Torm Plc Class A · OMXCOP:TRMD_A
Torm Plc Class A — Investor Presentation (January 2018)
36 slides from Torm Plc Class A's investor presentation, January 2018
Slide 1: Investor Presentation January 2018
INVESTOR PRESENTATION JANUARY 2018
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
Orion purchase price considerations AGENDA 1 Attractive Product Tanker Fundamentals 2 Company Overview 3 Q3 2017 Financials 3
Slide 4: Supply-demand factors moving in owners' favor
SUPPLY-DEMAND FACTORS MOVING IN OWNERS’ FAVOR + Sustained, increasing demand for gasoline and other petroleum products + Product inventories have decreased (approaching 5-year average) + Relocation of refineries expanding ton-mile demand + Low order book, particularly for smaller product tankers + S
Slide 5: Relocation of refineries will benefit product tankers and expand ton-miles
RELOCATION OF REFINERIES WILL BENEFIT PRODUCT TANKERS AND EXPAND TON-MILES Middle Eastern refinery capacity set to grow Saudi Arabia diesel exports increasing* 12 1.9m b/d of capacity to 0.7 be added through 2022 10 Historical rate of 1.5m 0.6 b/d of capacity to 3.4 times 0.5 8 0.4 M b/d M b/d 6 0.3
Slide 6: Key demand drivers have been normalising
KEY DEMAND DRIVERS HAVE BEEN NORMALISING Global CPP inventories Billion bbl Short-term factors 1.70 Decreasing inventory levels, 1.70 Product stock draws accelerated in Q3 driven by stronger-than- approaching 5-year average expected oil demand, preliminary data for the US and Europe 1.60 1.60 shows
Slide 7: Reduced order book for the product tanker fleet
REDUCED ORDER BOOK FOR THE PRODUCT TANKER FLEET Net fleet growth y-o-y (no. of vessels)* % 2005-2015 average fleet growth for LR2, LR1, MR and Handysize • In Q3, product tanker newbuilding activity slowed down from Q2, as owners’ appetite for more expensive Tier 3 tonnage remained weak and newbuildi
Slide 8: Significantly reduced shipyard capacity for product tankers
SIGNIFICANTLY REDUCED SHIPYARD CAPACITY FOR PRODUCT TANKERS Reduction in Korean shipyard capacity* Reduction in shipyard capacity 70 • Yard restructurings and consolidations in Korea and China have caused a reduction in available capacity for product 60 tankers 50 -45% • Overall yard capacity for pr
Slide 9: Stable product tanker vessel prices
STABLE PRODUCT TANKER VESSEL PRICES Vessel price development USDm LR2 - Newbuilding LR1 - Newbuilding MR - Newbuilding • Second-hand market in Q3 remained slow in a low freight market. Activity focused on older tonnage with prices overall unchanged • In Q4 so far, second-hand activity is picking up
Slide 10: Agenda
Orion purchase price considerations AGENDA 1 Attractive Product Tanker Fundamentals 2 Company Overview 3 Q3 2017 Financials 10
Slide 11: TORM – Key success factors
TORM – KEY SUCCESS FACTORS TORM’s superior integrated TORM is a large scale, pure-play operating platform includes product tanker owner, active in all in-house technical and commercial key product tanker segments in management (preferred by customers) order to meet customer needs Enhanced responsive
Slide 12: Large scale, pure-play product tanker company
LARGE SCALE, PURE-PLAY PRODUCT TANKER COMPANY Key facts Global footprint with presence in all major segments A world-leading pure product tanker company • One of the largest owners and operators of product tankers in the world • 128 years of track record • Customers consist of major independent oil
Slide 13: TORM – Key success factors
TORM – KEY SUCCESS FACTORS TORM’s superior integrated TORM is a large scale, pure-play operating platform includes product tanker owner, active in all in-house technical and commercial key product tanker segments in management (preferred by customers) order to meet customer needs Enhanced responsive
Slide 14: TORM commercially outperforms peers in its key MR segment
TORM COMMERCIALLY OUTPERFORMS PEERS IN ITS KEY MR SEGMENT 30,000 High-Low TORM Peer avg. 25,000 Q3 Performance: • TORM: USD/day 14,827 20,000 • Peer Average: USD/day 12,510 MR reported TCE, USD/day 15,000 10,000 5,000 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 TORM MR USD 8m USD 1m USD 7m USD 4m USD 3m USD -0m US
Slide 15: Vessel positioning is a key driver of TCE differential
VESSEL POSITIONING IS A KEY DRIVER OF TCE DIFFERENTIAL 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2017 WEST – Atlantic basket TC2 & TC14 EAST – Pacific round trip TC10 Note: The shown routes do not reflect actual earnings but ar
Slide 16: Industry leading ROIC
INDUSTRY LEADING ROIC * Q3 2017 2.1% 0.3% -0.2% -0.3% -0.5% 2017 YTD 2.5% 1.2% 0.8% 1.7% -0.4% 4.9% 2.8% 3.2% 2.4% 2016 1.1% Note: RoIC defined as Annualized RoIC (adjusted for impairments) or EBIT less tax / invested capital (average invested capital through the period) * Scorpio Tankers adjusted f
Slide 17: TORM – Key success factors
TORM – KEY SUCCESS FACTORS TORM’s superior integrated TORM is a large scale, pure-play operating platform includes product tanker owner, active in all in-house technical and commercial key product tanker segments in management (preferred by customers) order to meet customer needs Enhanced responsive
Slide 18: Acquired six MR re-sale newbuildings in Q3 2017
ACQUIRED SIX MR RE-SALE NEWBUILDINGS IN Q3 2017 FOR USD 185M; FOUR GSI VESSELS TO BE DELIVERED IN 2019 Clarksons quarterly MR newbuilding prices 2006-2017 14 TORM’s MR re-sales Clarksons today 12 10 Q3 2017 MR acquisitions: 2 Hyundai Mipo # of quarters 8 4 GSI 6 -The six acquisition vessels have att
Slide 19: TORM's newbuilding options
TORM’S NEWBUILDING OPTIONS TORM has negotiated to maintain eight options: Four MR vessels with delivery in 2H 2019/Q1 2020 Four LR1 vessels with delivery in 2H 2019 Status The options are with high specifications, including: USCG approved BWMS All with a scrubber-ready design The optio
Slide 20: Newbuilding options are very attractively priced in a historical context
THE NEWBUILDING OPTIONS ARE VERY ATTRACTIVELY PRICED IN A HISTORICAL CONTEXT Clarksons quarterly LR1 newbuilding prices 2006-2017 15 TORM’s option vessels Clarksons Q3 2017 # of quarters 10 Clarksons quarterly 2006-17 Four LR1 4 LR1 options options 5 0 USDm 70+ 36-37 38-39 40-41 42-43 44-45 46-47 48
Slide 21: TORM – Key success factors
TORM – KEY SUCCESS FACTORS TORM’s superior integrated TORM is a large scale, pure-play operating platform includes product tanker owner, active in all in-house technical and commercial key product tanker segments in management (preferred by customers) order to meet customer needs Enhanced responsive
Slide 22: TORM's net asset value estimated at USD 708m
TORM’S NET ASSET VALUE ESTIMATED AT USD 708M 30 September 2017 figures, USDm Net LTV of 57% • Based on broker values, TORM’s vessels including newbuildings were estimated at USD 1,524m as of 30 September 2017 310 • With an outstanding debt of USD 775m and committed CAPEX of 775 24% USD 238m, TORM’s
Slide 23: Favourable financing profile and strong liquidity position
TORM HAS A FAVOURABLE FINANCING PROFILE AND STRONG LIQUIDITY POSITION As of 30 September 2017 (USDm) CAPEX commitments Available liquidity (before equity transaction) TORM is well-positioned to service future CAPEX 196 416 and debt commitments. 238 75 98 145 38 102 2017 2018 2019 Total Cash position
Slide 24: Agenda
Orion purchase price considerations AGENDA 1 Attractive Product Tanker Fundamentals 2 Company Overview 3 Q3 2017 Financials 24
Slide 25: EBITDA of USD 37m in Q3 2017
EBITDA OF USD 37M IN Q3 2017 Q1-Q3 Q1-Q3 USDm Q3 2017 Q3 2016 2017 2016 2016 2015* P&L TCE Earnings 95 103 295 365 458 582 Gross profit 47 50 147 198 242 361 Sale of vessels 0 0 3 0 0 0 EBITDA 37 40 117 166 200 319 Profit before tax -4 2 -1 48 -142 188 Approximately break-even (net Adjusted profit b
Slide 26: Cost cutting has reduced OPEX by ~USD/day 1,000 since 2014
OUR FOCUS ON COST CUTTING HAS REDUCED OPEX BY ~USD/DAY 1,000 SINCE 2014 TORM’s platform remains highly focused on cost- efficiencies and high quality technical management Significant reduction in OPEX • The in-house technical management allows for close OPEX per day (yearly, weighted avg. in USD/day
Slide 27: Fully integrated business model and admin expenses trending down
TORM HAS A FULLY INTEGRATED BUSINESS MODEL AND ADMIN EXPENSES ARE TRENDING SIGNIFICANTLY DOWN TORM operates a fully integrated commercial TORM has trimmed administration expenses and technical platform significantly • TORM’s operational platform handles commercial and Admin. expenses (quarterly avg.
Slide 28: TORM has significant operating leverage
TORM HAS SIGNIFICANT OPERATING LEVERAGE LR2 LR1 MR Handy Unfixed days (excluding newbuilding options) # of days as of 30 September 2017 28,641 25,070 4,238 3,139 2,447 2,509 19,189 16,730 4,963 545 522 3,361 2,692 2,767 2017 2018 2019 Of total earning days 73% 89% 99% Illustrative change in cash flo
Slide 29: Appendix
= __ APPENDIX ~ — = TORM
Slide 30: Q3 impacted by inventory draws and Hurricane Harvey
Q3 IMPACTED BY INVENTORY DRAWS AND HURRICANE HARVEY Spot rates 60 Q3 LR LR2 (TC1) 50 Increased volume of middle distillates moved from the Middle East to 40 Europe, initially due to a shutdown of Europe’s largest refinery in Rotterdam 30 and later in order to replenish European stocks, following the
Slide 31: Fleet update
FLEET UPDATE # of vessels As of 14.11.2017 Q2 2017 Changes Q3 2017 Changes 2017 Changes 2018 Changes 2019 Owned vessels LR2 7 - 7 - 7 4 11 - 11 LR1 7 - 7 - 7 - 7 - 7 MR 48 2 50 - 50 - 50 4 54 Handysize 9 -1 8 - 8 -1 7 - 7 Total 71 1 72 - 72 3 75 4 79 Charter-in and leaseback vessels LR2 3 - 3 - 3 -2
Slide 32: Oaktree is the majority shareholder and ownership has become more dispersed
OAKTREE IS THE MAJORITY SHAREHOLDER AND OWNERSHIP HAS BECOME MORE DISPERSED Share information Estimated shareholdings as of 31 January 2017, % TORM’s shares are listed on Nasdaq 100 Copenhagen under the ticker TRMD A 2 and on Nasdaq New York under the 13 ticker TRMD 13 64 8 Shares • 62.3m A shares,
Slide 33: TORM has distributed a total of USD 48m to shareholders in 2016 and 2017
TORM HAS DISTRIBUTED A TOTAL OF USD 48M TO SHAREHOLDERS IN 2016 AND 2017 Distribution to shareholders (USDm) 1 • During the first nine months of 2017, TORM has 25 paid a USD 1.2m dividend on 12 September 2017, corresponding to a dividend per share of 48 USD 0.02 or DKK ~0.13 19 3 • During 2016, TORM
Slide 34: Management team with an international outlook
MANAGEMENT TEAM WITH AN INTERNATIONAL OUTLOOK AND MANY YEARS OF SHIPPING EXPERIENCE Executive Director Jacob Meldgaard ▪ Executive Director in TORM plc ▪ CEO of TORM A/S since April 2010 ▪ Previously Executive Vice President of the Danish shipping company NORDEN, where he was in charge of the compan
Slide 35: Reconciliation of non-IFRS financial measures
RECONCILIATION OF NON-IFRS FINANCIAL MEASURES Q3 Q3 Q1-Q3 Q1-Q3 Q3 Q3 Q1-Q3 Q1-Q3 USDm 2017 2016 2017 2016 USDm 2017 2016 2017 2016 Non-IFRS Financial Measures Gross profit Time charter equivalent (TCE) earnings 95.2 103.4 295.1 364.6 Operating profit 5.8 9.9 26.9 75.5 Gross profit 47.1 50.1 146.6 1
Slide 36: Reconciliation of non-IFRS financial measures continued
RECONCILIATION OF NON-IFRS FINANCIAL MEASURES CONTINUED Q3 Q3 Q1-Q3 Q1-Q3 Q3 Q3 Q1-Q3 Q1-Q3 USDm 2017 2016 2017 2016 USDm 2017 2016 2017 2016 Invested capital Net interest-bearing debt Tangible and intangible fixed assets 1,404.2 1,590.3 1,404.2 1,590.3 Mortgage debt and bank loans (current and non-