Dampskibsselskabet Norden A/s · OMXCOP:DNORD
Dampskibsselskabet Norden A/s — Norden — Q2 2018 Earnings Presentation
45 slides from Dampskibsselskabet Norden A/s's earnings presentation, Aug 15, 2018
Slide 1: Norden Results Q2 report
NORDEN RESULTS Q2 report Copenhagen, Denmark 15 August 2018 1 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 2: Agenda
AGENDA • Business update • Dry Cargo – Q2 update – Market outlook • Tankers – Q2 update – Market outlook • Final words “In addition to the agile management of cyclical exposure to shipping industry, NORDEN also delivers additional value through operator activities – all in a company you can trust” 2
Slide 3: Business update
Business update 3 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 4: Business update - overall: strong dry operator but weak tanker market
BUSINESS UPDATE - OVERALL STRONG PERFORMANCE IN DRY OPERATOR BUT WEAK TANKER MARKET Financial highlights Quarterly results • Q2 2018 Adjusted result USD 4 million 30 27 – Dry Operator USD 8 million benefitting from positioning voyages in Q1 18 25 – Dry Owner USD 3 million in improved markets – Tanke
Slide 5: Business update - guidance: full-year expectations revised
BUSINESS UPDATE - GUIDANCE FULL-YEAR EXPECTATIONS REVISED Guidance – Adjusted result Guidance 40 • Good performance in dry cargo business cannot make up for the tanker market conditions that 30 are worse than expected 20 to 30 20 • Dry Operator exceeded expectations and result of 15 to 20 second hal
Slide 6: Successful first year with split of dry cargo
BUSINESS UPDATE – DRY OPERATOR SINCE INITIATION SUCCESFUL FIRST YEAR WITH SPLIT OF DRY CARGO Dry Operator • Dry Operator has started to establish a strong track record and built a platform for further growth • A total of USD 57 million generated by Dry Operator – USD 23 million after overhead and ad
Slide 7: Significant value beyond asset values
BUSINESS UPDATE – VALUATION OF NORDEN SIGNIFICANT VALUE BEYOND ASSET VALUES Owned Assets NAV Value of TC/cover portfolio Value of Dry Operator Dry Cargo Vessels (ex CP) 444 Dry Cargo (+/-1,000USD* = USD 5 mill.) Adjusted Result last 4 quarters (USD million) 23 14,000 Capacity Cover Tanker Vessels (e
Slide 8: IMO 2020 - Scrubbers a good investment (1/2)
IMO 2020 – SCRUBBERS A GOOD INVESTMENT (1/2) • On January 1st the global sulphur cap will come into effect reducing the allowed sulphur content from the current level of 3.5 % to 0.5 %. • Throughout the first half of 2018, NORDEN has secured 26 scrubbers with options for further – 18 will be fitted
Slide 9: IMO 2020 - Scrubbers a good investment (2/2)
IMO 2020 – SCRUBBERS A GOOD INVESTMENT (1/2) • In total NORDEN has so far committed MGO – HSFO forward price spread (per 9/8-2018) USD 41 million to the installation of 400 scrubbers on owned vessels and USD 13 350 300 million in increased TC hire USD per ton 250 200 150 • Recognising uncertainties,
Slide 10: Dry Cargo
Dry Cargo 10 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 11: Higher activity and improved margins
BUSINESS UPDATE – Q2 DRY OPERATOR HIGHER ACTIVITY AND IMPROVED MARGINS • Q2 2018 Adjusted result of USD 8 million • Benefitted from the positioning of vessels into the Atlantic in the first quarter, although this years grain season did not create the same second quarter improvements in rates as in p
Slide 12: Positive results in improving markets
BUSINESS UPDATE – Q2 DRY OWNER POSITIVE RESULTS IN IMPROVING MARKETS • Q2 2018 Adjusted result of USD 3 million • Continues to optimize the dry owner fleet in efforts to concentrate ownership on Supramax and Panamax – – Sale of 1 Handysize tanker during Q2 – Completed four Supramax deals which adds
Slide 13: Gradual improvements have continued
MARKET REVIEW – DRY CARGO Q2 2018 GRADUAL IMPROVEMENTS HAVE CONTINUED Key developments Panamax spot rates 14,000 • Rates continued to improve over 12,000 2017 levels 10,000 USD/day 8,000 – Panamax up 20% vs Q2 2017 6,000 4,000 – Supramax up 31% vs Q2 2017 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep
Slide 14: Further market improvements expected in 2019
MARKET REVIEW – DRY CARGO OUTLOOK FURTHER MARKET IMPROVEMENTS EXPECTED IN 2019 • Low fleet growth continues to drive our expectations of rates being higher in H2 2018 and 2019 • Global economic conditions continue to support reasonable growth in volumes transported • Expected lower demand support fr
Slide 15: Tankers
Tankers 15 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 16: Difficult current market - large upside in portfolio
BUSINESS UPDATE – Q2 TANKERS DIFFICULT CURRENT MARKET – LARGE UPSIDE IN PORTFOLIO • Q2 2018 Adjusted Result of USD -8 million, in very challenging market conditions • Increased focus on MR – 2 secondhand MR purchased during Q2 with delivery in July 2018, 1 Handysize sold during Q2 with delivery to n
Slide 17: One of the most challenging markets in a decade
MARKET REVIEW – TANKERS Q2 2018 ONE OF THE MOST CHALLENGING MARKETS IN A DECADE • Supply overhang pressuring rates - freight rates at 5-year low • Disappointing oil demand growth in Q2 of only 0.9% (IEA) • High oil prices and high USD currency is a challenge for oil demand in some regions • Tanker s
Slide 18: Foundation for recovery improving
MARKET REVIEW – TANKERS OUTLOOK FOUNDATION FOR RECOVERY IMPROVING • Positive macro environment adding to demand upside • Oil inventories normalising • Higher refining utilisation expected to increase movement of oil products • Overall fleet growth for both product and crude tankers are declining sig
Slide 19: Final words
Final words 19 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 20: Capturing value potential of Dry Operator
FINAL WORDS CAPTURING VALUE POTENTIAL OF DRY OPERATOR • Dry Operator building a track record and well positioned for further growth • Dry Owner well positioned for improving markets • Currently challenging Tanker market, but improvements expected in 2019. Large upside in portfolio • Significant inve
Slide 21: Forward looking statements
DISCLAIMER FORWARD LOOKING STATEMENTS This presentation contains certain forward-looking statements reflecting the management’s present judgment of future events and financial results. Statements relating to the remainder of 2018 and subsequent years are subject to uncertainty, and NORDEN’s actual r
Slide 22: Thank you for your attention
THANK YOU FOR YOUR ATTENTION Dampskibsselskabet NORDEN A/S 52, Strandvejen DK-2900 Hellerup Denmark Phone: +45 3315 0451 www.ds-norden.com dampskibsselskabetnorden ds-norden ds_norden dsnorden ds_norden 22 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 23: Back-up slides
Back-up slides 23 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 24: Enabling smarter global trade
THE NORDEN DNA ENABLING SMARTER GLOBAL TRADE Characteristics Connecting the world • Active in Dry Cargo and Product Tankers – Cyclical exposure to market developments (~100 vessels) – Large scale independent operator activities (~300 vessels) • Agile portfolio management • Strong track record of mai
Slide 25: NORDEN's business units
NORDEN DNA NORDEN’S 3 BUSINESS UNITS Dry Operator Dry Owner Product Tankers Transport services and cyclical Global transport solutions to dry Cyclical market exposure to dry market exposure in product cargo customers cargo market tanker market Generate a margin by: Generate superior long-term return
Slide 26: The Dry Operator is independent from Dry Owner
NORDEN DNA THE DRY OPERATOR IS INDEPENDENT FROM DRY OWNER • Separate P&L • Separate organisations 25,000 vessel days in Q2 2018 - around 300 • Separate KPIs and reward structures Contribution Margin of vessels • The value of the Dry Operator is not 594 USD per driven by an overall exposure to the ma
Slide 27: Dry Operator: logistical optimisation and positions
DS NORDEN - DRY OPERATOR DRY OPERATOR: LOGISTICAL OPTIMISATION AND POSITIONS Value levers Regional exposure Overall market exposure Clip deals Employment arbitrage Vessel selection Options Vessel operation Minimising ballast Taking a view on regional Taking a view on the Securing margin on a Choosin
Slide 28: Dry Owner portfolio
NORDEN DNA DRY OWNER PORTFOLIO Owned Fleet Charateristics 16 Current To be delivered • Portfolio primarily consists of Supramax and Panamax vessels 12 • Large portfolio of long term charters from Japan with 5 significant optionality incl. purchase options 8 • Cover portfolio based on cargo contracts
Slide 29: Tankers portfolio
NORDEN DNA TANKERS PORTFOLIO Owned Fleet Charateristics • MR and Handysize vessels Current To be delivered 14 12 2 • Primarily own technical management 10 • Portfolio of ~20 short term (up to 1yr) time charters in 8 6 11 10 • All short-term chartering-out conducted via Norient Product 4 Pool (NPP) o
Slide 30: Connection between Operator and Owner
CONNECTION BETWEEN OPERATOR AND OWNER Q4 2017 (USD Million) Dry Owner Dry Operator Eliminations Dry Cargo • Dry Owner charters out Revenue – services rendered external 16 502 0 518 most of its capacity to Dry Revenue – services rendered internal 38 0 -38 0 Revenue 54 502 -38 518 Operator Voyage cost
Slide 31: Overall results
OVERALL RESULTS USDm Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 EBITDA – Dry Cargo -2.6 EBITDA – Dry Operator -4.6 14.1 4.1 9.1 EBITDA – Dry Owner 10.1 14.8 5.5 9.5 EBITDA - Tankers 10.0 6.5 9.4 7.5 2.4 EBITDA - Group 7.3 12.0 38.5 17.1 21.0 Depreciation -10.2 -10.6 -10.7 -10.5 -10.9 EBIT Group -2.8 -2
Slide 32: Capital structure - 48% equity share
CAPITAL STRUCTURE – 48% EQUITY SHARE Capital structure Net committed cash (ultimo) • Cash in low-risk deposit USDm Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 accounts and securities Adjusted net interest bearing -101 -69 -59 -69 -9 assets* • Outstanding yard payments Payments for newbuilding less -100
Slide 33: Dry Owner TCE
DRY OWNER TCE Vessel type Days TCE (USD / day) Post-Panamax 27 8,117 Panamax 1,851 11,888 Supramax 1,972 11,181 Handysize 859 10,391 33 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 34: Provisions
PROVISIONS Effect of provisions 150 119 108 100 50 25* 21 12 -230 -64 7 3 USD million 0 -50 -100 -150 -200 -250 2014 2015 2016 2017 2018 2019 2020 2021 2022 Comments • Remaining provisions for second half of 2018 at USD 10 million • Reduced impact from provisions from 2018 34 | Q2 REPORT 2018 *Of wh
Slide 35: Performance: continuously outperforming the markets
PERFORMANCE CONTINUOUSLY OUTPERFORMING THE MARKETS MR – 4 quarter rolling NORDEN TCE over benchmark 2,500 2,000 1,500 USD/day 1,000 500 0 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 35 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 36: Dry Owner positioning
30 JUNE 2018 DRY OWNER POSITIONING 2018 ROY 2018 ROY Q3 Q4 2018 2019 2020 Q3 Q4 2018 2019 2020 Own vessels Ship days Panamax 368 363 731 1,376 1,444 Supramax 690 734 1,424 3,699 4,028 Handysize 490 365 855 1,448 1,452 Total 1,548 1,462 3,010 6,523 6,924 Chartered vessels Cash costs for T/C capacity
Slide 37: Dry Owner fleet and values
30 JUNE 2018 DRY OWNER FLEET AND VALUES NORDEN’s NORDEN's Dryfleet Dry Owner Owner at 30 fleet June 2018 NORDEN’s Dry Owner fleet values (USD million) Vessel type Post-Panamax Panamax Supramax Handysize Total Vessel type Post-Panamax Panamax Supramax Handysize Total * Ch Vessels in operation Average
Slide 38: Tanker positioning
30 JUNE 2018 TANKER POSITIONING 2018 ROY 2018 ROY Q3 Q4 2018 2019 2020 Q3 Q4 2018 2019 2020 Owned vessels Ship days MR 1,196 1,190 2,386 4,647 4,681 Handysize 876 824 1,700 3,229 3,267 Total 2,072 2,014 4,086 7,876 7,948 Cash costs for T/C capacity (USD per day) LR1 184 184 368 730 397 18,655 18,655
Slide 39: Tanker fleet and values
30 JUNE 2018 TANKER FLEET AND VALUES NORDEN’s Tanker fleet NORDEN’s NORDEN's Tanker Tanker fleetatvalues fleet values 30 June(USD million) 2018 (USD million) Vessel type LR1 MR Handysize Total Vessel type LR1 MR Handysize Total Vessels in operation Owned vessels 0.0 11.0 10.0 21.0 Average age of own
Slide 40: Newbuilding prices
Million USD 0 10 20 30 40 50 60 Jan-76 Jan-78 40 | Q2 REPORT 2018 Jan-80 Panamax (Dry) Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 NEWBUILDING PRICES Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Million USD 0 10 20 30 40 50 60 Jan-76 MR (Tank) Jan-78 Jan-8
Slide 41: Panamax
PANAMAX Spot rate 14,000 12,000 10,000 8,000 USD/day 6,000 4,000 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2017 2018 * Source: Clarksons 41 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 42: Supramax
SUPRAMAX Spot rate 12,000 10,000 8,000 USD/day 6,000 4,000 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2016 2017 2018 * Source: Clarksons 42 | Q2 REPORT 2018 CUSTODIANS OF SMARTER GLOBAL TRADE
Slide 43: Working capital
WORKING CAPITAL Working capital assets 299.7 Inventories 75.2 Freight Receivables 144.5 Receivables from joint ventures 2,9 Other receivables 25.6 Prepayments 81.5 Working capital liabilities 154.0 Trade payables 83.8 Other payables 34.6 Deferred income 35.6 Net Working Capital 145.7 43 | Q2 REPORT
Slide 44: What is Time Charter Equivalent (TCE)?
INDUSTRY – TCE WHAT IS TIME CHARTER EQUIVALENT (TCE)? NORDEN (as owner) has contracted with a customer to move 50,000 mt of cargo at a rate of $20 per Metric Ton. 10 Days 5 Days 20 Days 5 Days Ballast Leg Loading Laden Leg Discharging Total: 40 Days Owner’s cost: Owner’s cost: Owner’s cost: Owner’s
Slide 45: The share (DNORD)
THE SHARE (DNORD) Master data Composition of shareholders Shareholder capital DKK 42,200,000 • 16,086 registered shareholders owning Number of shares and 87.4% denomination 42,200,000 shares of DKK 1 • Approx. 31% international ownership Classes of shares 1 Voting and ownership A/S Motortramp, restr