Slide 1: Q3 2019 Results
12 NOVEMBER 2019 Q3 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 Q3 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 5 Asset management 3
Slide 4: TORM at a Glance
TORM AT A GLANCE A world-leading product tanker company Fleet overview* 78 Owned 4 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: Q3 2019 Financial Highlights
Q3 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 Q3 2019 performance: • TORM: USD/day 13,125 • Peer average: USD/day 13,069 FY 2015: USD 28m FY 2016: USD 14m FY 2017: USD 35m FY 2018: USD 20m 9M 2019: USD 14m Note: Peer group is based on Ardmore, d’Amico (composite of LR1, MR and Handy), Di
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
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, -17% 2008 TORM has reduced 7,655 2009 the annual OPEX 7,19
Slide 10: Industry Cooperation and Transparency Are 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. UN Global TORM became signatory to
Slide 11: Corporate Transactions and IMO 2020 Preparations
CORPORATE TRANSACTIONS AND IMO 2020 PREPARATIONS • Taking delivery of a total of seven vessels. Three MR newbuildings and four 2011-built MR second-hand vessels • Executed sale and leaseback agreements for a total of eight vessels • Four vessels sold since the beginning of Q3 2019 Corporate transact
Slide 12: Investment Highlights
INVESTMENT HIGHLIGHTS Pure-play product ~80 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 13: Agenda
AGENDA 1 Introduction to TORM and Q3 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 5 Asset management 13
Slide 14: Soft Rates During Q3 Followed by a Strong Uptick in Q4
SOFT RATES DURING Q3 FOLLOWED BY A STRONG UPTICK IN Q4 Q3 2019 USD/day • In the West, the closure of the largest refinery on the US East Coast supported transatlantic gasoline flows, although weak demand from West Africa and limited West to East naphtha arbitrage flows kept freight rates suppressed
Slide 15: Unprecedented Sentiment in Crude Tanker Market Carried Over to Product Tanker Rates
UNPRECEDENT SENTIMENT IN THE CRUDE TANKER MARKET HAS CARRIED OVER TO PRODUCT TANKER RATES Crude tanker rates Product tanker rates USD/day USD/day VLCC LR2 350,000 80,000 Suezmax LR1 Aframax 70,000 MR 300,000 60,000 250,000 50,000 200,000 40,000 150,000 30,000 100,000 20,000 50,000 10,000 0 0 Jul Aug
Slide 16: Vessel Values Have Continued to Improve as Freight Market Strengthens
VESSEL VALUES HAVE CONTINUED TO IMPROVE AS FREIGHT MARKET STRENGTHENS 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 Jan-1
Slide 17: 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 18: Product Inventories Back to Normal Levels
PRODUCT INVENTORIES BACK TO NORMAL LEVELS Aggregated global CPP inventories* Global inventories compared to 5-year average levels Billion bbl • Global CPP inventories are back to 5-year average levels • Low diesel inventories in main import areas (e.g. Europe) indicate the need for restocking prior
Slide 19: Low Diesel Inventories in the Atlantic Basin Ahead of IMO 2020
LOW DIESEL INVENTORIES IN THE ATLANTIC BASIN AHEAD OF IMO 2020 AND THE WINTER HEATING SEASON Diesel inventories in the US East Coast Million bbl Million bbl • Diesel inventories in the US East Coast are currently at 5-year lows (~30% below the 5-year average) • Diesel inventories in the ARA (Amsterd
Slide 20: 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 21: Product Tanker Order Book Remains at 25 Years Low
PRODUCT TANKER ORDER BOOK REMAINS AT 25 YEARS LOW 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 6.8% (9% for MRs, 2% for LR1s and 8% for LR2s) • In the first nine months of 2019, the product tanker fleet gr
Slide 22: IMO 2020 Catalyst for Estimated 7% Growth in Ton-Mile Demand
IMO 2020 WILL BE THE CATALYST FOR AN ESTIMATED 7% GROWTH IN PRODUCT TANKER TON-MILE DEMAND IN 2020 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
Slide 23: 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 24: 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 impacted 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 25: Agenda
AGENDA 1 Introduction to TORM and Q3 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 5 Asset management 25
Slide 26: Two Main Options for Vessels to Comply with IMO 2020
THERE ARE TWO MAIN OPTIONS FOR OCEAN-GOING VESSELS TO COMPLY WITH THE UPCOMING IMO 2020 SULFUR REGULATIONS Product/chemical Worldwide tankers1) TORM2) Newbuildings Scrubber ~3,700 ~480 44 vessels installation vessels vessels sass (12%) (14%) (55%) Existing fleet on the Shipowners’ sulfur water regul
Slide 27: Scrubber Installations Across Shipping Segments
SCRUBBER INSTALLATIONS ACROSS SHIPPING SEGMENTS Crude and product tankers to be fitted with scrubbers (% of current fleet) No. of vessels 200 12% In service and fitted with scrubber / in yard In service and reported for retrofit On order and to be fitted with scrubber 150 26% 100 50 5% 4% 0 LR2 Pana
Slide 28: Scrubber Installations Impact Timing of Supply Effect and Fuel Mix
SCRUBBER INSTALLATIONS IMPACT TIMING OF SUPPLY EFFECT AND FUEL MIX FOR MARINE TRANSPORTATION Bunker consumption – scrubber sensitivity M b/d Compliant fuels HSFO 6 5 1.3 4 3.9 3.7 3 4.2 4.7 4.5 2 3.7 1 1.1 1.3 0.5 0.8 0 0.3 Current bunker Consumption Consumption Consumption Consumption Consumption c
Slide 29: Scrubber Installations Supported by TORM's Scrubber JV
44 SCRUBBER INSTALLATIONS WILL BE CONDUCTED SUPPORTED BY TORM’S SCRUBBER JV TORM’s scrubber JV, ME Production China Ownership share: 27.5% ME • One of the largest risks with scrubber Production installations is the potential delay during both China the production and the installation phase • Due to
Slide 30: Current Fuel Spread Prices Support Attractive Scrubber Business Cases
CURRENT FUEL SPREAD PRICES SUPPORT THE ATTRACTIVE SCRUBBER BUSINESS CASES Cal2020 price spread between 0.5% compliant fuels and 3.5% HSFO, Rotterdam delivery 1) 50% LSFO/ 50% ULSD blend VLSFO 0.5% marine fuel (CAL2020) USD/t 260 • The spread between 0.5% compliant fuel 240 and 3.5% HSFO is currently
Slide 31: Agenda
AGENDA 1 Introduction to TORM and Q3 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 5 Asset management 31
Slide 32: Results Q3 2019
RESULTS Q3 2019 USDm Q3 2019 Q3 2018 2018 P&L TCE earnings 84 71 352 Gross profit 43 27 169 Sale of vessels 0 0 1 EBITDA 32 15 121 Profit before tax -9 -25 -33 Balance sheet Equity 852 859 847 NIBD 733 597 627 Cash and cash equivalents 121 163 127 Key figures -0.12 -0.34 -0.48 Earnings per share (US
Slide 33: Spot-Orientation Provides Significant Operating Leverage
SPOT-ORIENTATION PROVIDES SIGNIFICANT OPERATING LEVERAGE Unfixed days # of days as of 30 September 2019 LR2 LR1 MR Handy (% of total days) 27,946 (96%) 29,301 (100%) 3,472 4,231 3,274 3,265 19,769 20,383 5,291 (79%) 524 568 3,902 1,431 1,422 297 2019 2020 2021 Illustrative change in cash flow genera
Slide 34: Net Asset Value Estimated at USD 887m
NET ASSET VALUE ESTIMATED AT USD 887M 30 September 2019 figures, USDm Net LTV of 50% 1,720 850 887 24 9 138 121 Value of vessels Outstanding debt Committed Cash Working Capital Other* Net Asset Value (incl. newbuildings) CAPEX • Net Loan-to-Value was 50% ensuring a strong capital structure • Net Ass
Slide 35: Well-Positioned to Service Future CAPEX Commitments
WELL-POSITIONED TO SERVICE FUTURE CAPEX COMMITMENTS CAPEX and liquidity as of 30 September 2019 USDm CAPEX commitments Available liquidity 1) Additional scrubbers Newbuildings incl. scrubber Retrofit scrubbers 105 182 337 12 12 14 32 142 78 76 75 17 138 121 59 2019 2020 Total Cash position Available
Slide 36: Favourable Financing Profile with No Near-Term Maturities
FAVOURABLE FINANCING PROFILE WITH NO NEAR-TERM MATURITIES Scheduled debt repayments as of 30 September 2019 USDm 4 16 21 Financial Lease 179 83 16 Mortgage debt 317 27 671 88 116 162 Oustanding debt as of Q4 2019 2020 2021 2022 Hereafter 30 September 2019* Ample headroom under our attractive covenan
Slide 37: Agenda
AGENDA 1 Introduction to TORM and Q3 2019 highlights 2 Product tanker market overview and outlook 3 IMO 2020 preparations 4 Financial metrics 5 Asset management 37
Slide 38: Vessels Acquired Below Market Price
VESSELS ACQUIRED BELOW MARKET PRICE USDm LR1 - Newbuildings MR - 7.5 year second-hand (based on avg. of 5 and 10 year) 48 MR - Newbuildings 46 44 42 40 38 Two GSI LR1s 36 (incl. scrubbers) 34 32 Three GSI NBs 30 Two HM resales (incl. scrubbers) 28 (excl. scrubbers) Four GSI NBs (incl. scrubbers) 26
Slide 39: TORM's Recent Vessel Sales Are Done at Broker Values
TORM’S RECENT VESSEL SALES ARE DONE AT BROKER VALUES Vessel name Vessel Date Age Sales price, net Broker segment of commission, values, USDm USDm TORM Ohio Handy Q3-18 16.7 TORM Neches MR Q3-18 18.0 • Since Q3 2018 TORM has sold 11 vessels at TORM Clara MR Q4-18 17.9 broker values TORM Charente Hand
Slide 40: Appendix
OOD AT SHIPPING. APPENDIX TORM
Slide 41: 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 of TORM plc ▪ CEO of TORM A/S since April 2010 ▪ Chairman of the Board of Danish Shipping and member of the Board of Danish Ship Finance ▪ Previously Executive
Slide 42: Key Figures
KEY FIGURES USDm Q3 2019 Q3 2018 Q1-Q3 2019 Q1-Q3 2018 2018 Revenue 147 140 499 467 635 EBITDA 32 15 134 81 121 Profit/(loss) before tax -9 -25 20 -32 -33 Net profit/(loss) -9 -25 19 -33 -35 Balance sheet Total assets 1,834 1,718 1,834 1,718 1,714 Equity 852 859 852 859 847 NIBD 733 597 733 597 627
Slide 43: Fleet Overview
FLEET OVERVIEW # of LR2 LR1 MR Handy As of 12 November 2019 vessels 70 69 69 67 67 11 11 60 11 11 7 8 9 9 50 40 30 45 44 46 46 20 10 4 4 3 3 0 12 November End 2019 End 2020 End 2021 Graph excludes sale and leaseback 11 11 11 11 vessels 43
Slide 44: 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 45: Soft Rates During Q3 Followed by a Strong Uptick in Q4
SOFT RATES DURING Q3 FOLLOWED BY A STRONG UPTICK IN Q4 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->S
Slide 46: TORM Monitors Geopolitical Situation in 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 47: Oaktree Is Majority Shareholder with Free Float of 35%
OAKTREE IS THE MAJORITY SHAREHOLDER WITH A REMAINING FREE FLOAT OF 35% Share information Estimated shareholdings as of November 2019 (%)* TORM’s shares are listed on Nasdaq in Copenhagen and Nasdaq in New York under 100 the tickers TRMD A and TRMD, respectively. 11 Shares 19 • 74.2m A-shares, one B-
Slide 48: TORM Expects Positive TCE Impact Due to Scrubber Investments
TORM EXPECTS A POSITIVE TCE IMPACT ON 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 = ~2,000 0.7 MR Non-eco vessel ~