlook in the Medium Term Possible market drivers in the medium term 2017 Annual Results 35

  37. Slide 37: Appendix: Atlantic Rates Stronger than Pacific

    Appendix: Atlantic Rates Stronger than Pacific Handysize (BHSI) Supramax (BSI) # US$/day net* US$/day net* Atlantic 16,000 Atlantic 12,000 $8,310 $11,120 14,000 10,000 12,000 8,000 10,000 6,000 8,000 Pacific $6,670 6,000 Pacific 4,000 4,000 $9,020 2,000 2,000 0 0 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 A

  38. Slide 38: Appendix: China Major and Minor Bulk Trade

    Appendix: China Major and Minor Bulk Trade China Coal Trade 2017 Chinese Minor Bulk Imports Mil Tonnes Mil Tonnes 35 350 Increased 17% YOY 30 263 300 247 25 250 20 200 15 150 10 100 5 50 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -9 -8 -50 06 07 08 09 10 11 12 13 14 15 16 17 2015 2016 2017

  39. Slide 39: Appendix: Sustainability

    Appendix: Sustainability  Applying sustainable thinking in our decisions and the way we run our business 2017 CSR Report  Creating long-term value through good corporate www.pacificbasin.com/ar2017 governance and CSR Corporate Social Responsibility (CSR)  Guided by strategic objectives on (i) wor

  40. Slide 40: Appendix: Convertible Bonds Due 2021

    Appendix: Convertible Bonds Due 2021 Issue size US$125 million Maturity Date 3 July 2021 (approx. 6 years) Investor Put Date and Price 3 July 2019 (approx. 4 years) at par Coupon 3.25% p.a. payable semi-annually in arrears on 3 January and 3 July Redemption Price 100% Initial Conversion Price HK$4.0

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