Slide 1: Q2 2020 Results
17 AUGUST 2020 Q2 2020 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 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 3
Slide 4: TORM at a Glance
TORM AT A GLANCE A world-leading product tanker company Fleet overview* 75 Owned 2 On order • A leading pure-play product tanker owner • Large commercial footprint with presence in all key product tanker segments 10 ⚫⚫⚫⚫⚫⚫⚫⚫⚫⚫ • Strong capital structure to support disciplined growth strategy LR2 +2
Slide 5: Q2 2020 Financial Highlights
Q2 2020 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 tanker owner, TORM’s superior integrated active in all key product tanker operating platform includes segments in order to meet customer in-house technical and commercial management needs. as preferred by customers. Our produc
Slide 7: TORM Commercially Outperforms Peers in Its Key MR Segment
TORM COMMERCIALLY OUTPERFORMS PEERS IN ITS KEY MR SEGMENT CORRESPONDING TO USD 34M IN H1 2020 MR reported TCE, USD/day Q2 2020 performance: • TORM: USD/day 23,012 • Peer average: USD/day 19,512 TORM MR USD 14m USD 36m USD 19m USD 24m USD 34m premium* Note: Peer group is based on Ardmore, d’Amico (co
Slide 8: TORM's Commercial Capabilities Focused on Optimizing Geographical Positioning
TORM’S COMMERCIAL CAPABILITIES ARE FOCUSED ON OPTIMIZING GEOGRAPHICAL POSITIONING USD/day (%) 14,000 80 West outperformance Majority of TORM’s MRs West of Suez 12,000 10,000 70 8,000 6,000 60 4,000 2,000 0 50 -2,000 East outperformance Majority of TORM’s -4,000 MRs East of Suez 40 -6,000 -8,000 30 -
Slide 9: Cost Focus Maintained with Current Low Levels
COST FOCUS MAINTAINED WITH CURRENT LOW LEVELS PARTLY IMPACTED BY COVID-19 FACTORS Significant reduction in OPEX OPEX per day (yearly, weighted avg. in USD/day) -21% 7,655 7,193 Compared to the full 6,771 6,673 6,389 6,371 year of 2014, TORM 6,021 has reduced the OPEX cost base by approx. USD 44m on
Slide 10: CSR Highlights
CSR HIGHLIGHTS TORM remains committed to taking an active GENDER DIVERSITY FUEL role in caring for communities and our EFFICIENCY environment. It is not just our shared duty, but our shared responsibility. Therefore, IMPROVEMENT TORM continues the work to combat carbon, IN THE SHORE-BASED sulfur and
Slide 11: 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 12: Second Quarter Highlights
SECOND QUARTER HIGHLIGHTS Q2/H1 FINANCIAL HIGHLIGHTS VESSEL INVESTMENTS One MR delivered during Q2 2020. Seven older vessels sold covering two LR2s and five MRs. Q2 2020 TCE of USD/day 25,274 H1 2020 TCE of USD/day 24,465 As of 17 August 2020, TORM has installed 40 Q2 EBITDA of USD 119m H1 EBITDA of
Slide 13: Crew Change Challenge Being Resolved by the One TORM Platform
CREW CHANGE CHALLENGE BEING RESOLVED BY THE ONE TORM PLATFORM AND IN DIALOGUE WITH AUTHORITIES • Safety is the top priority for TORM and an integral part of the One TORM platform 22 June 2020 14 August 2020 • Safety is especially important during the COVID-19 pandemic and TORM has implemented severa
Slide 14: TORM's Recent Vessel Sales Were Well Timed
TORM’S RECENT VESSEL SALES WERE WELL TIMED AND DONE ABOVE PREVAILING BROKER VALUES USDm Vessel name Vessel Delivery Age Sales price, net Q1 2020 segment date of commission, broker 32 5-year MR vessel USDm values, USDm 31 TORM Mary MR Q2-20 18.1 30 TORM Gertrud MR Q3-20 17.6 29 TORM Kristina LR2 Q3-2
Slide 15: Strong Performance Enabled Significant Return to Shareholders
STRONG PERFORMANCE AND CAPITAL STRUCTURE HAVE ENABLED A SIGNIFICANT RETURN TO SHAREHOLDERS TORM’s financial position and H1 2020 result… …has enabled a meaningful return to shareholders Total TCE rates USD/day 24,465 Payout ratio 50% of Net income EBITDA USD 221m Total dividend USD 63m (DKK 397m) Ne
Slide 16: Equity Investment Highlights
EQUITY INVESTMENT HIGHLIGHTS 16
Slide 17: Agenda
AGENDA 1 Introduction to TORM and Q2 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 17
Slide 18: COVID-19 Factors Sending Product Tanker Freight Rates on a Rollercoaster Ride
COVID-19 RELATED FACTORS SENDING PRODUCT TANKER FREIGHT RATES ON A ROLLERCOASTER RIDE LR2 (TC1) TORM MR (spot) Q2 2020 USD/day MR (avg) TORM MR covered Q3 2020 as of 13 August 2020 • Unprecedented decline in local oil demand 170,000 leading to regional dislocations and long- haul trade (e.g. US/Euro
Slide 19: Oil Market Has Moved from Stockbuilding to Stockdrawing Phase
THE OIL MARKET HAS MOVED FROM STOCKBUILDING TO STOCKDRAWING PHASE • The COVID-19 pandemic has Pre-COVID-19 led to an unprecedented oil Jan 2020 demand destruction • Initially, refinery runs have been Refined product lagging declines in demand, stocks build leading to unprecedented inventory builds b
Slide 20: Floating Storage Has Come Down as First Step Towards Rebalancing
FLOATING STORAGE HAS COME DOWN AS A FIRST STEP TOWARDS REBALANCING Vessels in floating storage • The unprecedented decline in oil product Mn dwt demand has resulted in limited storage space 18 at terminals and refineries, resulting in a spate 17 of logistical floating storage 16 15 • At its peak in
Slide 21: Onshore Inventories Have Stabilized and Started to Slowly Decline
ONSHORE INVENTORIES HAVE STABILIZED AND STARTED TO SLOWLY DECLINE AFTER UNPRECEDENTED BUILDS CPP inventories in key trading hubs* Mn bbl • The COVID-19 caused demand destruction and resulted in a counter-seasonal growth of CPP inventories in the US, ARA and Singapore to an all-time high • This put o
Slide 22: Low Tonnage Supply Growth Alleviating Effects from Destocking
LOW TONNAGE SUPPLY GROWTH ALLEVIATING EFFECTS FROM DESTOCKING Fundamental effects on demand and supply from the COVID-19 Product tanker order book at historical low level as % of total fleet Short-term Medium-term • Potential economic stimulus 56% • Increased product exports in initial phases of dem
Slide 23: Changing COVID-19 Situation Impacts the Product Tanker Market
CONTINUOUS CHANGES IN THE COVID-19 SITUATION, AND ECONOMIC ACTIVITIES IN DIFFERENT COUNTRIES, IMPACT THE PRODUCT TANKER MARKET THE COVID-19 SITUATION CONTINUES TO IMPACT THE GLOBAL TANKER MARKET • The initial unprecedented decline in oil demand due to the COVID-19, led to significant regional demand
Slide 24: Share of Tonnage in Dirty Trade Remains Relatively High
DESPITE SOME LR2 CLEANING-UP, THE SHARE OF TONNAGE IN THE DIRTY TRADE REMAINS RELATIVELY HIGH USD/day % Aframax rate premium to LR2 • Over Q4 2019 and Q1 2020, the 40,000 Share of LR2s in dirty trades (rhs) 55 product tanker market was 30,000 supported by around 40 LR2s 50 switching to dirty trades,
Slide 25: Middle East Refinery Capacity Additions Expected to Have Positive Long-Term Impact
MIDDLE EAST REFINERY CAPACITY ADDITIONS EXPECTED TO HAVE A POSITIVE LONG-TERM IMPACT Middle East refinery capacity net additions (m b/d) Forecasted Realized 0.63 0.56 2020-23 avg.=0.41 mb/d 0.32 0.25 0.14 2015-19 avg. 2020F 2021F 2022F 2023F • As oil product demand increases, the ton-mile demand is
Slide 26: COVID-19 Causing Medium-Term Market Volatility
COVID-19 CAUSING MEDIUM-TERM MARKET VOLATILITY Key medium- to long-term market drivers • Economic stimulus supporting recovery in oil demand in H2 2020, and restoring some of the trades distorted by the COVID-19 once the initial stock draw is over • Product tanker order book to fleet ratio at histor
Slide 27: Vessel Values Follow Declines in Market Rates
VESSEL VALUES FOLLOW DECLINES IN MARKET RATES ‘000 USD/day USDm LR2 ‘000 USD/day USDm MR 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 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Newbuilding 5 yr. Second-Hand 1 Yr T/C Source: Clarksons. T/C rate for
Slide 28: Agenda
AGENDA 1 Introduction to TORM and Q2 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 28
Slide 29: Q2 2020 Financials
Q2 2020 FINANCIALS USDm Q2 2020 Q2 2019 H1 2020 H1 2019 2019 P&L TCE earnings 174 98 333 215 425 Gross profit 131 55 246 129 252 Sale of vessels 0 0 0 0 1 EBITDA 119 41 221 102 202 Profit before tax 71 5 128 29 167 Profit before tax excl. impairment reversal 71 5 128 28 47 Balance sheet Equity 1,111
Slide 30: Spot-Orientation Provides Significant Operating Leverage
SPOT-ORIENTATION PROVIDES SIGNIFICANT OPERATING LEVERAGE WITH HIGH NEAR-TERM COVERAGE Significant operational leverage Unfixed days as of 30 June 2020 LR2 MR (% of total days) LR1 Handy 26,207 (98%) 27,210 (100%) 3,251 4,172 3,237 3,177 10,960 (82%) 1,308 982 18,993 19,135 8,357 313 726 726 2020 202
Slide 31: Net Asset Value Estimated at USD 985M, Net LTV of 47%
NET ASSET VALUE ESTIMATED AT USD 985M WHILE NET LOAN-TO-VALUE OF JUST 47% 30 June 2020 figures, USDm Net LTV of 47% 1,735 908 985 52 11 86 181 Value of vessels Outstanding debt Committed Cash Working Capital Other* Net Asset Value (incl. newbuildings) CAPEX • Net Loan-to-Value was 47% ensuring a str
Slide 32: Well-Positioned to Service Future CAPEX Commitments
WELL-POSITIONED TO SERVICE FUTURE CAPEX COMMITMENTS AND FURTHER LEVERAGE MARKET OPPORTUNITIES Liquidity and CAPEX as of 30 June 2020 USDm Available liquidity CAPEX commitments 302 Retrofit scrubbers Newbuildings incl. scrubber 76 45 181 98 12 86 86 12 0 12 Cash position Available LR2 Total available
Slide 33: Favorable Financing Profile with No Major Near-Term Maturities
FAVORABLE FINANCING PROFILE WITH NO MAJOR NEAR- TERM MATURITIES Scheduled debt repayments as of 30 June 2020 USDm 902 19 46 12 Financial lease 155 Mortgage debt 149 13 97 13 80 27 77 38 747 59 33 239 Oustanding ROY 2020 2021 2022 2023 2024 2025 Hereafter debt as of 30 June 2020* Ample headroom under
Slide 34: Agenda
AGENDA 1 Introduction to TORM and Q2 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 34
Slide 35: TORM Is a Long-Term Industrial Player
TORM IS A LONG-TERM INDUSTRIAL PLAYER WITH FOCUS ON SUPERIOR OPERATIONAL PERFORMANCE Long-term industrial player with an integrated operational platform • Industrial player with a long-term time horizon in the product tanker market • Prevalent platform through several cycles with superior financial
Slide 36: Historical Transactions and Vessel Value Development
HISTORICAL TRANSACTIONS AND VESSEL VALUE DEVELOPMENT USDm LR2 - Newbuildings MR - Newbuildings 60 LR1 - Newbuildings MR - 7.5-year second-hand (based on avg. of 5 and 10 years) 55 50 Two GSI LR2s Four GSI LR2s (incl. scrubbers) 45 (excl. scrubbers) 40 Two GSI LR1s (incl. scrubbers) 35 30 Three GSI N
Slide 37: TORM's Recent Vessel Sales Are Done at Broker Value
TORM’S RECENT VESSEL SALES ARE DONE AT BROKER VALUE Vessel name Vessel segment Delivery date Age Sales price, net of commission, USDm Broker values, USDm TORM Ohio Handy Q3-18 16.7 TORM Neches MR Q3-18 18.0 TORM Clara MR Q4-18 17.9 TORM Charente Handy Q4-18 17.2 TORM Amazon MR Q1-19 17.1 • Since Q3
Slide 38: Two Main Options to Comply with IMO 2020 Sulfur Regulation
THERE ARE TWO MAIN OPTIONS FOR OCEAN-GOING VESSELS TO COMPLY WITH THE IMO 2020 SULFUR REGULATION Product/chemical Worldwide tankers1) TORM2) Newbuildings Scrubber ~4,200 ~500 49 vessels installations vessels vessels sass (12%) (15%) (66%) Existing fleet on the Shipowners’ sulfur water regulation com
Slide 39: Scrubber Installations Across Shipping Segments
SCRUBBER INSTALLATIONS ACROSS SHIPPING SEGMENTS Product tankers to be fitted with scrubbers (% of current fleet) No. of vessels 300 In service and fitted with scrubber/in yard 16% In service and reported for retrofit 250 On order and to be fitted with scrubber 200 150 33% 100 50 11% 3% 0 LR2 Panamax
Slide 40: TORM's Scrubber JV
49 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 41: Fuel Spread Has Narrowed Along with Lower Crude Oil Price
FUEL SPREAD HAS NARROWED ALONG WITH LOWER CRUDE OIL PRICE Price spread between 0.5% compliant fuels and 3.5% HSFO, Rotterdam delivery vs Brent USD/t USD/bbl • The spread 320 70 VLSFO-HSFO spread (spot) between 0.5% 300 compliant fuel Brent (RHS) 65 280 and 3.5% HSFO 260 60 is currently trading at US
Slide 42: Appendix
APPENDIX TORM
Slide 43: Management Team with International Outlook
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 44: Key Figures
KEY FIGURES USDm Q2 2020 Q2 2019 Q1-Q2 2020 Q1-Q2 2019 2019 Revenue 232 166 479 353 693 EBITDA 119 41 221 102 202 Profit/(loss) before tax 71 5 128 29 167 Net profit/(loss) excluding impairment charges 71 5 128 28 46 Balance sheet Total assets 2,135 1,718 2,135 1,718 2,004 Equity 1,111 864 1,111 864
Slide 45: Fleet Overview
FLEET OVERVIEW # of LR2 LR1 MR Handy As of 17 August 2020 vessels 70 66 64 64 60 10 10 10 50 9 9 9 40 30 45 43 43 20 10 0 2 2 2 17 August End 2020 End 2021 Graph excluding sale and 9 8 10 leaseback vessels 45
Slide 46: Medium-Haul and Long-Haul Trade Supported by IMO 2020
BOTH MEDIUM-HAUL REGIONAL TRADE AND LONG-HAUL TRADE ARE 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 trad
Slide 47: Product Tanker Freight Rates at an All-Time High
PRODUCT TANKER FREIGHT RATES AT AN ALL-TIME HIGH 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->Sydney.
Slide 48: Contango in Oil Prices Supports Floating Storage
CONTANGO IN OIL PRICES SUPPORTS FLOATING STORAGE Brent forward spreads and VLCC rates USD/bbl USD/day 8 Brent M5-M1 VLCC rate (rhs) 180,000 Contango 150,000 4 2 120,000 0 90,000 Backwardation -2 60,000 -4 -6 30,000 -8 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ARA gasoil forwar
Slide 49: IMO 2020 Effects on Clean Trading Not Fully Unfolded
IMO 2020 EFFECTS ON CLEAN TRADING HAVE NOT FULLY UNFOLDED YET MGO and VLSFO price spreads (USD/t) 100 MGO-VLSFO spread, Rotterdam • The tight price spread between MGO-VLSFO spread, Singapore MGO and VLSFO in early 2020, incentivized the use of MGO in Europe, with MGO share in bunker 50 sales increas
Slide 50: Positive TCE Impact Expected from Scrubber Investments
TORM EXPECTS A POSITIVE TCE IMPACT ON THE TORM FLEET DUE TO THE SCRUBBER INVESTMENTS Avg. fuel Compliant fuel and TCE impact per Annual TCE impact Vessel type consumption, HSFO fuel spread vessel, USD/day2) per vessel, USDm tons/day1) assumption, USD/t MR Eco vessel ~11 × 100 = ~1,100 0.4 MR Non-eco
Slide 51: Oaktree Is Majority Shareholder with Free Float of 31%
OAKTREE IS THE MAJORITY SHAREHOLDER WITH A REMAINING FREE FLOAT OF 31% Share information Estimated shareholdings as of August 2020 (%) TORM’s shares are listed on Nasdaq in Copenhagen and Nasdaq in New York under 100 the tickers TRMD A and TRMD, respectively. 14 Shares 17 • 74.8m A-shares, one B-sha