Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — 1H 2021 Earnings Presentation
45 slides from Pacific Basin Shipping's earnings presentation, Jul 29, 2021
Slide 1: Pacific Basin
Pacific Basin
Slide 2: Our Best Half-Year Result in 13 Years
Our Best Half-Year Result in 13 Years US$million 1H 2021 1H 2020 EBITDA 244.6 79.2 P&L Underlying (loss) / profit 150.4 (26.6) Net profit 160.1 (222.4) US$million 30 June 2021 31 Dec 2020 Available liquidity 417.1 362.5 B/S Net gearing 31% 37% Significant increase in rates and monthly results in t
Slide 3: Exceptionally Strong 2021 Market
Exceptionally Strong 2021 Market Handysize Market Spot Rates Supramax Market Spot Rates US$/day net* US$/day net* 35,000 35,000 27 July 2021 30,000 $30,230 30,000 27 July 2021 $26,720 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Slide 4: Market TCE Rates Now Well Above 2010 Levels
Market TCE Rates Now Well Above 2010 Levels Handysize Market TCE Rates* Supramax Market TCE Rates# US$/day net US$/day net 45,000 45,000 40,000 40,000 35,000 35,000 30,000 30,000 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 1Q21
Slide 5: The Positive TCE Trend Continues
The Positive TCE Trend Continues Handysize Core Business TCE Supramax Core Business TCE US$/day net US$/day net 36,000 36,000 33,190* 32,000 32,000 28,000 28,000 26,410 94% 24,000 22,000* 24,000 of 19,960 20,000 days 20,000 91% 16,000 of 16,000 12,000 days 12,000 8,000 8,000 4,000 4,000 - - Jan Feb
Slide 6: Loading Data Explains the Strong Start to 2021
Loading Data Explains the Strong Start to 2021 Minor Bulks +13% YTD Grain + Soybean Meal +9% YTD Million tonnes annualised Million tonnes annualised 1,600 700 1,500 650 600 1,400 550 1,300 500 2018 450 1,200 2018 2019 400 2019 2020 2020 1,100 2021 350 2021 1,000 300 Jan Feb Mar Apr May Jun Jul Aug S
Slide 7: Demand Fundamentals Have Driven the Market
Demand Fundamentals Have Driven the Market Core Market Drivers Continued strong Chinese demand for dry bulk imports (except coal) with 2Q21 seeing stronger growth to non-Chinese destinations Global grain loadings in 1H21 were 9% higher than the same period last year, benefiting from record high
Slide 8: Net Fleet Growth Well Below 2% in 2022
Net Fleet Growth Well Below 2% in 2022 Handysize / Supramax Supply Development Overall Dry Bulk Supply Development % of Total Fleet % of Total Fleet 6% 6% 5% 5% 4.0% 3.8% 4% 4% 3.2% 3.3% 2.9% 2.8% 3% 3% 2% 2% 1.6% 1.4% 1% 1% 0% 0% -1% -1% -2% -2% 2019 2020 2021F 2022F 2019 2020 2021F 2022F Scrapping
Slide 9: All Time Low Dry Bulk Orderbook
All Time Low Dry Bulk Orderbook 25% 23.5% 21.3% 20% 17.8% Higher probability of 15% sustained stronger rates in dry bulk 10% 8.6% 6.2% 5.6% 5% 2.7% 0% LNG LPG Container Crude Product Dry Bulk Handysize Pacific Basin 9 Source: Clarksons Research
Slide 10: Why Supply is Likely to Remain Moderate
Why Supply is Likely to Remain Moderate While strong freight rates have historically lead to increased new ordering, we believe that dry bulk supply growth can remain at moderate levels Decarbonisation rules result in uncertainty and shorter expected economic lives for newbuildings with convention
Slide 11: New Rules Leading to Lower Speeds from 2023
New Rules Leading to Lower Speeds from 2023 Adopted in June 2021, IMO rules will require existing ships to combine technical and operational measures to meet IMO’s 2030 GHG reduction targets In July 2021 EU announced a number of environmental regulations affecting shipping New Regulation Require
Slide 12: Improved Rates Support Vessel Values
Improved Rates Support Vessel Values Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 70 50 60 40 50 30 Newbuilding (38,000 dwt): US$27.3m 40 Newbuilding (62,000 dwt): US$30.5m 30 20 20 10 10 Second-hand 5-year old benchmark (37,000 dwt): US$22.0m Second-hand 5-year old b
Slide 13: Current Handysize Values and Earnings vs 2010
Current Handysize Values and Earnings vs 2010 Newbuilding Second-hand Contract Resale 5 YO 10 YO 15 YO Value end 2010 (US$m) 26.5 30.0 25.0 21.5 15.0 Value now (US$m) 27.3 28.0 22.0 14.8 9.0 Upside to 2010 value -3% 7% 14% 45% 67% Years of EBITDA to scrap 3.2 2.6 1.9 1.3 Approx 1 year TC Rate/day (U
Slide 14: Current Supramax Values and Earnings vs 2010
Current Supramax Values and Earnings vs 2010 Newbuilding Second-hand Contract Resale 5 YO 10 YO 15 YO Value end 2010 (US$m) 31.0 37.0 29.0 24.0 19.0 Value now (US$m) 30.5 33.5 27.5 19.0 13.8 Upside to 2010 value 2% 10% 5% 26% 38% Years of EBITDA to scrap 3.3 2.8 1.9 1.5 Approx 1 year TC Rate/day (US
Slide 15: We Continue to Buy Ships in Line With Our Strategy
We Continue to Buy Ships in Line With Our Strategy DWT Year Built Delivered 61,115 2015 Feb-2021 61,593 2015 Mar-2021 61,587 2015 Apr-2021 38,190 2014 Apr-2021 61,105 2015 May-2021 61,684 2011 May-2021 Not Previously Announced 38,309 2011 July-2021 61,484 2010 Q4-2021 We also sold four smaller old
Slide 16: Significant Leverage from Our Larger Owned Fleet
Significant Leverage from Our Larger Owned Fleet Significant Growth of Overall Fleet and Supramax Proportion Million dwt 5.0* 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Supramax Handysize Owned fleet has expanded from 34 to 119 ships Good qualit
Slide 17: Pacific Basin
Pacific Basin
Slide 18: Our Best Half-Year Result in 13 Years
Our Best Half-Year Result in 13 Years US$160.1 million net profit and US$244.6 million EBITDA 28% return on equity (annualised) US$203.9 million operating cash flow1 driving a strengthening of the balance sheet: net borrowings to NBV of owned vessels at 31% and US$417.1 million available liqui
Slide 19: Financial Results
Financial Results US$m 1H21 1H20 Revenue 1,142.0 681.5 Owned vessel costs 1H21 1H20 Voyage expenses (429.8) (351.6) Opex (90.3) (83.2) Depreciation (57.9) (66.7) Time-charter equivalent ("TCE") earnings 712.2 329.9 Finance (15.0) (16.4) Owned vessel costs (163.2) (166.3) Charter costs (363.9) (160.0
Slide 20: Handysize and Supramax Contribution
Handysize and Supramax Contribution 1H21 1H20 Handysize contribution (US$m) 105.2 (16.0) Core Revenue days (days) 16,030 16,980 Core TCE earnings (US$/day) 14,380 7,190 Core Owned + LT chartered costs (blended) (US$/day) 7,660 7,920 Supramax contribution (US$m) 65.9 5.0 Core Revenue days (days) 7,36
Slide 21: Handysize – Costs Well Controlled and Slightly Lower
Handysize – Costs Well Controlled and Slightly Lower Opex Depreciation Costs FY20 Costs 1H21 Finance Cost US$/day 12,000 10,020 9,980 10,000 7,380 7,780 7,270 7,660 8,000 660 580 6,000 2,620 2,360 4,000 2,000 4,100 4,330 - Owned Long-Term Blended Owned Long-Term Blended Chartered Chartered No. of Sh
Slide 22: Supramax – Well Controlled
Supramax – Well Controlled Opex Depreciation Costs FY20 Costs 1H21 Finance Cost US$/day 14,000 11,920 11,420 12,000 10,000 8,820 9,180 8,960 9,200 8,000 1,070 990 6,000 3,590 3,550 4,000 2,000 4,160 4,420 - Owned Long-Term Blended Owned Long-Term Blended Chartered Chartered No. of Ships as at 30 Jun
Slide 23: Cash Inflow and Outflow in 1H2021
Cash Inflow and Outflow in 1H2021 1 Operating cash inflow was US$203.9 1 2 3 4 million, inclusive of all long and short-term charter hire payments. This compares with US$77.5 million in the first half 2020 and US$181.5 million in the full year 2020 2 Proceeds from sale of 4 Handysize vessels 3 Borro
Slide 24: Strengthening Balance Sheet and Available Liquidity
Strengthening Balance Sheet and Available Liquidity Balance Sheet Summary Strong operating cash flow has driven a US$m 2020 reduction in net borrowings to NBV of 1H21 owned vessels to 31% and an increase in Vessels & other fixed assets 1,711 1,665 available liquidity to US$417.1 million Total asse
Slide 25: Pacific Basin
Pacific Basin
Slide 26: Introduction to Our New CEO
Introduction to Our New CEO / Martin Fruergaard 53 years old, Danish 2015 – 2021 CEO for Ultragas (fully integrated owner of gas carriers) 1989 – 2015 Various leadership positions within Maersk, incl. 10 years at Maersk Bulk Various board seats, including six years on the board of Danish Shi
Slide 27: Strategy Remains Unchanged
Strategy Remains Unchanged Stay specialised in minor bulk and therefore focused on Handysize and Supramax (incl. Ultramax) Remain customer and cargo focused Remain asset heavy in our Core Business Continue to selectively acquire quality second-hand ships in a disciplined way Leverage our c
Slide 28: With Special Focus on
With Special Focus on Supporting our teams to ensure we continue to deliver a quality service to our customers while maximising our earnings in the current strong upturn Supporting our customers’ longer term cargo contract requirements Ensuring our vessels continue to operate safely and effici
Slide 29: We are Well Positioned for the Future
We are Well Positioned for the Future Favourable Supply Pacific Basin Operating Healthy Demand Outlook Fundamentals Leverage • Dry bulk order book at 5.6% (lowest in • Large owned fleet with modern time) • Vaccine and economic fixed costs including stimulus expected to increasing Supramax • Handy/Su
Slide 30: 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 31: Appendix: Understanding Our Core Market
Appendix: Understanding Our Core Market Pacific Basin 31
Slide 32: Appendix: Pacific Basin Overview
Appendix: Pacific Basin Overview We operate the world’s largest fleet of interchangeable high-quality Handysize and Supramax ships, equipping us for efficient trading and reliable service any time and anywhere Cargo system business model – consistently outperforming market rates Own 119* Handy
Slide 33: Appendix: Strategic Model
Appendix: Strategic Model Delivering TCE earnings that outperform the market Delivering long-term shareholder value with attractive returns over the shipping cycle MARKET-LEADING COMPREHENSIVE GLOBAL CUSTOMER FOCUS & SERVICE OFFICE NETWORK Priority to build and sustain long-term customer Integra
Slide 34: Business Foundation: Our People, Our Record, Our Fleet
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
Slide 35: Appendix: Diversified Cargo Mix
Appendix: Diversified Cargo Mix Diverse range of commodities reduces product risk China and North America are our largest markets Pacific Basin 35
Slide 36: Appendix: Pacific Basin Current Fleet
Appendix: Pacific Basin Current Fleet 119 Vessels 16LT 135 129 264 ST Total owned1 Chartered Total Chartered Pacific Basin 36
Slide 37: Appendix: Our Two Main Activities
Appendix: 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 KP
Slide 38: Appendix: New TCE Reporting Methodology
Appendix: New TCE Reporting Methodology Our “core business” is to optimally combine our owned and long-term chartered ships with multi-shipment contract cargos and spot cargoes to achieve the highest daily TCE earnings. Our core business also uses short-term chartered ships to carry contract cargoes
Slide 39: Appendix: How to Model Pacific Basin
Appendix: How to Model Pacific Basin Handysize contribution Core TCE1 x owned & LTC 2 revenue days + Blended cost x owned & LTC cost days 3 - = X Supramax contribution Core TCE1 x owned & LTC revenue days + Blended cost x owned & LTC cost days 3 - = X Operating Activity Operating margin x operating
Slide 40: Appendix: Vessel Days and Long-Term Chartered Commitments
Appendix: Vessel Days and Long-Term Chartered Commitments Pacific Basin 40
Slide 41: Appendix: Forward Cargo Cover
Appendix: Forward Cargo Cover *Please note that our forward cargo cover for the rest of the year is backhaul heavy, meaning that a significant share of the covered days is made up of lower daily TCE backhaul voyages. When combined with better earning fronthaul voyages, the overall TCE is typically
Slide 42: Appendix: Favourable Demand / Supply Balance
Appendix: Favourable Demand / Supply Balance Minor Bulk Demand and Supply Total Dry Bulk Supply and Demand % YOY Change % YOY Change 6% 6% 5% 4.3% 5% 4% 3.8% 4.3% 4% 2.9% 2.8% 3.2% 3.3% 3% 3% 2% 2.2% 2% 1.6% 1.4% 1% 1% 0.5% 0% 0% -1% -0.9% -1% -2% -2% 2020 2021F 2022F 2020 2021F 2022F Net Fleet Grow
Slide 43: Appendix: Dry Bulk Demand in 2021 and 2022 Forecast
Appendix: Dry Bulk Demand in 2021 and 2022 Forecast 2021F Dry Bulk Trade Volumes 2022F Dry Bulk Trade Volumes Million Tonnes YoY Million Tonnes YoY Coal 5% 1221 1% 1237 Coal Iron Ore 1557 4% 1% 1568 Iron Ore Total Major Bulk (Iron Ore + Coal) 2778 4% 1% 2805 Total Major Bulk (Iron Ore + Coal) Scrap
Slide 44: Appendix: Better Supply Fundamentals for Handysize / Supramax
Appendix: Better Supply Fundamentals for Handysize / Supramax Scheduled Average Over 1H21 Scrapping as Orderbook as Age 20 Years % of 1 January 2021 % of Existing Existing Fleet Fleet Handysize (25,000-41,999 dwt) 2.7% 12 13% 0.4% Supramax (incl. Ultramax) (42,000-64,999 dwt) 6.2% 10 8% 0.2% Panamax
Slide 45: Appendix: Possible Market Drivers in the Medium Term
Appendix: Possible Market Drivers in the Medium Term Opportunities Threats Continued growth and strong industrial production Expanding or renewed pandemic containment and grain consumption in China, driving demand for measures impacting global economic activity and dry bulk commodities the trade
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