Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — Investor Day (May 2018)
81 slides from Pacific Basin Shipping's investor day presentation, May 31, 2018
Slide 1: Pacific Basin 2018 Analyst Day
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Slide 2: Agenda
Agenda Time Topics Speaker 8.30am-9.00am Introduction Mats Berglund 9.00am-10.00am Beating the Market Surinder Brrar 10.00am-10.15am Break 10.15am-11.15am Steaming Towards Better Markets Morten Ingebrigtsen 11.15am-12.15pm Ship Management of PB Owned Fleet Jay Pillai 12.15pm-1.00pm Forecasting Our B
Slide 3: Introduction - Mats Berglund, CEO
Introduction - Mats Berglund, CEO 2018 Analyst Day 2
Slide 4: Our Business Model Continues to Outperform
As in 1Q18 Trading Update 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 l
Slide 5: 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* 24 May 2018 12,000 $10,890 24 May 2018 12,000 2017 10,000 $8,180 2017 10,000 8,000 8,000 2016 2016 6,000 6,000 4,000 4,000 2,000 2,000 0 0 Jan Feb Mar Apr Ma
Slide 6: Improved Outlook Supports Vessel Values
Improved Outlook Supports Vessel Values Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 70 50 60 40 Newbuilding (38,000 dwt): 50 US$23m Newbuilding (62,000 dwt): 30 40 US$25m 30 20 20 10 10 5 years (32,000 dwt): US$15.5m 5 years (56,000 dwt): US$18m 0 0 04 05 06 07 08 09
Slide 7: PB Acquires 4 Ships with 50% Equity Funding
PB Acquires 4 Ships with 50% Equity Funding Acquisition of four attractive modern ships: Supramax Supramax Handysize Handysize Total built 2010 Resale built 2015 Resale newbuild newbuild Shipbuilder Tsuneishi Tsuneishi Imabari Imabari Dwt 58,000 64,000 37,000 37,000 Total consideration US$m 15.5 28.
Slide 8: Reasons for the Transaction
Reasons for the Transaction 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 be an attractive time To
Slide 9: New Regulations
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 approval In
Slide 10: We Like Low Risk / High Return Vessels
We Like Low Risk / High Return Vessels The beauty of age (if well kept and operated within PB’s cargo system….) New 5 yr 10 yr 15 yr TC In US$ 37 dwt 32 dwt 32 dwt 28 dwt TCE 10,600 10,000 10,000 9,100 10,600 Opex / TC in rate 3,600 4,000 4,100 4,200 10,500 Drydocking 500 600 650 700 - G&A 850 850 8
Slide 11: Vessel Speed Optimisation Example
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 9,000 10,
Slide 12: Well Positioned for a Recovering Market
As in 1Q18 Trading Update 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$75.7m +/- over market indices in 75 US$
Slide 13: Beating the Market - Surinder Brrar, Chartering Director
Beating the Market - Surinder Brrar, Chartering Director 12
Slide 14: Beating the market: Overview
Beating the market: Overview Our Vision Total global dry bulk trade volumes of 5.1B mt per annum What choices have we made in the cargo segments and why? “To be a leading ship Total global dry bulk fleet of 11,200 ships owner/operator What choices have we made in the vessel sizes and why? in
Slide 15: 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
Slide 16: Diverse Cargoes & Customers
Diverse Cargoes & Customers Diverse range of commodities reduces product risk Diverse customers reduces counterparty risk Our cargo volumes in 2017: 2018 Analyst Day 15
Slide 17: Minor Bulk Ships: our strategic focus
Minor Bulk Ships: our strategic focus 2018 Analyst Day 16
Slide 18: 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 2018 Analyst Day 17
Slide 19: Our Worldwide Network
Our Worldwide Network Our People Close to our customers 12 local dry 24/7 bulk offices support Strong local relationships with customers Experienced commercial and operations staff around the world Being local facilitates clear understanding of and response to customers’ needs and first-rate p
Slide 20: Our People
Our People Diverse backgrounds - 28 nationalities Well established trainee program since 2008 Staff given global exposure Emphasis on shipping as a career, not just a job Preference for internal promotions and succession Lateral hires at mid-management level bringing fresh knowledge, new
Slide 21: Key Trading Areas – Pacific
Key Trading Areas – Pacific Diverse trades reduce impact of geopolitical & trade pattern changes North East Asia Persian Gulf New Zealand North Pacific South East Asia Australia 2018 Analyst Day 20
Slide 22: Key Trading Areas – Atlantic
Key Trading Areas – Atlantic US Gulf Continent Mediterranean / Black Sea West Coast South America East Coast South America 2018 Analyst Day 21
Slide 23: Optimising Cargo Systems
Optimising Cargo Systems A normal cargo system comprises 1 empty ballast leg + 1 laden fronthaul leg By combining backhaul and fronthaul cargoes, we achieve higher utilisation and outperform the market (Baltic Exchange indices) Operating activity also contributes to our outperformance 2018 Ana
Slide 24: Shipping Cycle Management
Shipping Cycle Management 3) Long-term COA 2) Medium-term COA 4) Spot trade 1) Spot trade 5) Reduce spot exposure Shipping Market Cycle General chartering strategy changes with the cycle Getting it right requires anticipation, flexibility and action Source: Adapted from Marsoft, 2003, cited in L
Slide 25: Strategic Model
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 ensures accessi
Slide 26: Business Foundation
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 record environ
Slide 27: Q&A Session
Q&A Session 2018 Analyst Day 26
Slide 28: Steaming towards better markets - Morten Ingebrigtsen
Steaming towards better markets - Morten Ingebrigtsen, Director, Asset Management 2018 Analyst Day 27
Slide 29: Reduced yard deliveries ahead
Reduced yard deliveries ahead GOOD A regulatory curve ball is Scrapping already very low helpful to limit appetite with limited downside for newbuildings GOOD INTERESTING World cargo prospects are positive GOOD 28 With you 2018 for Analyst Day the long haul
Slide 30: Freight Market Earnings - Update
Freight Market Earnings - Update 80,000 Supramax US$ / day earnings The market has improved since the 70,000 low point in early 2016 but it is far from what we can call ‘recovered’ 60,000 50,000 40,000 30,000 Now Low point Handysize early 2016 20,000 earnings 10,000 0 2007 2008 2009 2010 2011 2012 2
Slide 31: What can we say about the Supply Side?
What can we say about the Supply Side? Yard deliveries are reducing and we expect net fleet growth to slow from +3.0% last year to +2.1% this year and to 2.0% in 2019 – the lowest since the 1990s. Net fleet growth for 2020 and beyond is too much of an open book to forecast Scrapping would normal
Slide 32: Long Term View on Net Fleet Growth Gives Us Reason to be Positive
Long Term View on Net Fleet Growth Gives Us Reason to be Positive 20% Clarkson growth % of fleet 17.0% forecasts 2.1% & 2.0% for 2018 & 2019 - the 15% lowest since 1990s Net fleet growth 10% Deliveries 2017: Deliveries 38M dwt (4.8%) 5% 3.0% 2.6% 2.2 % 0% -5% Scrapping Scrapping 2017: 15M dwt (1.8%)
Slide 33: Clarkson's Fleet Forecast by Sector Shows Reduced Growth
Clarkson’s Fleet Forecast by Sector Shows Reduced Growth for Sub-cape Vessel Types Year-on-Year net fleet growth All BC Cape Pmax Smax Handy 2017 Actual Actual 3.0% 2.8% 2.7% 4.0% 1.9% Lower Same Lower Lower Lower 2018 F'cast 2.1% 2.8% 1.6% 1.7% 1.8% 2019 F'cast 2.0% 2.8% 1.7% 1.3% 1.4% Based on Cla
Slide 34: Contracting Picked Up in 2017 from Near Zero
Contracting Picked Up in 2017 from Near Zero as Market Sentiment Improved Contracting (annualised % of fleet) 14% 12% Handy & Supra Pmax & Cape Tier II 10% contracting 8% 6% 4% Apr-18 2% 0% 2015 2016 2017 2018 2018 Analyst Day 33 Source: Clarkson Research
Slide 35: Pro-forma Orderbook vs Fleet Profile by Build-year
Pro-forma Orderbook vs Fleet Profile by Build-year Mill dwt Due to slippage actual 120 Bulk carrier pro-forma orderbook deliveries per year will 80M dwt or 9.7% of the fleet.... be less than what the 100 pro-forma orderbook schedule indicates ....is equal to the trading fleet 80 built prior to Nov-2
Slide 36: Unprecedented Uncertainty on Design Front
Unprecedented Uncertainty on Design Front New design regulation: Deliveries after June 2020 will have to comply with new CSR regulation requiring a new more expensive design with greater steel input. Tier III main engines are more expensive. This means a higher NB cost for ships. Additional cost i
Slide 37: What can we say about the Demand Side?
What can we say about the Demand Side? The demand side in 2017 surprised on the upside with Clarkson‘s estimating +5.1% on tonne-mile basis led by coal & grain, but also minor bulks saw good expansion at the highest level since 2011 Total demand in 2018 is forecast by Clarkson to grow at a slowe
Slide 38: Long Term Demand Overview
Long Term Demand Overview Demand development (t-mile basis) 16% 14% GFC rebound 12% Annual 10% 8% 5-yr average Fleet growth 2004 - 2015 6% 4% China 2% coal Fleet growth after 2015 0% -2% -4% Global Fin Crisis -6% 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 2018 Analyst Day 37 Source: Clarkson Resea
Slide 39: 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 for 2018 is 1,600 +5.1% but comfortably moderate 1395 above supply 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
Slide 40: 2018 Demand Forecast
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 America, and
Slide 41: Growth in Chinese Electricity Generation Drives Higher Consumption of Coal
Growth in Chinese Electricity Generation Drives Higher Consumption of Coal 7500 Chinese electricity 7000 generation by source Chinese electricity generation grows 6500 Annualised Bill kwh 6000 5500 China continues to rely on thermal 5000 (coal) based generation to support 4500 its growth in electric
Slide 42: Simplistic Supply / Demand Balance Since 2015 with Forecast
Simplistic Supply / Demand Balance Since 2015 with Forecast Demand % growth t-mile basis Some YoY % fleet growth improvement Bottoming Market is out tightening further In Good & low decline starting point for supply 3.0% 2.4% 2.2% 2.1% 2.0% 0.9% 2.5% 5.1% 3.4% 2015 2016 2017e 2018f 2019f Demand Supp
Slide 43: Summary
Summary Finally the supply side is under control Contracting has increased since last year but mainly for larger vessel types and design uncertainty is limiting owners’ appetite for new ordering Scrapping is low and this is good as it can‘t decline much more Demand expectations for 2018 are mode
Slide 44: Ship Management of PB Owned Fleet - Jay Pillai
Ship Management of PB Owned Fleet - Jay Pillai, Fleet Director 2018 Analyst Day 43
Slide 45: Ship Management of PB Owned Fleet
Ship Management of PB Owned Fleet Our vision: to be a leading ship owner/operator in dry bulk shipping, and to be the first choice partner for customers and other stakeholders Our mission: to be the best in our field by continuously refining our business model, our service and our conduct in everyth
Slide 46: Ship Management of PB Owned Fleet
Ship Management of PB Owned Fleet 1) Overview of the Ship Management Function & Organization 2) Our Asset – Our People at Sea & on Shore 3) Industry leading Focus on Outcome 4) Environmentally friendly ships and Operation 5) Secondhand S&P Inspections and Newbuilding Evaluation & Supervision 6) Dry-
Slide 47: Overview of the Ship Management Function
Overview of the Ship Management Function In-house Ship Management Team in Hong Kong crewing and training centers in Dalian & Manila focus on safe & efficient operation of Owned Fleet Technical and crew management of 105 ships Pacific Basin Management System certified to HSEQ standards by L
Slide 48: Overview of the Ship Management Function
Overview of the Ship Management Function Pacific Basin Management System (cont.) Focused on 3 crew pools PRC Philippines FSU (Russia, Ukraine) also some from Hong Kong and Bangladesh with Officer Cadet program: 1~2 cadets per ship, healthy budget for training Sector-leading Marine &
Slide 49: Organisation
Organisation 106 technical staff ashore Chief Executive Officer 12 roving Fleet Training Director, Fleet Managers 4 DD Superintendents General Manager, Marine* (Designated Person General Manager, General Manager, 55 Technical Managers Technical* Ashore, Company Security Officer, Management F
Slide 50: Our Asset: Our People at Sea & on Shore
Our Asset: Our People at Sea & on Shore 4+ Officer Training Seminars per year 2018 Analyst Day 49 49
Slide 51: Technical Teams at Sea
Technical Teams at Sea 3,400+ PB Seafarers Ships Handysize Supramax PRC Crew Filipino / FSU Crew 105 80 25 58 47 Standard No Electrical Officer UMS* Crew Size 20 19 17 No. of Ships 8 50 47 *UMS = Unattended Machinery Spaces Control systems in engine room are designed for “No watch-keeping in engine
Slide 52: Technical Teams at Sea
Technical Teams at Sea Standard No Electrical Officer UMS Master 1 1 1 Navigating Officers 3 3 3 Chief Engineer 1 1 1 Engineer Officers 3 3 2 Electrical Officer 1 Deck Ratings 5 5 5 Engine Ratings 4 4 3 Catering Ratings 2 2 2 Total 20 19 17 Navigating Officers and Engineer Officers keep watch: 4 h
Slide 53: Technical Teams at Sea
Technical Teams at Sea Technical team ashore (106 staff) is the support team of technical teams at sea (3,400+ crew) We strive to provide our colleagues at sea the best shore-based support and empower Master and Chief Engineer (on-board managers) and crew to Care for Ship and Cargo with passion
Slide 54: Talent Retention At Sea
Talent Retention At Sea Career Progression from Sea to Shore Cadet to Master/Chief Engineer, Ship Manager/Marine Manager/Training Manager, Fleet Manager/Risk Manager, Personnel Manager Leisure on Board Indoor sports, games and fitness, entertainment equipment (eg TV, video & audio equipment, kar
Slide 55: Talent Retention At Sea
Talent Retention At Sea Compassion & Family Welfare Compassionate sign-off and repatriation worldwide for crew members with serious family or personal issues where reasonable (whether covered by P&I Insurance or not) For Filipino crew Dedicated Family Welfare Center in PB Manila handling PB se
Slide 56: 87% Crew Retention
87% Crew Retention 94% Officer Retention 79% Ratings Retention 2018 Analyst Day 55
Slide 57: Stopping Unsafe Acts
Stopping Unsafe Acts: 3W Risk Assessment for each task What can go wrong? 3W What factors can cause it to go wrong? A P What shall I do to prevent it going wrong? One-Man Errors, accidents, injuries Act Plan occur when people don’t: do 3W Risk Assessments for each task Check Do C D care for each
Slide 58: Stopping Unsafe Acts: Hazards
Stopping Unsafe Acts: 3W Risk Assessment for each task Our Safety Management The goal is to minimise holes Hazards in our defenses so that Hazards System endeavours to develop layers of effective defences to hazards are stopped before protect against risks from incidents occur operations Hazards
Slide 59: Leadership – Speaking up with focus on outcome
Leadership – Speaking up with focus on outcome 2018 Analyst Day 58
Slide 60: Leadership in Dry Bulk Shipping
Leadership in Dry Bulk Shipping Think Safe, Work Safe and Be Safe I take pride in my job and the great work I do for myself and my family My family awaits my safe return I will: Stop & report unsafe acts & conditions Correct my colleagues if I see them doing anything wrong Maintain the ship an
Slide 61: Industry Leading Opex
Industry Leading Opex Crewing & messing Repairs & maintenance 2017 Opex: $3,840/day Insurance Sundries & others Saving of $66 per day in crew costs on 47 UMS ships from reduced manning of engineering crew Policy to own reliable Japanese-built tonnage (or select PRC tonnage if built under
Slide 62: Industry Leading Ship Management Standards
Industry Leading Ship Management Standards 0.82 is our best ever LTIF result 2018 Analyst Day 61
Slide 63: Industry Leading Ship Management Standards
Industry Leading Ship Management Standards 78% of our Port State Control inspections found zero regulatory deficiencies 2018 Analyst Day 62
Slide 64: Award-winning Safety Culture & Performance
Award-winning Safety Culture & Performance Top global & regional industry awards in Notable other awards in recent years 2017 Safety Award at Lloyd’s List Global Awards 2016 Lloyd’s List Global Awards 2017 Ship Operator Award at Lloyd’s List Company of the Year Awards Asia 2015 and 2016 Be
Slide 65: Shipping Company of the Year (2017)
Shipping Company of the Year (2017) 2018 Analyst Day 64
Slide 66: Environmentally-friendly Ships and Operation
Environmentally-friendly Ships and Operation 2018 Analyst Day 65
Slide 67: Environmentally-friendly Features
Environmentfally-friendly Features Use of exhaust gas to generate heating steam Garbage compactors facilitate easy storage of operational Advanced self-tuning autopilot systems garbage Teduce rudder movements and improve course-keeping to improve fuel efficiency Environmentally-friendly biodegradabl
Slide 68: Energy Efficiency Projects
Energy Efficiency Projects Optimise speed down to 30% engine load minimises CO2 emissions and impact on environment Enhance fleet performance with regular hull & machinery maintenance Operational inputs at design stage to reduce dry docking and environmental impact cargo holds, cargo gear,
Slide 69: Energy Efficiency Projects: Eco Devices
Energy Efficiency Projects Eco Devices Non hub-vortex propeller Prop-rudder transition bulb Mewis duct + post-swirl Propeller boss cap fins Pre-duct Silicon paint 2018 Analyst Day 68
Slide 70: S&P Inspections and Newbuilding Support
S&P Inspections and Newbuilding Support Secondhand Sale & Purchase Technical support for PB’s discerning secondhand ship acquisition activity Newbuilding Support Contracting support and newbuilding site supervision PB built 15 Handysize ships to high standard at JNS shipyard in PRC These shi
Slide 71: Dry-Docking Management
Dry-Docking Management Requirement: 2 dockings every 5 years (max. 36 months between dockings) Intermediate Survey (IS) every 2.5 years Vessels can skip IS if <12.5 yrs old and classed for “In Water Survey” or specially permitted by Class Typical cost ≈ US$ 550K, 17 days (incl. repositioning
Slide 72: Dry-Dock Management
Dry-Dock Management Shipyard & All dockings in China as far as possible, or Turkey (when Atlantic trading) if not cost-efficient to position to Vendor China Selection Concentrate on a few select shipyards to obtain pricing and service advantage. We use a selection of SOE and private shipyards fo
Slide 73: Projects – Ballast Water Management
Projects – Ballast Water Management Ballast Water Management Convention IMO’s BWMC in force since 8 September 2017. In July 2017, IMO agreed on a practical and pragmatic implementation schedule with a 2-year extension for installation of Ballast Water Treatment Systems from 8 September 2019 to 202
Slide 74: Statutory Legislation Landscape
Statutory Legislation Landscape Energy Consumption – Monitoring, Reporting & Verification (MRV) EU’s MRV legislation effective 1 January 2018. We have developed an in-house solution rather than buy expensive market software. IMO’s MARPOL Annex VI fuel consumption data collection system in force 1 Ma
Slide 75: Future of Ship Safety
Future of Ship Safety Recommendations from IMO symposium Future of Ship Safety review regulatory regime to meet future needs and expectations consider the pace of change and technological advancements encourage safety culture that goes beyond mere compliance Support for Seafarers focus on th
Slide 76: Promoting Careers at Sea
Promoting Careers at Sea Let’s strive for safe ship operations and a clean environment To achieve this, we must make sea careers attractive and embrace regulations and technological innovations 2018 Analyst Day 75
Slide 77: Forecasting Our Business - Peter Schulz, CFO
Forecasting Our Business - Peter Schulz, CFO 2018 Analyst Day 76
Slide 78: Our Key Disclosures
Our Key Disclosures Costs (excl. G&A) TCE Revenue 2017 “Fixed” Vessels Vessel Days Costs/Day Handysize Supramax FY2017 FY2017 2017 31 Mar 2018 FY 2017 Owned 53,360 34,510 P.12 Handysize 80 28,410 $7,480 1) revenue days at revenue days at P.11 $8,320 $9,610 P.12 Supramax 25 7,800 $8,210 2) Q1 2018 LT
Slide 79: Forecasting Our Business
Forecasting Our Business Handysize Excluding G&A Onerous Contracts • $20.3mn utilized in Vessel No. Revenue TCE/d TCE No. Vessel Cost/d Cost Contr. 2017 Type Days ($) ($m) Days ($) ($m) ($m) • $16.1mn utilization allocated to 2018 Owned 801) X 3602) X BHSI + PB prem.= (A) 801) X 365 = 7,4803) (B) (A
Slide 80: Understanding the Earnings Sensitivity
Understanding the Sensitivity Owned + 360 +/- Open days in Sensitivity LT chartered on-hire US$1,000/day next 12 mths +/- Key Assumptions fleet days market rate (excl. CoA cover) Underlying Profit • No change in ST Earnings TC-in profitability US$35-40m Total • No change in G&A • No change in Onerou
Slide 81: 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,