Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — FY2018 Earnings Presentation
38 slides from Pacific Basin Shipping's earnings presentation, Feb 28, 2019
Slide 1: 2018 Annual Results
2018 Annual Results 28 February 2019
Slide 2: Results, Market Review and Outlook
Results, Market Review and Outlook 2018 Annual Results 1
Slide 3: 2018 Annual Results Highlights
2018 Annual Results Highlights US$m 2018 2017 US$m Change EBITDA 215.8 133.8 +82.0 Underlying profit 72.0 2.2 +69.8 P&L Net profit 72.3 3.6 +68.7 HK6.2¢ Full-year dividends - (Final: HK3.7¢) Cash 341.8 244.7 B/S Net gearing 34% 35% Fleet Owned/Total1 111/ 217 106 / 222 Continued strong outperforma
Slide 4: 2018 TCE Performance and 2019 Cover
2018 TCE Performance and 2019 Cover US$/day Handysize Supramax Market (BHSI/BSI) index net rate 8,270 10,910 Improvement over 2017: Handysize: +21% / $1,740 2018 PB daily TCE net rate 10,060 12,190 Supramax: +27% / $2,580 PB outperformance 22% / 1,790 12% / 1,280 Revenue Days 50,120 29,980 Cover as
Slide 5: Three Years of Improving TCE
Three Years of Improving TCE PB Handysize TCE Performance PB Supramax TCE Performance US$/day net US$/day net 12,000 14,000 PB Handysize PB Supramax Baltic Handysize Index (BHSI)* 12,000 Baltic Supramax Index (BSI)* 10,000 10,000 8,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4
Slide 6: Weaker Start to 2019
Weaker Start to 2019 Handysize (BHSI) Supramax (BSI) Market Spot Rates in 2016-2019 Market Spot Rates in 2016-2019 US$/day net* US$/day net* 12,000 14,000 10,000 12,000 2017 2018 2018 10,000 2017 8,000 2016 8,000 $7,800 2016 6,000 $5,270 27 Feb 2019 27 Feb 2019 6,000 4,000 4,000 2,000 2,000 0 0 Jan
Slide 7: Minor Bulk Expected to Drive Demand in 2019
Minor Bulk Expected to Drive Demand in 2019 Overall Dry Bulk Tonne-miles Demand Growth Since 2010 Annual Change in Dry Bulk Tonne-miles Demand Bn tonne-miles Iron Ore 15% YOY Change Coal 13.4% 1,500 +4.7% Grain 12% Minor Bulk 1,200 9% +2.9% 900 +2.5% 6.4% 6.0% +2.1% 5.6% 6.0% +2.3% Minor 6% 4.7% 600
Slide 8: Better Supply Fundamentals for Handysize / Supramax (I)
Better Supply Fundamentals for Handysize / Supramax (I) Overall Dry Bulk Supply Development Handysize / Supramax Supply Development Mil Dwt Mil Dwt 100 35 80 30 Current Orderbook: Current Orderbook: 25 37% 49% 5.2% 4.4% 1.2% 3.8% 2.2% 0.5% 60 36% 42% 48% 20 41% 34% 37% 40 4.4% 15 5.7% 19% 4.1% 3.0%
Slide 9: Better Supply Fundamentals for Handysize / Supramax (II)
Better Supply Fundamentals for Handysize / Supramax (II) Scheduled Average Over Over 2018 Scrapping as Orderbook Age 20 Years 15 Years % 1 Jan 2019 as % of Existing Fleet Existing Fleet Lower Handysize – 83m dwt orderbook (25,000-41,999 dwt) 5% 10 11% 19% 0.4% More Supramax – 198m dwt older 7% 10 8%
Slide 10: New Regulations Benefitting Stronger Companies
New Regulations Benefitting Stronger Companies New Regulations Content Impact on the Industry PB actions IMO Ballast Water IMO and USCG requirement Capex for shipowners 14 PB owned vessels fitted Treatment: Increased scrapping Retrofitting 97 owned vessels Installation with system based on
Slide 11: Favourable Minor Bulk Supply and Demand Outlook
Favourable Minor Bulk Supply and Demand Outlook Total Dry Bulk Supply and Demand Minor Bulk Demand and Handysize/Supramax Supply % YOY Change 6% 5.3% 8 Tonne-mile Demand Growth (%) 5% 4.3% Net Fleet Growth (%), (deliveries net of scrapping) 4.2% 4% 6 4.7% 3% 2.4% 2.0% 2% 4 3.2% 2.9% 3.0% 1% 3.0% 0.2
Slide 12: Secondhand Values Remain Attractive
Secondhand Values Remain Attractive Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 70 50 60 40 50 Newbuilding (38,000 dwt): 40 Newbuilding (62,000 dwt): 30 US$24m US$26m 30 20 20 10 10 5 years (58,000 dwt): US$17m 5 years (37,000 dwt): US$17m 0 0 04 05 06 07 08 09 10 11
Slide 13: Financial Review
Financial Review 2018 Annual Results 12
Slide 14: Significant Improvement in 2018 Financial Results
Significant Improvement in 2018 Financial Results As at 31 December 2018 US$m 2018 2017 Revenue 1,591.6 1,488.0 Owned vessel costs 2018 2017 Voyage expenses (710.5) (701.5) Opex (149.7) (139.3) Depreciation (114.5) (107.6) Time-charter equivalent ("TCE") earnings 881.1 786.5 Finance (32.4) (32.3) Ow
Slide 15: Improvement in Handysize and Supramax Segments
Improvement in Handysize and Supramax Segments As at 31 December 2018 2018 2017 Change Handysize contribution (US$m) 85.5 31.4 +172% Revenue days (days) 50,120 53,360 -6% TCE earnings (US$/day) 10,060 8,320 +21% Owned + chartered costs (US$/day) 8,260 7,660 -8% Supramax contribution (US$m) 42.1 19.8
Slide 16: Handysize – Good Control of Owned Vessel Costs
Handysize – Good Control of Owned Vessel Costs As at 31 December 2018 2018 Daily Vessel Costs - Handysize Owned Chartered # US$8,260/day Blended Daily P/L Costs before G&A Overheads (2017: US$7,660) US$/day 10,000 9,440 7,850 2018 Charter Costs # 8,000 7,480 7,410 810 740 Vessel Average daily 6,000
Slide 17: Supramax – More Owned Ships with Lower Daily Cost
Supramax – More Owned Ships with Lower Daily Cost As at 31 December 2018 2018 Daily Vessel Costs - Supramax Owned Chartered # US$10,740/day Blended Daily P/L Costs before G&A Overheads (2017: US$9,000) US$/day 11,950 12,000 10,000 9,240 2018 Charter Costs # 8,210 8,090 Vessel Average daily 8,000 day
Slide 18: Significant Operational Leverage
Significant Operational Leverage Handysize Supramax Sensitivity2 2018 Vessel Costs 2018 Vessel Costs avg. TCE Days incl. G&A1 avg. TCE Days incl. G&A1 (US$/d) (US$/d) (US$/d) (US$/d) Largely Owned 29,470 8,360 9,420 9,040 +/- US$1,000 daily TCE Fixed Cost LT Chartered US$35-40m 7,450 9,140 2,820 12,
Slide 19: Strong Balance Sheet and Liquidity
Strong Balance Sheet and Liquidity As at 31 December 2018 US$m 2018 2017 Vessels & other fixed assets 1,808 1,798 Total assets 2,366 2,232 Total borrowings 961 881 Total liabilities 1,135 1,070 Total Equity 1,231 1,161 Net borrowings (total cash US$342m) 619 636 Net borrowings to net book value of o
Slide 20: Extended Repayment Profile and Reduced Cost of Funding
Extended Repayment Profile and Reduced Cost of Funding As at 31 December 2018 Cash Flow in 2018 Schedule of Repayments of Borrowings Cash and deposit balance Cash inflow Cash outflow Secured borrowings (US$841m) Convertible bond (US$125m) * Excluding US$18m Capex in shares US$342m 8 vessels 3.9% Unm
Slide 21: Strategy and Position
Strategy and Position 2018 Annual Results 20
Slide 22: Our Business Model Continues to Outperform
Our Business Model Continues to Outperform Our business model has been refined over many TCE Outperformance Compared to Market years. We are able to generate a TCE earnings in Last 5 Years premium over market rates because of our high laden percentage (minimum ballast legs), which is US$1,870 US$1,3
Slide 23: Competitive at Every Level
Competitive at Every Level 1 TCE/day Outperforming indexes and most publicly reporting companies Cargo focused business model with 90% plus laden percentage 2 Opex/day US$3,850/day in 2018 Scale, focus and sister ship effects In-house management 3 G&A/day Scale benefits and efficient sys
Slide 24: Our Strategic Direction and Priorities
Our Strategic Direction and Priorities Maintain and grow our cargo focus and scale Continue to be both a fully integrated owner and operator – Not only owned ships, not only asset light Maintain empowered local chartering and operations close to customers – With best in class centralised suppo
Slide 25: Well Positioned for the Future
Well Positioned for the Future Our TCE More Owned Efficient Cost Sensitivity toward Outperform Vessels with Structure Market Rates* Market Fixed Costs Annual Group 106 111 Market Rate 92 G&A Overheads 86 Average PB premium 75 80 US$75.7m +/- over market indices in US$1,000 US$59.8m last 5 years: 34
Slide 26: 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 27: Appendix: Pacific Basin Overview
Appendix: Pacific Basin Overview World’s largest owner and operator of modern Handysize & Supramax ships Cargo system business model – consistently outperforming market rates Own 111* Handysize and Supramax vessel, with total 220+ dry bulk ships on the water serving major industrial customers
Slide 28: Appendix: Understanding Our Core Market
Appendix: Understanding Our Core Market 2018 Annual Results 27
Slide 29: Appendix: Pacific Basin Dry Bulk – Diversified Cargo
Appendix: Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 2018 Diverse range of commodities reduces product risk China and North America were our largest markets About 60% of business in Pacific and 40% in Atlantic 2018 Annual Results 28
Slide 30: Appendix: Business Foundation
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 31: Appendix: Strategic Model
Appendix: Strategic Model MARKET-LEADING COMPREHENSIVE GLOBAL CUSTOMER FOCUS & SERVICE OFFICE NETWORK Priority to build and sustain long-term Integrated international service enhanced by customer relationships experienced commercial and technical staff around the world Solution-driven approach ensur
Slide 32: Appendix: Fleet List – 31 January 2019
Appendix: Fleet List – 31 January 2019 www.pacificbasin.com Our Fleet 111 Vessels 27LT 79ST 217 Total owned1 Chartered Chartered2 Total Handysize 83 19 30 132 Supramax 27 7 49 83 Post- Panamax 1 1 0 2 Average age of core fleet: 8 years old 1 An additional 2 vessels purchased and 1 sold during the pe
Slide 33: Appendix: 2019 Future Cover
Appendix: 2019 Future Cover Handysize Supramax Contracted Contracted Revenue Days Revenue Days 39,950 Days 38,980 Days 39,870 Days 40,000 20,000 19,120 Days 15,970 Days 15,860 Days 30,000 15,000 20,000 10,000 71% 69% 63% 10,000 44% 50% 44% 5,000 $11,400 $8,680 $10,570 $8,200 $9,280 $9,370 0 0 2017 2
Slide 34: Appendix: Inward Charter-in Commitments
Appendix: Inward Charter-in Commitments As at 31 December 2018 Note: Following the adoption of new accounting standard HKFRS16 Leases on 1 Jan 2019, charter-in operating leases of longer than 12 months will be accounted for on balance sheet as right-of-use assets and lease liabilities. 2018 Annual R
Slide 35: Dry Bulk Demand in 2018 and 2019 Forecast
Appendix: Dry Bulk Demand in 2018 and 2019 Forecast 2018E Dry Bulk Trade Volumes 2019F Dry Bulk Trade Volumes Million Tonnes YOY Million Tonnes YOY Iron Ore 1,473 0% Iron Ore 1,480 0.5% Coal 1,240 Coal 1,264 1.9% 3.3% Major bulk total 2,713 Major bulk total 2,744 1.1% 1.5% Nickel Ore 57 Manganese or
Slide 36: Appendix: Dry Bulk Outlook in the Medium Term
Appendix: Dry Bulk Outlook in the Medium Term Possible Market Drivers in the Medium Term 2018 Annual Results 35
Slide 37: Appendix: Sustainability
Appendix: Sustainability Applying sustainable thinking in our decisions and the way we run our business 2018 CSR Report Creating long-term value through good corporate www.pacificbasin.com/ar2018 governance and CSR Corporate Social Responsibility (CSR) Guided by strategic objectives on (i) wor
Slide 38: Appendix: Convertible Bonds Due 2021
Appendix: Convertible Bonds Due 2021 Issue size US$125 million Maturity Date 3 July 2021 (approx. 6 years) Investor Put Date and Price 3 July 2019 (approx. 4 years) at par Coupon 3.25% p.a. payable semi-annually in arrears on 3 January and 3 July Redemption Price 100% Initial Conversion Price HK$4.0
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