Pacific Basin Shipping Limited · HKEX:2343

Pacific Basin Shipping — HSBC 12th Annual Transport & Logistics Conference (June 2018)

40 slides from Pacific Basin Shipping's conference presentation, Jun 27, 2018

  1. Slide 1: HSBC 12th Annual Transport & Logistics Conference

    HSBC 12th Annual Transport & Logistics Conference Hong Kong, 27 June 2018

  2. Slide 2: Market Review

    Market Review 1

  3. Slide 3: Freight Market Recovery Continues

    Freight Market Recovery Continues Handysize Market Spot Rates in 2016-2018 Supramax Market Spot Rates in 2016-2018 # US$/day net* US$/day net* 22 Jun 2018 12,000 12,000 $11,240 2017 22 Jun 2018 10,000 2017 10,000 $8,210 8,000 8,000 2016 2016 6,000 6,000 4,000 4,000 2,000 2,000 0 0 Jan Feb Mar Apr Ma

  4. Slide 4: 2018 Demand is Forecast to Grow 3.4% with Minor Bulks at +4.0%

    2018 Demand is Forecast to Grow 3.4% with Minor Bulks at +4.0% Annual change dry bulk Forecast demand Bn tonne-miles Less than 2017 but for 2018 is 1,600 +5.1% comfortably above moderate supply 1395 1,400 285 1,200 +3.4% 969 1,000 296 +2.5% 800 322 Iron ore +3.9% 660 322 Coal +1.7% 600 88 285 102 Gr

  5. Slide 5: Historically Low Handysize and Supramax Orderbook

    Historically Low Handysize and Supramax Orderbook Total Dry Bulk Orderbook Combined Orderbook: Handysize and Supramax Mil Dwt Mil Dwt 3.4% 2.8% 3.3% 30 28m 3.1% 8 7.7m 27m 26m 25 6 1.8% 1.8% 20 44% 4.9m 45% 4.9m 1.7% Shortfall 14m Shortfall 15 4 0.9% 1.0% 1.0% 2.6m 8m 2.7m 10 2 5 0 0 Scheduled Actua

  6. Slide 6: Better Fundamentals for Handysize

    Better Fundamentals for Handysize Orderbook Average Over Over YTD Scrapping as as % of Age 20 Years 15 Years % of Existing Fleet Existing as at 1 Apr 2018 Fleet (annualised) Lower Handysize – 81m dwt orderbook (25,000-41,999 dwt) 6.2% 10 11% 17% 0.6% More Supramax – 195m dwt older 5.2% 9 7% 15% 0.4%

  7. Slide 7: Favourable Dry Bulk Supply and Demand Outlook

    Favourable Dry Bulk Supply and Demand Outlook Dry Bulk Supply and Demand % YOY  Demand outpacing supply 8  Progressively fewer new ships will deliver from shipyards in 2018 and 2019 6 5.0%  Clarksons Research estimate: 3.5% tonne-mile demand growth and 3.5% 2.0% net fleet growth in 2018 4 (3.2% d

  8. Slide 8: Improved Outlook Supports Vessel Values

    Improved Outlook Supports Vessel Values Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 80 60 70 50 60 40 50 Newbuilding (38,000 dwt): Newbuilding (62,000 dwt): US$23.5m 40 US$25.5m 30 30 20 20 10 10 5 years (32,000 dwt): US$16m 5 years (56,000 dwt): US$18m 0 0 04 05 06 07 08

  9. Slide 9: 1Q18 Trading Update and Recent Events

    1Q18 Trading Update and Recent Events Pacific Basin 8

  10. Slide 10: 2018 First Quarter Performance and 2018 Cover

    2018 First Quarter Performance and 2018 Cover Cover as at 6 Apr 2018 US$/day Handysize Supramax Market (BHSI/BSI) index net rate 8,070 10,190 Improvement over 1Q17: Handysize: 1Q +25% / $1,900 PB daily TCE net rate 9,360 11,250 Supramax: PB outperformance 16% / 1,290 10% / 1,060 +40% / $3,220 2Q-4Q

  11. Slide 11: PB Acquires 4 Ships with 50% Equity Funding

    PB Acquires 4 Ships with 50% Equity Funding Updated as at 14 May 2018 Acquisition of four attractive modern ships: Supramax Supramax Handysize Handysize Total 2010-built Resale 2015-built Resale newbuild newbuild Shipbuilder Tsuneishi Tsuneishi Imabari Imabari Dwt 58,000 64,000 37,000 37,000 Total c

  12. Slide 12: Reasons for the Transaction

    Reasons for the Transaction Updated as at 14 May 2018  To grow and renew our fleet with modern, efficient ships of the best design for our trades at still historically low prices  To increase further the proportion of our owned vs. chartered-in vessels (especially Supramax) at what we consider to

  13. Slide 13: Outlook and Strategy

    Outlook and Strategy Pacific Basin 12

  14. Slide 14: Competitive Owned Vessel Break-Even Levels

    Competitive Owned Vessel Break-Even Levels Handysize Supramax 2018 YTD PB TCE cover rate* 2018 YTD PB TCE cover rate* US$11,370/day US$9,540/day 2017 PB TCE rate $840 US$9,610/day G&A Overheads 2017 PB TCE rate $840 US$8,320/day Finance Cost $1,170 $810 $2,820 Depreciation $3,260 Break-even Break-ev

  15. Slide 15: Our Business Model Continues to Outperform

    Our Business Model Continues to Outperform Our business model has been refined over many Our 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 US$1,850 US$1,

  16. Slide 16: Well Positioned for a Recovering Market

    Well Positioned for a Recovering Market Our TCE More Owned Efficient Cost Sensitivity toward Outperforms Vessels with Structure Market Rates4 Market Fixed Costs Annual Group 106 G&A Overheads Market Rate Average PB premium 92 80 86 US$75.7m +/- over market indices in 75 US$54.4m US$1,000 last 5 year

  17. Slide 17: Our Outlook and Strategy

    Our Outlook and Strategy Outlook  1Q18 market improvement for minor bulk is encouraging, and all-important supply fundamentals look more positive  Possible market drivers in the medium term: Fully Handysize & Positive economic growth and commodity demand outlook, low deliveries, Supramax focused a

  18. Slide 18: 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,

  19. Slide 19: Pacific Basin Overview

    Appendix: As in 2017 Annual Report Pacific Basin Overview Owned Fleet Hong Kong HQ Our Vision 200+ Handysize and 12 “To be a Supramax vessels leading ship owner/operator 106 Handysize & Supramax Global Offices 330+ Shore-based staff 3,400+ World’s largest owner and operator of in the dry bulk Bulk C

  20. Slide 20: Appendix: Business Foundation

    Appendix: As in 2017 Annual Report 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 wit

  21. Slide 21: Appendix: Strategic Model

    Appendix: As in 2017 Annual Report 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 Solut

  22. Slide 22: Appendix: Understanding Our Core Market

    Appendix: As in 2017 Annual Report Understanding Our Core Market Pacific Basin 21

  23. Slide 23: Dry Bulk Trade Volumes

    Dry Bulk Trade Volumes Full Year 2017 Global Dry Bulk Trade (Volume) = 5.1 Billion Tonnes (+4% YOY) 29% 24% 10% 37% Iron Ore Coal Grain & Minor Bulk Soybean  Minor Bulks & Grain is 47% of total Dry Bulk demand  Pacific Basin focuses on these growing markets Why we choose this segment  More divers

  24. Slide 24: Fleet List – Mar 2018

    Fleet List – 31 Mar 2018 www.pacificbasin.com Our Fleet 106 Vessels 30 LT 106ST 242 Total owned Chartered Chartered * Total Handysize 80 21 45 146 Supramax 25 8 61 94 Post- Panamax 1 1 0 2 * Average number of vessels operated in Mar 2018 Average age of core fleet: 8.2 years old Pacific Basin 23

  25. Slide 25: Earnings Cover in 2018

    Appendix: Earnings Cover in 2018 Contracted Handysize Supramax Revenue Days 41,900 42,630 20,000 days 19,500 days days days 2Q-4Q 2Q-4Q FY18 65% 12,270 66% 29,880 FY18 61% days $11,490 days 44% $10,090 79% 37% $9,540 $8,520 $9,710 $11,370 1Q 1Q 1Q 1Q 100% 100% 100% 100% 12,380 12,750 8,290 7,730 day

  26. Slide 26: Pacific Basin Dry Bulk – Diversified Cargo

    Appendix: Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 1Q 2018 (1 Jan – 28 Mar)  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 25

  27. Slide 27: New Regulations

    Appendix: As in 2017 Annual Report New Regulations New Regulations Content Impact on the Industry PB actions IMO Ballast Water  International Maritime  Increased capex for existing shipowners  System selected, pending US Treatment - Organization (IMO)  Increased potential scrapping Coast Guard a

  28. Slide 28: Impact of Recent Trade Tariffs

    Appendix: Impact of Recent Trade Tariffs Recent Protectionist Measures Impact to the Dry Bulk industry and Pacific Basin US imposed tariffs on steel  Now in effect but we do NOT expect a material impact and aluminum from certain Dry bulk cargo flows threatened by these protectionist measures March

  29. Slide 29: We Will Not Order More Newbuildings Today

    Appendix: As in 2017 Annual Report We Will Not Order More Newbuildings Today  Market does not need more newbuildings  Extra capacity remains in the global fleet through potentially higher operating speed  Limited efficiency benefits from newbuildings compared to good quality Japanese-built second

  30. Slide 30: 2017 Annual Results - Highlights

    Appendix: As in 2017 Annual Report 2017 Annual Results - Highlights US$m 2017 2016 Change EBITDA 133.8 22.8 +111.0 Net profit 3.6 (86.5) +90.1 Cash 244.7 269.2 Net gearing 35% 34% Owned fleet / Total fleet * 105 / 225 92 / 226  Significantly improved dry bulk market supported a much improved EBITDA

  31. Slide 31: Significant Improvement in 2017 Financial Results

    Appendix: As in 2017 Annual Report Significant Improvement in 2017 Financial Results As at 31 Dec US$m 2017 2016 Owned vessel costs 2017 2016 Revenue 1,488.0 1,087.4 Opex (139.3) (130.9) Voyage expenses (701.5) (555.4) Depreciation (107.6) (97.1) Finance (32.3) (32.8) Time-charter equivalent earning

  32. Slide 32: Improvement in Both Handysize and Supramax Segments

    Appendix: As in 2017 Annual Report Improvement in Both Handysize and Supramax Segments 2017 2016 Change Handysize contribution (US$m) 31.4 (37.1) >+100% Revenue days (days) 53,360 47,590 +12% TCE earnings (US$/day) 8,320 6,630 +25% Owned + chartered costs (US$/day) 7,660 7,320 -5% Supramax contribut

  33. Slide 33: Handysize – Owned Vessel Costs Reducing

    Appendix: Handysize – As in 2017 Annual Report Owned Vessel Costs Reducing As at 31 Dec US$7,660/day US$6,360/day US$600* Blended P/L Costs before Blended Cash Cost before Daily G&A Overheads G&A Overheads G&A Overheads (2016: US$660) (2016: US$7,320) (2016: US$6,090) Blended US$7,660 (FY2016: US$7,

  34. Slide 34: Supramax – More Owned Ships with Lower Daily Cost

    Appendix: Supramax – As in 2017 Annual Report More Owned Ships with Lower Daily Cost As at 31 Dec US$9,000/day US$8,310/day US$600* Blended Daily P/L Costs Blended Daily Cash Cost Daily G&A Overheads before G&A Overheads before G&A Overheads (2016: US$660) (2016: US$6,830) (2016: US$6,390) 2017 Dail

  35. Slide 35: Strong Balance Sheet and Liquidity

    Appendix: As in 2017 Annual Report Strong Balance Sheet and Liquidity US$m 2017 2016 Vessels & other fixed assets 1,798 1,653 Total assets 2,232 2,107 Total borrowings 881 839 Total liabilities 1,070 1,066 Total Equity 1,161 1,041 Net borrowings (total cash US$245m) 636 570 Net borrowings to net boo

  36. Slide 36: No Newbuilding Capex Ahead

    Appendix: As in 2017 Annual Report No Newbuilding Capex Ahead As at 31 Dec Cash Flow in 2017 Schedule of Repayments and Vessel Capital Commitments Cash and deposit balance Secured borrowings (US$763.3m) Cash inflow Vessel capital commitments (US$20.8m) Cash outflow Convertible bond (face value US$12

  37. Slide 37: 2018 Demand Forecast

    Appendix: 2018 Demand Forecast Key Drivers in so far in 2018 2018E Dry Bulk Trade Volumes  Broad based economic recovery seen through Million Tonnes YOY increased steel output, also outside China Iron Ore 1,520 3%  Increased Q1 coal trade, including long haul Coal 1,228 2% exports out of North Ame

  38. Slide 38: China Major and Minor Bulk Trade

    Appendix: China Major and Minor Bulk Trade China Coal Trade 2018 Chinese Minor Bulk Imports Mil Tonnes Mil Tonnes 350 35 298 300 263 Increased 17% YOY 247 30 250 25 200 20 302 150 15 271 100 256 10 50 5 0 0 -9 -8 -4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -50 2016 2017 2018 06 07 08 09 10 11

  39. Slide 39: Sustainability

    Appendix: As in 2017 Annual Report Sustainability  Applying sustainable thinking in our decisions and the way we run our business 2017 CSR Report  Creating long-term value through good corporate www.pacificbasin.com/ar2017 governance and CSR Corporate Social Responsibility (CSR)  Guided by strate

  40. Slide 40: 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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