Pacific Basin Shipping Limited · HKEX:2343

Pacific Basin Shipping — H1 2019 Earnings Presentation

42 slides from Pacific Basin Shipping's earnings presentation, Aug 14, 2019

  1. Slide 1: Investors Meetings Aug 2019

    mi Pacific Basin Investors Meetings Aug 2019 14 Aug 2019

  2. Slide 2: Company and Market Review

    Company and Market Review Pacific Basin 1

  3. Slide 3: Pacific Basin Overview

    Pacific Basin Overview  World’s largest owner and operator of modern Handysize & Supramax ships  Cargo system business model – consistently outperforming market rates  Own 115* Handysize and Supramax vessels, with total 240+ dry bulk ships on the water serving major industrial customers around th

  4. Slide 4: Understanding Our Core Market

    Understanding Our Core Market Pacific Basin 3

  5. Slide 5: 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$2,000 US$1,5

  6. Slide 6: Competitive at Every Level

    Competitive at Every Level 1H19 1 TCE/day HS: US$9,170/day  Outperforming indexes and most publicly reporting companies SM: US$10,860/day  Cargo focused business model with 90% plus laden percentage 2 Opex/day US$3,9901/day  Scale, focus and sister ship effects  In-house management 3 G&A/day US$

  7. Slide 7: Disappointing 1H19 but PB Continues to Outperform the Market

    Disappointing 1H19 but PB Continues to Outperform the Market PB Handysize TCE Performance PB Supramax TCE Performance US$/day net* US$/day net* 1H19 PB Handysize 1H19 PB Supramax 12,000 14,000 PB TCE: PB TCE: Baltic Handysize Index (BHSI)* Baltic Supramax Index (BSI)* $10,860 $9,170 12,000 10,000 10

  8. Slide 8: Markets are Recovering

    Markets are Recovering Handysize (BHSI) Supramax (BSI) Market Spot Rates in 2016-2019 US$/day net* Market Spot Rates in 2016-2019 US$/daynet* 14,000 12,000 13 Aug 2019 12,000 $10,760 10,000 2017 2018 13 Aug 2019 10,000 2017 8,000 $7,400 2018 8,000 2016 6,000 2016 6,000 4,000 4,000 2,000 2,000 0 0 Ja

  9. Slide 9: Explaining the Market Movement in 2019

    Explaining the Market Movement in 2019 What can Make it Stronger?  Continued minor bulk growth (bauxite, Why was the Beginning of the Year Weak? nickel, manganese ore, etc.)  Trade war – less soybean  Chinese infrastructure stimulus  African Swine Fever – less soybean  Chinese steel production

  10. Slide 10: Minor Bulk Expected to Drive Demand into 2020

    Minor Bulk Expected to Drive Demand into 2020 Overall Dry Bulk Tonne-miles Demand Growth Since 2010 Annual Change in Dry Bulk Tonne-miles Demand Iron Ore Annual change in 16% Billion tonne-miles Coal 1,500 Grain 14% 13.4% +4.6% Minor Bulk 12% 1,200 +3.0% +3.1% 10% 900 +2.2% +1.3% 8% +1.4% +2.1% +2.2

  11. Slide 11: Net Fleet Growth Reducing for Handysize / Supramax

    Net Fleet Growth Reducing for Handysize / Supramax Overall Dry Bulk Supply Development Handysize / Supramax Supply Development Mil Dwt Mil Dwt Current Orderbook: Current Orderbook: 100 35 2.7% 3.5% 1.0% 3.4% 5.6% 2.2% 30 80 37% 49% 25 42% 48% 37% 60 20 36% 41% 34% 15 5.7% 40 3.8% 21% 17% 3.7% 4.4% 2

  12. Slide 12: Better Supply Fundamentals for Handysize

    Better Supply Fundamentals for Handysize Scheduled Average Over Over 1H19 Scrapping as Orderbook Age 20 Years 15 Years % Existing Fleet as % of as at 1 Jul 2019 Existing (Annualised) Fleet Lower Handysize – 84m dwt orderbook (25,000-41,999 dwt) 5.5% 10 11% 18% 0.4% More Supramax – 201m dwt older 7.9

  13. Slide 13: 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% 5.0% 4.8% 8% Tonne-mile Demand Growth (%) 5% 4.5% Net Fleet Growth (%), (deliveries net of scrapping) 4% 6% 3% 2.5% 2.3% 2% 1.3% 4% 3.0% 1% 2.7% 3.1% 0% 2.

  14. Slide 14: Secondhand Values Remain Attractive

    Secondhand Values Remain Attractive Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 70 50 60 40 Newbuilding (38,000 dwt): 50 Newbuilding (62,000 dwt): US$24m US$26m 30 40 30 20 20 10 10 5 years (37,000 dwt): US$17m 5 years (58,000 dwt): US$17m 0 0 05 06 07 08 09 10 11 12

  15. Slide 15: Outlook and Strategy

    Outlook and Strategy Pacific Basin 14

  16. Slide 16: 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  Capex for shipowners  30 PB owned vessels fitted Treatment: requirement  Increased scrapping  Retrofitting remaining owned Handysize and Installation Suprama

  17. Slide 17: 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

  18. Slide 18: 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 111 113 3 G&A Overheads Market Rate 106 Average PB premium 92 US$75.7m +/- over market indices in 80 86 US$1,000 75 US$61.0m last 5 year

  19. Slide 19: Financial Review

    Financial Review Pacific Basin 18

  20. Slide 20: 2019 Interim Results Highlights

    2019 Interim Results Highlights US$m 1H19 1H18 Change Net profit 8.2 30.8 -22.6 Underlying (loss) / profit (0.6) 28.0 -28.6 P&L EBITDA 101.11 99.3 Dividends - HK2.5¢ US$m 30 June 19 31 Dec 18 Cash 313.82 341.8 -8% B/S Net gearing 37% 34% +3% Fleet Owned fleet / Total fleet4 1133/ 230 111 / 222  Wea

  21. Slide 21: 1H19 TCE Performance and Future Cover

    1H19 TCE Performance and Future Cover Cover as at 26 July 2019 US$/day Handysize Supramax Market (BHSI/BSI) index net rate in 1H19 $5,750 $7,790 BHSI (Handysize) and 1H19 PB daily TCE net rate $9,170 $10,860 BSI (Supramax) down 30% and 26% YOY PB outperformance 59% / $3,420 39% / $3,070 respectively

  22. Slide 22: US$8.2m Net Profit in 1H19

    US$8.2m Net Profit in 1H19 Six months ended 30 June US$m 2019 2018 Revenue 767.1 795.6 Owned vessel costs 2019 2018 Voyage expenses (360.5) (360.6) Opex (80.1) (72.5) Depreciation (60.1) (56.3) Time-charter equivalent ("TCE") earnings 406.6 435.0 Finance (16.5) (15.9) Owned vessel costs (156.7) (144

  23. Slide 23: Explanation of New Lease Accounting Standard (HKFRS 16)

    Explanation of New Lease Accounting Standard (HKFRS 16 “Leases”) US$m 1H19 What are the Changes? Before HKFRS 16 As reported  EBITDA as the charter- P&L hire costs are replaced Leases > 12 months Revenue 768.8 (1.7) 767.1 by interest and depreciation Balance Sheet: EBITDA 78.9 22.2 101.1  Slight i

  24. Slide 24: Handysize and Supramax Contributions

    Handysize and Supramax Contributions Six months ended 30 June 2019 2018 Change Handysize contribution (US$m) 21.2 38.4 -45% Revenue days (days) 24,450 25,210 -3% TCE earnings (US$/day) 9,170 9,750 -6% Owned + chartered costs (US$/day) 8,160 8,150 0% Supramax contribution (US$m) 7.4 15.8 -53% Revenue

  25. Slide 25: Handysize Vessel Costs (P/L)

    Handysize Vessel Costs (P/L) As at 30 Jun 2019 1H19 Daily Vessel Costs (US$/day) Owned Long-Term Short-Term & Chartered Index Chartered US$/day 1H19 Vessel Days Distribution 12,000 10,920 540 10,000 8,860 8,360 8,530 540 ST & Index 8,000 950 940 Chartered 740 740 27% 6,000 2,790 2,830 Owned 4,000 7,

  26. Slide 26: Supramax Vessel Costs (P/L)

    Supramax Vessel Costs (P/L) As at 30 Jun 2019 1H19 Daily Vessel Costs (US$/day) Owned Long-Term Short-Term & US$/day Chartered Index 14,000 Chartered 13,110 1H19 Vessel Days Distribution 12,000 540 11,400 540 10,000 9,040 9,160 950 940 8,000 1,090 1,060 Owned 6,000 12,5701 10,8602 31% 3,220 3,270 8,

  27. Slide 27: Significant Operational Leverage

    Significant Operational Leverage Handysize Supramax Sensitivity* 1H19 Vessel Costs 1H19 Vessel Costs avg. TCE Days incl. G&A avg. TCE Days incl. G&A (US$/d) (US$/d) (US$/d) (US$/d) Largely Owned 14,890 8,530 5,200 9,160 +/- US$1,000 daily TCE Fixed Cost LT Chartered US$35-40m 3,380 10,920 1,240 13,1

  28. Slide 28: Strong Balance Sheet and Liquidity

    Strong Balance Sheet and Liquidity US$m 30 Jun 19 31 Dec 18 Vessels & other fixed assets 1,848 1,808 Total assets 2,530 2,366 Total borrowings 1,001 961 Total liabilities 1,292 1,135 Total Equity 1,238 1,231 Net borrowings (total cash US$3141m) 687 619 Net borrowings to net book value of owned vesse

  29. Slide 29: Maintaining Strong Cash Position Following Repayment of US$125m Convertible Bonds

    Maintaining Strong Cash Position Following Repayment of US$125m Convertible Bonds As at 30 Jun 2019 Cash Flow in 1H19 (Adjusted for HKFRS 16 “Leases”) Schedule of Repayments of Borrowings * Cash and deposit balance Cash inflow Cash outflow Secured borrowings (US$879.4m) Convertible bond (US$125m) *

  30. Slide 30: 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,

  31. Slide 31: 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

  32. Slide 32: Pacific Basin Dry Bulk – Diversified Cargo

    Appendix: Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 1H2019  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 Pacific Basin 31

  33. Slide 33: 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

  34. Slide 34: 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

  35. Slide 35: Fleet List – June 2019

    Appendix: Fleet List – 30 June 2019 www.pacificbasin.com Our Fleet 113 Vessels 26 LT 107 ST 246 Total owned1 Chartered Chartered2 Total Handysize 82 19 33 134 Supramax 30 6 74 110 Post- Panamax 1 1 0 2 Average age of core fleet: 8.9 years old 1 An additional 2 Supramax vessels that we purchased deli

  36. Slide 36: 2019 Future Cover

    Appendix: 2019 Future Cover Contracted Handysize Contracted Supramax Vessel Days Vessel Days 45,650 45,890 50,000 Days 28,910 Days Days 30,000 25,190 40,000 34,960 Days 25,000 Days 2H 2H 2H 76% 54% 56% 20,000 2H 30,000 67% $10,790 $9,610 $9,050 FY19 $11,010 80% FY19 14,100 $9,130 15,000 90% Days 20,

  37. Slide 37: Inward Charter-in Commitments

    Appendix: Inward Charter-in Commitments As at 30 June 2019 Pacific Basin 36

  38. Slide 38: Negative Trade War vs Positive Chinese Stimulus Effects

    Appendix: Negative Trade War vs Positive Chinese Stimulus Effects Much Less Soybean from US to China Oct-Jan Chinese Steel Production at All Time High Sep Pacific Basin 37

  39. Slide 39: China Dry Bulk Import 2019 YTD

    Appendix: China Dry Bulk Import 2019 YTD Pacific Basin 38

  40. Slide 40: Dry Bulk Demand in 2019 and 2020 Forecast

    Appendix: Dry Bulk Demand in 2019 and 2020 Forecast 2019E Dry Bulk Trade Volumes 2020F Dry Bulk Trade Volumes Million Tonnes YOY Million Tonnes YOY Iron Ore 1,450 -1.8% Iron Ore 1,471 1.4% Coal 1,271 0.6% Coal 1,290 1.5% Major bulk total 2,721 -0.7% Major bulk total 2,761 1.5% Bauxite / Alumina 166

  41. Slide 41: Dry Bulk Outlook in the Medium Term

    Appendix: Dry Bulk Outlook in the Medium Term Pacific Basin 40

  42. Slide 42: Vessel Speed Optimisation Example

    Appendix: Vessel Speed Optimisation Example  Higher fuel oil prices allow freight rates to increase without increasing speed and hence supply Optimal MCR / Speed Matrix on Typical Handysize Ship (Japanese-built 32,000 dwt, all weather) TCE US$/day US$ 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

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