Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — Q3 2020 Earnings Presentation
38 slides from Pacific Basin Shipping's earnings presentation, Oct 14, 2020
Slide 1: 3Q20 Trading Update
3Q20 Trading Update 14 October 2020
Slide 2: Improving TCE Earnings
Improving TCE Earnings Cover as at 12 Oct 2020 Handysize Core Business TCE Supramax Core Business TCE US$/day (net) US$/day (net) $11,890 12,000 12,000 $11,200 $9,610 $9,980 10,000 10,000 1,770 $8,000 8,000 $7,190 330 8,000 4,250 6,000 2,270 6,000 75% 89% 4,000 4,000 of of 2,000 4,920 7,670 days 5,7
Slide 3: Continued Strong Outperformance…
Continued Strong Outperformance… Core Business PB Outperformance vs Index (per day) 3Q20 Last 12 months (US$) (US$) Handysize 330 2,010 Supramax 1,770 3,500 Operating Activity 3Q20 Last 12 months Operating Margin (per day) 760 1,500 Particularly strong outperformance in Supramax due to significant
Slide 4: … on Every Level
… on Every Level Handysize Performance vs Market Supramax Performance vs Market US$/day US$1,970/day average premium US$/day US$1,620/day average premium 14,000 in last 5 years 14,000 in last 5 years PB Performance PB Performance $11,720 12,000 12,000 $10,670 BHSI $9,630 BSI 10,000 10,000 $7,470 8,0
Slide 5: Market Rates have Improved Significantly since May
Market Rates have Improved Significantly since May Baltic Handysize Index (BHSI)1 Baltic Supramax Index (BSI) 2 Market Spot Rates in 2016-2020 Market Spot Rates in 2016-2020 US$/day net* US$/day net* 10,000 2017 15,000 8,000 2018 12,000 2018 6,000 2019 9,000 2017 2016 4,000 12 Oct 2020 6,000 2019 $8
Slide 6: Improved Rates Support Vessel Values
Improved Rates Support Vessel Values Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 70 50 60 40 Newbuilding (38,000 dwt): 50 US$23.0m 30 40 Newbuilding (62,000 dwt): US$24.0m 30 20 20 10 10 5 years (58,000 dwt): US$15.5m 5 years (37,000 dwt): US$14.75m 0 0 05 06 07 08 0
Slide 7: Global Dry Cargo Loadings Recovering
Global Dry Cargo Loadings Recovering Mil Tonnes Annualised Recent increase led by minor bulk 5,200 2020 5,000 2019 4,800 4,600 2018 Jan-Sep 2020 down 66Mt (-1.9%) YOY 4,400 4,200 4,000 3,800 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 3Q20 Trading Update 7 Source: Includes indicative data and ma
Slide 8: Cargo Loadings by Main Cargo Sector
Cargo Loadings by Main Cargo Sector Grains Million tonnes (annualised) Minor Bulks Million tonnes (annualised) 1,700 2020 600 Jan-Sep 2020 550 up 29Mt (+8.2%) YOY 2020 1,600 2019 2019 500 1,500 450 1,400 400 2018 Jan-Sep 2020 2018 350 1,300 down 27Mt (-2.4%) YOY 300 1,200 Jan Feb Mar Apr May Jun Jul
Slide 9: China Has Driven Demand in 2020 YTD
China Has Driven Demand in 2020 YTD The US Grain Season has had a Strong Start China Dry Bulk Imports Since 2009 US and Canadian Grain/Beans Loadings Mil Tonne/month Mil Tonne/month All-time high in July: 180m 22 200 2016 20 160 2017 18 16 2018 120 Aug20: 160m 14 2019 80 2020 12 40 10 0 8 09 10 11 1
Slide 10: Supply Growth Has Been High But is Expected to Slow
Supply Growth Has Been High But is Expected to Slow Overall Dry Bulk Supply Development Handysize / Supramax Supply Development % of Total Fleet % of Total Fleet 7% 6% 6% 5% 5% 4.0% 4% 4% 3.3% 3% 3.1% 3% 2.5% 2% 2% 1.6% 1% 1.4% 1% 0% 0% -1% -1% -2% -2% -3% 2019 2020E 2021F 2022+F -3% 2019 2020E 2021
Slide 11: Dry Bulk Orderbook is at a Multi-Decade Low and Set to Decline Further
Dry Bulk Orderbook is at a Multi-Decade Low and Set to Decline Further % of Fleet 90% Total Dry Bulk Orderbook 6.5% 80% 8.2% 6.3% 70% 5.4% 3.9% 60% 50% Handysize Supramax Panamax Capesize (25,000- (42,000- (65,000- (120,000+ 40% 41,999 dwt) 64,999 dwt) 119,999dwt) dwt) 30% 20% 8.0% 7.2% 8.4% 10% 6.5
Slide 12: Dry Bulk Contracting is Declining
Dry Bulk Contracting is Declining % of Fleet by Year Large gap between newbuilding and 50% secondhand prices and uncertainty about future technology continues to discourage 2007 45% new ship ordering 40% 35% 30% 25% 2010 20% 2020 annualised 1.2% 2013 15% 2003 1999 10% 2017/18 5% 1.4% 1.2% 0% 1995 20
Slide 13: Handysize – Est. Breakeven Level 2H20
Handysize – Est. Breakeven Level 2H20 Costs 1H20 Est. Cost 2H20 US$/day US$/day (net) Blended 1H20 7,920 Opex 12,000 Depreciation Depreciation * - 600 Finance Cost 10,090 10,000 Opex + 300 7,530 7,920 8,000 670 Est. 2H20 cost = 7,620 6,000 G&A + 950 2,920 4,000 Est. 2H20 b/e = ~8,600 2,000 3,940 3Q2
Slide 14: Supramax – Est. Breakeven Level 2H20
Supramax – Est. Breakeven Level 2H20 Costs 1H20 Est. Cost 2H20 US$/day (net) Blended 1H20 8,960 14,000 Opex Depreciation Opex + 300 11,940 12,000 Finance Cost 10,000 8,960 Est. 2H20 cost = 9,260 8,540 8,000 1,000 G&A + 950 6,000 3,590 Est. 2H20 b/e = ~10,200 4,000 2,000 3,950 3Q20 Actual TCE 11,200
Slide 15: How to Forecast Our Cash Flow
How to Forecast Our Cash Flow US$m 1H20 2H20 2021 Opening Cash 200.2 316.0 Operating Cash Inflow 1 77.5 Improving Drawdowns on Borrowings 212.7 33.5 3 Repayments of Borrowings (59.0) ~(65.0) ~(135.0) Repayments of Unsecured Facility (50.0) Net Interest (14.0) ~(15.0) ~(30.0) Capital Expenditure (90.
Slide 16: Strategy and Priorities
Strategy and Priorities 3Q20 Trading Update 16
Slide 17: Our Strategic Direction and Priorities
Our Strategic Direction and Priorities Maintain and grow our cargo focus and scale as both a fully integrated owner and operator – Both asset heavy and asset light Empowered local chartering and operations teams close to customers – With best in class centralised support and systems Continue o
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 1 117 G&A Overheads Market Rate 111 106 US$75.7m Average PB premium 92 +/- 86 over market indices in 75 80 US$60.0m US$1,000 last 5 year
Slide 19: 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 20: 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 About 230 ships on the water, including 117 owned, serving major industrial customers around the world Hong Kong head
Slide 21: Understanding Our Core Market
Appendix: Understanding Our Core Market 3Q20 Trading Update 21 From Annual Report 2019
Slide 22: Pacific Basin Dry Bulk – Diversified Cargo
Appendix: Pacific Basin Dry Bulk – Diversified Cargo Our Cargo Volumes in 1Q-3Q 2020 Diverse range of commodities reduces product risk China and North America are our largest markets 3Q20 Trading Update 22
Slide 23: Fleet List – 30 September 2020
Appendix: Fleet List – 30 September 2020 www.pacificbasin.com Our Fleet 117Vessels 20LT 98ST 236 Total owned Chartered * Chartered * Total Handysize 81 15 37 133 Supramax 35 4 62 101 Post- Panamax 1 1 0 2 Average age of core fleet: 10.6 years old * Average number of long-term, short-term (including
Slide 24: 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 25: Our People Our Record Our Fleet
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 26: 2020 Interim Results Highlights
2020 Interim Appendix: 2020 Interim Results Highlights US$m 1H20 1H19 Change EBITDA 79.2 101.1 -21.9 Underlying (loss) / profit (26.6) (0.6) -26.0 P&L Net (loss) / profit (222.4) 8.2 -230.6 Dividends - - US$m 30 June 20 31 Dec 19 Change Available liquidity 349.5 382.8 -33.3 B/S Net gearing 41% 35%
Slide 27: 2020 Interim Financial Results
2020 Interim Appendix: Financial Results US$m 1H20 1H19 Revenue 681.5 767.1 Owned vessel costs 1H20 1H19 Voyage expenses (351.6) (360.5) Opex (83.2) (80.1) Depreciation (66.7) (60.1) Time-charter equivalent ("TCE") earnings 329.9 406.6 Finance (16.4) (16.5) Owned vessel costs (166.3) (156.7) Charter
Slide 28: Handysize and Supramax Contribution
2020 Interim Appendix: Handysize and Supramax Contribution Handysize contribution (US$m) (16.0) Core Revenue days (days) 16,980 Core TCE earnings (US$/day) 7,190 Core Owned + chartered costs (US$/day) 7,920 Supramax contribution (US$m) 5.0 Core Revenue days (days) 6,950 Core TCE earnings (US$/day) 9
Slide 29: Cash Flow Analysis
2020 Interim Appendix: Cash Flow Analysis US$m 1 2 3 4 Operating cash inflow was US$77.5 500 1 million, inclusive of all long and short-term +3 charterhire payments. Despite lower TCE +154 rates, this was higher than the same period last year due to a reduction in 400 working capital 2 Borrowings in
Slide 30: Possible Market Drivers in the Medium Term
2020 Interim Appendix: Possible Market Drivers in the Medium Term Opportunities Threats Post-pandemic recovery in Chinese industrial Expanding or renewed COVID-19 containment production and extensive stimulus in other key measures further impacting global economic economies, driving a rebound in
Slide 31: Vessel Days Breakdown
Appendix: Vessel Days Breakdown Long-Term Chartered Commitments Vessel Days (as at 1H20) Handysize Supramax Handysize Supramax Vessel Average Vessel Average Year Days FY19 1Q-3Q20 FY19 1Q-3Q20 Days Cost Days Cost 2H2020 2,590 10,370 710 11,890 Core Revenue Days 36.220 25,590 12,380 10,490 2021 3,490
Slide 32: New TCE Reporting Methodology
Appendix: New TCE Reporting Methodology Our “core business” is to optimally combine our owned and long-term chartered ships with spot cargoes and multi- shipment contract cargos to achieve the highest daily TCE earnings. Our core business also uses short-term chartered ships to carry contract cargoe
Slide 33: Our Two Main Activities
Appendix: Our Two Main Activities Core Business Operating Activity Contract and spot cargoes Spot cargoes Owned and long-term chartered ships Short-term ships carrying spot cargoes Short-term ships carrying contract cargoes Costs largely fixed and disclosed Costs fluctuate with freight market Key KP
Slide 34: How to Model Pacific Basin
Appendix: How to Model Pacific Basin Handysize contribution Core TCE1 x owned & LTC 2 revenue days + Blended cost x owned & LTC cost days 3 - = X Supramax contribution Core TCE1 x owned & LTC revenue days + Blended cost x owned & LTC cost days 3 - = X Operating Activity Operating margin x operating
Slide 35: Clarksons Research Dry Bulk Demand in 2020 and 2021
Appendix: Clarksons Research Dry Bulk Demand in 2020 and 2021 Forecast 2020E Dry Bulk Trade Volumes 2021F Dry Bulk Trade Volumes Million Tonnes YOY Million Tonnes YOY Iron Ore 1,467 1% Iron Ore 1,492 2% -8% Coal 1,189 Coal 1,246 5% Major bulk total 2,656 -3% 2,738 Major bulk total 3% Soybean 160 8%
Slide 36: Better Supply Fundamentals for Handysize / Supramax
Appendix: Better Supply Fundamentals for Handysize / Supramax Scheduled Average Over Over YTD Scrapping as Orderbook Age 20 Years 15 Years % of 1 Oct 2020 as % of Existing Fleet Existing (annualised) Fleet Lower Handysize – 86m dwt orderbook (25,000-41,999 dwt) 3.9% 10.3 10% 19% 0.9% More Supramax –
Slide 37: Clarksons Research Supply and Demand Outlook
Appendix: Clarksons Research Supply and Demand Outlook Minor Bulk Demand and Handysize/Supramax Supply % YOY Change 8% 7.1% % YOY Total Dry Bulk Supply and Demand 6% Change 3.1% 6% 5.0% 4% 2.5% 1.6% 4.0% 2% 4% 1.0% 0% 2% 3.3% -2% 0.3% 1.4% -4% 0% -5.2% -6% 2015 2016 2017 2018 2019 2020E 2021F -2% Ne
Slide 38: 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 speed for typical Handysize vessel (Hakodate 32,000 dwt) Freight rate in US$/ton 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 for t
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