Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — Maritime Capital Forum 2018
43 slides from Pacific Basin Shipping's conference presentation, Nov 27, 2018
Slide 1: Maritime Capital Forum
Maritime Capital Forum Singapore 27 Nov 2018 12 Nov 2018
Slide 2: Overview
ra =| Overview a Do ares Pe os PRUE tity
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 108* Handysize and Supramax vessel, with total 220+ dry bulk ships on the water serving major industrial customers around the
Slide 4: Understanding Our Core Market
Understanding Our Core Market Pacific Basin 3
Slide 5: Why Handysize and Supramax? Why Minor Bulk?
Why Handysize and Supramax? Why Minor Bulk? Full Year 2018E Global Dry Bulk Trade (Volume) = 5.2 Billion Tonnes (+2.4% YOY) 28% 24% 9% 38% Iron Ore Coal Grain & Minor Bulk Soybean Minor Bulks & Grain is 47% of total Dry Bulk demand Pacific Basin focuses on these growing markets More diverse cu
Slide 6: Pacific Basin Dry Bulk – Diversified Cargo
Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 1Q-3Q 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 Pacific Basin 5
Slide 7: 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$1,870 US$1,
Slide 8: Market Review
Market Review Pacific Basin 7
Slide 9: Freight Market Continues to Improve
Freight Market Continues to Improve Handysize Market Spot Rates in 2016-2018 Supramax Market Spot Rates in 2016-2018 US$/day net* US$/day net* 9 Nov 2018 12,000 14,000 9 Nov 2018 $10,690 $9,000 12,000 10,000 2017 2017 10,000 8,000 2016 8,000 2016 6,000 6,000 4,000 4,000 2,000 2,000 0 0 Jan Feb Mar A
Slide 10: 2018 Demand is Forecast to Grow 2.9% with Minor Bulks at +3.9%
2018 Demand is Forecast to Grow 2.9% with Minor Bulks at +3.9% Annual change dry bulk demand Bn tonne-miles Demand Growth Since 2010 % YOY 1,500 16% Less than 2017 but 14% 13.4% +5.0% 12% above supply 10% 8% 1,200 6.3% 5.9% 6.4% 6% 5.3% 5.0% 4% 2.9% 2.9% 2.4% +2.9% 2% 0.8% 0% 900 2010 2011 2012 2013
Slide 11: Better Fundamentals for Handysize
Better Fundamentals for Handysize Orderbook Average Over Over YTD Scrapping as as % of Age 20 Years 15 Years % of Existing Fleet Existing as at 1 Oct 2018 Fleet (annualised) Lower Handysize – 82m dwt orderbook (25,000-41,999 dwt) 4.6% 9 10% 17% 0.4% More Supramax – 197m dwt older 5.8% 9 7% 15% 0.3%
Slide 12: Newbuilding Deliveries Continue to Reduce
Newbuilding Deliveries Continue to Reduce Dry Bulk Supply Development Total Ordering vs Existing Fleet Mil Dwt 60 6.0 % of Fleet (Dwt) 50% 40 4.0 2.3% 40% Historically low 20 2.0 30% new ship ordering 22.4m 0 0.0 20% -3.1m -20 -2.0 10% 4.0% -40 -4.0 1.5% 2014 2015 2016 2017 1Q-3Q18 0% 07 08 09 10 11
Slide 13: Favourable Dry Bulk Supply and Demand Outlook
Favourable Dry Bulk Supply and Demand Outlook Dry Bulk Supply and Demand % YOY Change Clarksons Research estimates FY18: 8.0 2.9% tonne-mile demand growth 2.8% net fleet growth 6.0 (3.4% deliveries – 0.6% scrapping) 5.0% Actual deliveries expected to be around 27m dwt compared to 38m dwt in 20
Slide 14: Significant gap between Newbuilding and Secondhand prices
Significant gap between Newbuilding and Secondhand prices Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 70 50 60 40 Newbuilding (38,000 dwt): 50 US$24m Newbuilding (62,000 dwt): 30 40 US$26m 30 20 20 10 10 5 years (32,000 dwt): US$15m 5 years (56,000 dwt): US$18m 0 0 0
Slide 15: New Regulations
New Regulations New Content Impact on the Industry PB actions Regulations IMO Ballast International Maritime Increased capex for existing We have arranged BTWS for Water Organization (IMO) requires shipowners all our owned vessels Treatment: ballast water treatment Potentially increased scra
Slide 16: Outlook and Strategy
Outlook and Strategy Pacific Basin 15
Slide 17: PB's Fleet Mix is Changing
PB’s Fleet Mix is Changing Fleet Development for Handysize and Supramax vessels Average no. of Our number of owned ships is increasing vessels operated providing us with greater operational 250 242 222 control and earnings leverage 207 213 200 Owned vessels are replacing LT charters 110 94 89 as
Slide 18: Competitive Owned Vessel Break-Even Levels
Competitive Owned Vessel Break-Even Levels Handysize Supramax FY18 PB TCE cover rate1 US$11,810/day FY18 PB TCE cover rate1 US$9,980/day 2017 PB TCE actual US$9,610/day 2017 PB TCE actual US$8,320/day 900 P&L Break-even G&A Overheads P&L Break-even 900 ≈ US$9,000/day Finance Cost 1,090 ≈ US$8,300/da
Slide 19: Well Positioned for a Recovering Market
Well Positioned for a Recovering Market Our TCE More Owned Efficient Cost Sensitivity toward Outperform Vessels with Structure Market Rates* Market Fixed Costs Annual Group 106 112 Market Rate 92 G&A Overheads 86 Average PB premium 75 80 US$75.7m +/- over market indices in Annualised US$1,000 US$57m
Slide 20: Our Outlook and Strategy
Our Outlook and Strategy Outlook The minor bulk freight market has improved again since late September. Despite increasing trade tensions, the outlook for widely-spread global GDP growth remains favourable and bodes well for dry bulk demand. In addition, supply fundamentals are now more positive F
Slide 21: 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 22: 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 23: 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 24: Appendix: Fleet List – as at 30 Sep 2018
Appendix: Fleet List – as at 30 Sep 2018 www.pacificbasin.com Our Fleet 109 Vessels 30 LT 82ST 221 Total owned 1 Chartered Chartered 2 Total Handysize 81 21 36 138 Supramax 27 8 46 81 Post- Panamax 1 1 0 2 1 An additional 3 vessels we purchased during the period are scheduled to deliver into our fle
Slide 25: Appendix: PB Daily TCE Earnings in 3Q Improved by 24% and 30%
Appendix: PB Daily TCE Earnings in 3Q Improved by 24% and 30% Handysize and Supramax freight market indices reached their highest 3Q levels since 2011, and our average Handysize and Supramax daily TCE earnings in 3Q improved by 24% and 30% YOY respectively During 3Q, we purchased and took delive
Slide 26: Appendix: Our Quarterly TCE has Improved Significantly Since Early 2016
Appendix: Our Quarterly TCE has Improved Significantly Since Early 2016 PB Handysize TCE Performance PB Supramax TCE Performance US$/day US$/day PB TCE: PB TCE: $12,180 11,000 $10,080 13,000 12,000 10,000 11,000 9,000 10,000 8,000 9,000 7,000 8,000 6,000 7,000 5,000 6,000 5,000 4,000 4,000 3,000 3,0
Slide 27: 3Q18 Performance and 2018 / 2019 Cover
Appendix: 3Q18 Performance and 2018 / 2019 Cover Cover as at 10 Oct 2018 US$/day Handysize Supramax PB daily TCE net rate 3Q18 10,080 12,180 Improvement over 3Q17: Handysize: 3Q18 Market (BHSI/BSI) index net rate 3Q18 7,840 11,260 +24% / $1,950 Supramax: PB outperformance 28% / 2,240 8% / 920 +30% /
Slide 28: Appendix: 3Q18 Performance and Future Cover
Appendix: 3Q18 Performance and Future Cover Contracted Handysize Supramax Revenue Days 32,360 days 51,350 days 48,330 days 4Q 28,230 days 4Q 79% 70% 4Q 5,750 $10,600 4Q 11,170 days 10,790 68% days 5,290 78% $8,890 37,680 days days $10,560 days $11,970 26,610 FY17 FY17 94% days 96% 22,940 FY18 13,410
Slide 29: Appendix: 2018 Interim Results - Highlights
Appendix: 2018 Interim Results - Highlights US$m 1H18 1H17 Change EBITDA 99.3 56.6 +42.7 Underlying profit / (loss) 28.0 (6.7) +34.7 Net profit 30.8 (12.0) Dividends HK2.5¢ - US$m 30 June 18 31 Dec 17 Cash 317.1 244.7 Net gearing 36% 35% Owned fleet / Total fleet * 108 / 224 106 / 222 Better minor
Slide 30: Appendix: Strong Balance Sheet and Liquidity
Appendix: Strong Balance Sheet and Liquidity US$m 30 Jun 18 31 Dec 17 Vessels & other fixed assets 1,821 1,798 Total assets 2,358 2,232 Total borrowings 974 881 Total liabilities 1,163 1,070 Total Equity 1,195 1,161 Net borrowings (total cash US$317m) 657 636 Net borrowings to net book value of vess
Slide 31: Appendix: Significant Improvement in 1H18 Financial Results
Appendix: Significant Improvement in 1H18 Financial Results As at 30 Jun US$m 1H18 1H17 Revenue 795.6 702.9 Owned vessel costs 1H18 1H17 Voyage expenses (360.6) (339.8) Opex (72.5) (66.9) Depreciation (56.3) (52.2) Time-charter equivalent earnings ("TCE") 435.0 363.1 Finance (15.9) (15.7) Owned vess
Slide 32: Appendix: Improvement in Both Handysize and Supramax Segments
Appendix: Improvement in Both Handysize and Supramax Segments 1H18 1H17 Change Handysize contribution (US$m) 38.4 7.8 +392% Revenue days (days) 25,210 25,660 -2% TCE earnings (US$/day) 9,750 7,920 +23% Owned + chartered costs (US$/day) 8,150 7,660 -6% Supramax contribution (US$m) 15.8 9.1 +74% Reven
Slide 33: Appendix: Handysize – Owned Vessel Costs Reducing
Appendix: Handysize – Owned Vessel Costs Reducing As at 30 June 2018 US$8,150/day US$6,690/day US$690* Blended P/L Costs before Blended Cash Cost before Daily G&A Overheads G&A Overheads G&A Overheads (FY2017: US$600) (FY2017: US$7,660) (FY2017: US$6,360) Blended US$7,660 (FY2016: US$7,320) 1H18 Dai
Slide 34: Appendix: Supramax – More Owned Ships with Lower Daily Cost
Appendix: Supramax – More Owned Ships with Lower Daily Cost As at 30 June 2018 US$10,690/day US$9,790/day US$690* Blended Daily P/L Costs Blended Daily Cash Cost Daily G&A Overheads before G&A Overheads before G&A Overheads (FY2017: US$600) (FY2017: US$9,000) (FY2017: US$8,310) 1H18 Daily Vessel Cos
Slide 35: Appendix: Extended Repayment Profile and Reduced Cost of Funding
Appendix: Extended Repayment Profile and Reduced Cost of Funding As at 30 June 2018 Cash Flow in 1H18 Schedule of Repayments of Borrowings * * Excluding US$8m Capex in shares Cash and deposit balance Cash inflow Cash outflow Secured borrowings (US$855m) Convertible bond (face value US$125m), book va
Slide 36: Appendix: Dry Bulk Outlook in the Medium Term
Appendix: Dry Bulk Outlook in the Medium Term Possible market drivers in the medium term Pacific Basin 35
Slide 37: Appendix: We Will Not Order More Newbuildings Today
Appendix: We Will Not Order More Newbuildings Today Market does not need more newbuildings Extra capacity remains in the global fleet through potentially higher operating speed Limited efficiency benefits from newbuildings compared to good quality Japanese-built secondhand ships The industry
Slide 38: Dry Bulk Demand in 2018
Appendix: Dry Bulk Demand in 2018 Key Drivers in 3Q18 2018E Dry Bulk Trade Volumes Broad based economic recovery seen through increased Million Tonnes YOY steel output, also outside China US coal exports grew strongly Iron Ore 1,486 0.9% Coal 1,249 4.0% Stronger minor bulk demand in the Atlant
Slide 39: Appendix: Handysize and Supramax Scheduled Orderbook at Historically Low Level
Appendix: Handysize and Supramax Scheduled Orderbook at Historically Low Level Total Dry Bulk Orderbook Combined Orderbook: Handysize and Supramax Mil Dwt 4.5% Mil Dwt 40 4.2% 37.4m 35.0m 10 3.1% 29% 35 8.7m Shortfall 3.4% 20% 2.6% 30 28.1m Shortfall 8 7.2m 2.7% 2.2% 25 22.4m 6.2m 1.8% 6 5.1m 20 1.1
Slide 40: Vessel Speed Optimisation Example
Appendix: Vessel Speed Optimisation Example Higher fuel oil prices allow freight rates to increase without increasing speed and hence supply Optimal MCR / Speed Matrix on Typical Handysize Ship (Japanese-built 32,000 dwt, all weather) TCE US$/day US$ 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Slide 41: Appendix: 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 Increased 5% YOY 300 25 300 247 263 20 250 200 15 305 150 271 10 100 256 5 50 0 0 -9 -8 -5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -50 06 07 08 09 10 11 12 13 14 15 16 17 18E
Slide 42: Appendix: Sustainability
Appendix: 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 strategic objectives on (i) wor
Slide 43: 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