Torm Plc Class A · OMXCOP:TRMD_A
Torm Plc Class A — Q1 2021 Earnings Presentation
50 slides from Torm Plc Class A's earnings presentation, May 12, 2021
Slide 1: Q1 2021 Results
12 MAY 2021 Q1 2021 RESULTS TORM
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or
Slide 3: Agenda
AGENDA 1 Introduction to TORM and Q1 2021 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management 3
Slide 4: TORM at a Glance
TORM AT A GLANCE A world-leading product tanker company Fleet overview* 74 Owned 11 On order • A leading pure-play product tanker owner • Large commercial footprint with presence in all key product tanker segments 10 ⚫⚫⚫⚫⚫⚫⚫⚫⚫⚫ • Strong capital structure to support disciplined growth strategy LR2 +5
Slide 5: Q1 2021 Financial Highlights
Q1 2021 FINANCIAL HIGHLIGHTS 5
Slide 6: The Reference Company in the Product Tanker Segment
THE REFERENCE COMPANY IN THE PRODUCT TANKER SEGMENT 6
Slide 7: TORM Commercially Outperforms Peers in Its Key MR Segment
TORM COMMERCIALLY OUTPERFORMS PEERS IN ITS KEY MR SEGMENT CORRESPONDING TO USD 12M IN Q1 2021 MR reported TCE, USD/day Q1 2021 performance: • TORM: USD/day 12,935 • Peer average: USD/day 10,337 TORM MR USD USD 14m USD 36m USD 20m USD 24m USD 39m premium* 12m Note: Peer group is based on Ardmore, d’A
Slide 8: TORM's Commercial Capabilities Focused on Optimizing Geographical Positioning
TORM’S COMMERCIAL CAPABILITIES ARE FOCUSED ON OPTIMIZING GEOGRAPHICAL POSITIONING USD/day (%) 14,000 80 West outperformance Majority of TORM’s MRs west of Suez 12,000 10,000 70 8,000 6,000 60 4,000 2,000 0 50 -2,000 East outperformance Majority of TORM’s -4,000 MRs east of Suez 40 -6,000 -8,000 30 -
Slide 9: Cost Focus Maintained with Current Low Levels
COST FOCUS MAINTAINED WITH CURRENT LOW LEVELS PARTLY IMPACTED BY COVID-19 FACTORS Significant reduction in OPEX OPEX per day (yearly, weighted avg. in USD/day) Compared to the full-year 2014, TORM has reduced -12% the OPEX cost base by 7,655 7,193 approx. USD 23.3m on an 6,771 6,673 6,767 annualized
Slide 10: Prudent Financial Management and Cash Flow Generation Support Capital Distribution
PRUDENT FINANCIAL MANAGEMENT AND CASH FLOW GENERATION SUPPORT CAPITAL DISTRIBUTION Strong cash flow and a solid capital structure… …have enabled vessel investment and dividend payments EBITDA (USDm) 272 Fleet investments (USDm) Vessel investments *) 384 Sale of vessels 200 202 158 121 202 173 145 11
Slide 11: TORM's Medium to Long-Term ESG Targets
TORM’S MEDIUM TO LONG-TERM ESG TARGETS • 11
Slide 12: Q1 2021 Highlights
Q1 2021 HIGHLIGHTS Q1 FINANCIAL HIGHLIGHTS CORPORATE EVENTS Purchase of eight 2007-2012 built MR EBITDA of USD 18.9m TCE Q1 2021 of USD/day 13,493 Inproduct tanker early 2020, vessels TORM for a total refinanced USDcash 496m of consideration existing debt. of USD 82.5m and the issuance of 5.97 milli
Slide 13: The Three LR2 Purchases Build on TORM's Coverage and S&P Strategy
THE THREE LR2 PURCHASES BUILD ON TORM’S COVERAGE AND S&P STRATEGY OVER THE PAST YEAR MR freight rates, USD/day # Vessels on the water • TORM has actively managed the spot exposure in the recent volatile market development through coverage strategy as well as sales 80,000 and purchase activities: 76
Slide 14: TORM Uses Freight Derivatives to Obtain Attractive Coverage
TORM USES FREIGHT DERIVATIVES TO OBTAIN ATTRACTIVE COVERAGE Freight derivatives* are a natural element of … and TORM has historically benefitted from the use of freight derivatives but M- TORM’s coverage strategy… t-M of unrealized element impacts TORM’s P&L statement ROY 2021 cover as of 31 March 2
Slide 15: Equity Investment Highlights
EQUITY INVESTMENT HIGHLIGHTS 15
Slide 16: Agenda
AGENDA 1 Introduction to TORM and Q1 2021 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management 16
Slide 17: Dynamic COVID-19 Situation Continues to Affect the Product Tanker Market
DYNAMIC COVID-19 SITUATION CONTINUES TO AFFECT THE PRODUCT TANKER MARKET USD/day Q1 2021 190,000 • Renewed lockdowns in several regions LR2 (avg.) temporarily reversed oil demand MR (avg.) recovery and capped trade flows TORM MR (spot) • The extremely cold weather in mid- 90,000 February led to seve
Slide 18: The Oil Market Has Moved from Stockbuilding to Stockdrawing
THE OIL MARKET HAS MOVED FROM STOCKBUILDING TO STOCKDRAWING • The COVID-19 pandemic led to an unprecedented oil demand destruction Pre-COVID-19 • Initially, refinery runs lagged declines in demand, leading to unprecedented inventory builds bringing the onshore Refined product spare storage capacity
Slide 19: Oil Demand in China Has Rebounded
OIL DEMAND IN CHINA HAS REBOUNDED, ILLUSTRATING THE POTENTIAL POST-COVID-19 SITUATION While the oil demand recovery in the West stalled on increased COVID-19 cases over the year-shift… Oil demand growth vs 2019, % • China’s oil demand (~14% of the Europe United States 10 10 global oil demand) has re
Slide 20: Precautionary Measures in India as COVID-19 Affects Oil Demand
TORM HAS IMPLEMENTED PRECAUTIONARY MEASURES IN INDIA WHERE THE COVID-19 DEVELOPMENT IS AFFECTING OIL DEMAND No of cases India new COVID cases 400,000 • The recent increase in COVID-19 cases in 300,000 India has caused TORM to implement 200,000 precautionary measures to safeguard both 100,000 the sho
Slide 21: Successful Vaccine Rollout in the US Leading to Improved Oil Demand
SUCCESSFUL VACCINE ROLLOUT IN THE US LEADING TO IMPROVED OIL DEMAND Weekly US Vehicle-Miles Travelled (VMT) vs 2019 respective week US Flight Traveler Throughput (7d avg) % All vehicles Passenger vehicles Trucks 2019 2020 2021 20 3,000,000 10 2,500,000 0 2,000,000 -10 -20 1,500,000 -30 1,000,000 -40
Slide 22: Unwinding Floating Storage Is Done, Onshore Inventories Declining
THE UNWINDING FLOATING STORAGE IS DONE, ONSHORE INVENTORIES SIMILARLY ON THE WAY DOWN Onshore CPP inventories in key trading hubs* and global CPP floating storage • Onshore CPP inventories in key Mln bbl Mln dwt trading hubs (~20% of global 90 16 Floating storage (RHS) stocks) have declined from the
Slide 23: COVID-19 Has Led to a New Wave of Refinery Closures
COVID-19 HAS LED TO A NEW WAVE OF REFINERY CLOSURES, INCREASING TON-MILES IN THE MEDIUM- AND LONG-TERM Announced refinery closures and capacity additions in 2020-2023* 130 kb/d 116 kb/d 58 kb/d 55 kb/d 485 kb/d 220 kb/d 137 kb/d 335 kb/d 200 kb/d 80 kb/d 190 kb/d 235 kb/d 267 kb/d 1,030 kb/d 250 kb/
Slide 24: Low Tonnage Supply Growth Supporting Market Recovery
LOW TONNAGE SUPPLY GROWTH SUPPORTING MARKET RECOVERY The product tanker order book at a historical low level as % of the total fleet • The product tanker order 56 book to fleet ratio is at a historical low of 7% • This is supported by historically low crude tanker order book at 9% of the fleet, 37 w
Slide 25: Vessel Values Follow Market Expectations and Newbuilding Prices
VESSEL VALUES FOLLOW THE DEVELOPMENTS IN MARKET EXPECTATIONS AND NEWBUILDING PRICES ‘000 USD/day USDm LR2 ‘000 USD/day USDm MR 60 35 40 25 55 30 35 20 25 50 20 45 15 30 15 40 10 10 25 35 5 0 0 0 5 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Newbuilding 5 yr. S
Slide 26: COVID-19 Impacts Short-Term, but Long-Term Drivers Are Supportive
COVID-19 CONTINUES TO IMPACT THE MARKET IN THE SHORT- AND MEDIUM-TERM, BUT LONG-TERM DRIVERS ARE SUPPORTIVE Key medium- to long-term market drivers • Rollout of vaccines and economic stimulus supporting recovery in the oil demand and restoring the tanker trades distorted by the COVID-19 • Tanker ord
Slide 27: The Potential for Further LR2 Clean-Ups Has Lessened
THE POTENTIAL FOR FURTHER LR2 CLEAN-UPS HAS LESSENED USD/day Aframax rate premium to LR2 Share of LR2s in dirty trades (rhs) % 40,000 55 • Weak crude tanker market has incentivized LR2 clean-ups, 30,000 counterbalancing the large ~40 50 20,000 vessel migration to the dirty market in Q3/Q4 2019 10,00
Slide 28: Agenda
AGENDA 1 Introduction to TORM and Q1 2021 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management 28
Slide 29: Q1 2021 Financials
Q1 2021 FINANCIALS USDm Q1 2021 Q1 2020 2020 P&L TCE earnings 77 158 520 Gross profit 32 115 341 Sale of vessels 0 0 1 EBITDA 19 102 272 Net profit 21 56 88 Net profit adjusted 1) 21 59 122 Balance sheet Equity 1,004 1,046 1,017 NIBD 743 798 713 Cash and cash equivalents 117 129 136 Key figures Earn
Slide 30: Increased Coverage De-Risk Q2 2021 Result
INCREASED COVERAGE DE-RISK Q2 2021 RESULT Open earning days per segment as of 31 March 2021 28,903 29,246 4,189 4,211 3,093 3,234 LR2 14,236 LR1 1,599 689 MR 20,895 21,102 Handy 11,427 521 725 698 2021 2022 2023 Q2 2021 coverage USD/day Q1 2021 TCE per day Q2 2021 cover as of 7 May 2021* % of total
Slide 31: Net Asset Value Estimated at USD 788m, Net LTV 55%
NET ASSET VALUE ESTIMATED AT USD 788M WHILE NET LOAN-TO-VALUE OF JUST 55% 31 March 2021 figures, USDm Net LTV of 55% 1,705 858 788 210 22 13 117 Value of vessels Outstanding debt Committed Cash Working Capital Other* Net Asset Value (incl. newbuildings) CAPEX • Net Loan-to-Value was 55% • Net Asset
Slide 32: Well-Positioned to Service Future CAPEX Commitments
WELL-POSITIONED TO SERVICE FUTURE CAPEX COMMITMENTS AND FURTHER LEVERAGE MARKET OPPORTUNITIES Liquidity and CAPEX as of 31 March 2021 Available liquidity, USDm Cash CAPEX commitments, USDm Expected closed during Q2 2021 3x 2015-built LR2 Team Tankers1 Newbuildings incl. scrubber 446 24 92 329 Purcha
Slide 33: Favorable Financing Profile with No Major Near-Term Maturities
FAVORABLE FINANCING PROFILE WITH NO MAJOR NEAR- TERM MATURITIES Scheduled debt repayments as of 31 March 2021 USDm 849 10 69 16 Financial lease 144 92 16 Mortgage debt 92 13 90 55 705 72 33 289 Oustanding debt as ROY 2021 2022 2023 2024 2025 Hereafter of 31 March 20211 Ample headroom under our attra
Slide 34: Agenda
AGENDA 1 Introduction to TORM and Q1 2021 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management 34
Slide 35: TORM Is a Long-Term Industrial Player Focused on Operational Performance
TORM IS A LONG-TERM INDUSTRIAL PLAYER WITH FOCUS ON SUPERIOR OPERATIONAL PERFORMANCE Long-term industrial player with an integrated operational platform • Industrial player with a long-term time horizon in the product tanker market • Prevalent platform through several cycles with superior financial
Slide 36: Historical Vessel Purchases and Vessel Value Development
HISTORICAL VESSEL PURCHASES AND VESSEL VALUE DEVELOPMENT USDm LR2 - Newbuildings MR - Newbuildings 58 LR1 - Newbuildings MR - 7.5-year second-hand (based on avg. of 5 and 10 years) 56 54 52 Four GSI LR2s 50 (excl. scrubbers) 48 Two GSI LR2s 46 (incl. scrubbers) 44 42 40 Two GSI LR1s 38 Four GSI MR N
Slide 37: TORM's Recent Vessel Sales Are Done at Broker Value
TORM’S RECENT VESSEL SALES ARE DONE AT BROKER VALUE Vessel name Vessel segment Delivery date Age Sales price, net of commission, USDm Broker values, USDm TORM Ohio Handy Q3-18 16.7 TORM Neches MR Q3-18 18.0 TORM Clara MR Q4-18 17.9 TORM Charente Handy Q4-18 17.2 TORM Amazon MR Q1-19 17.1 • Since Q3
Slide 38: Two Main Options to Comply with the IMO 2020 Sulfur Regulation
THERE ARE TWO MAIN OPTIONS FOR OCEAN-GOING VESSELS TO COMPLY WITH THE IMO 2020 SULFUR REGULATION Product/chemical Worldwide tankers1) TORM2) Newbuildings Scrubber ~4,600 ~500 53 vessels installations vessels vessels sass (9%) (14%) (62%) Existing fleet on the Shipowners’ sulfur water regulation comp
Slide 39: Fuel Spread Has Started to Widen Along with Higher Crude Oil Price
FUEL SPREAD HAS STARTED TO WIDEN ALONG WITH HIGHER CRUDE OIL PRICE Price spread between 0.5% compliant fuels and 3.5% HSFO, Rotterdam delivery vs Brent USD/t USD/bbl • The spread 280 70 VLSFO-HSFO spread (spot) between 0.5% 260 Brent (RHS) compliant fuel 65 and 3.5% HSFO 240 is currently 220 60 trad
Slide 40: Appendix
APPENDIX TORM
Slide 41: Management Team with an International Outlook
MANAGEMENT TEAM WITH AN INTERNATIONAL OUTLOOK AND MANY YEARS OF SHIPPING EXPERIENCE Executive Director Jacob Meldgaard ▪ Executive Director of TORM plc ▪ CEO of TORM A/S since April 2010 ▪ Chairman of the Board of Danish Shipping and member of the Board of Danish Ship Finance ▪ Previously Executive
Slide 42: Key Figures
KEY FIGURES USDm 2019 2020 Q1 2020 Q1 2021 Revenue 693 747 246 124 EBITDA 202 272 102 19 Profit/(loss) before tax 167 90 57 21 Net profit/(loss) 166 88 56 21 Net profit/(loss) adjusted1 51 122 59 21 Balance sheet Total assets 2,004 1,999 2,101 1,999 Equity 1,008 1,017 1,046 1,004 NIBD 786 713 798 74
Slide 43: Quarterly Highlights
QUARTERLY HIGHLIGHTS TCE USD/day TCE Earnings USDm 25,274 174 23,643 158 19,234 126 17,949 117 16,762 110 15,405 13,392 13,493 98 12,863 84 77 77 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 EBITDA Net profit adjusted 119 77 102 59 68 62
Slide 44: TORM's Scrubber JV
53 SCRUBBER INSTALLATIONS WILL BE CONDUCTED SUPPORTED BY TORM’S SCRUBBER JV TORM’s scrubber JV, ME Production China Ownership share: 27.5% • One of the largest risks with scrubber ME installations is the potential delay during both Production the production and the installation phase China • Due to
Slide 45: Fleet Overview
FLEET OVERVIEW # of vessels LR2 LR1 MR Handy As of 12 May 2021 on water 90 85 85 84 80 73 14 15 15 70 10 9 9 9 60 9 50 40 30 59 59 59 52 20 10 0 2 2 2 2 1 March 2021 End 2021 End 2022 End 2023 Sale and leaseback 8 12 13 13 vessels1 1. Sale and leaseback vessels are included in the chart. 45
Slide 46: Product Tanker Benchmark Freight Rates
PRODUCT TANKER BENCHMARK FREIGHT RATES LR2 (average) MR (average) USD ‘000/day USD ‘000/day Source: Clarksons. Spot earnings: LR2: average of Clarksons LR2 East combination (Ras Tanura->Chiba->Ulsan->Singapore) and East-West combination (Ulsan->Singapore->Mina Al Ahmadi- >Rotterdam->Skikda->Chiba);
Slide 47: IMO 2020 Effects
IMO 2020 EFFECTS MGO and VLSFO price spreads (USD/t) 80 MGO-VLSFO spread, Rotterdam 60 MGO-VLSFO spread, Singapore 40 20 0 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 -20 Bunker sales in Singapore (million tons) 5 Other MGO VLSFO HSFO 4 3 2 1 0 Jun-19 Jul-19 Aug-19 S
Slide 48: Refinery Closures in Australia and New Zealand Will Increase MR Demand
REFINERY CLOSURES IN AUSTRALIA AND NEW ZEALAND WILL INCREASE MR DEMAND BY 35-50 VESSELS Australia and New Zealand refinery map Australia and New Zealand CPP imports (kb/d)* Bulver Island 102 kb/d Kurnell refinery 124.5 closure 907 kb/d (AUS) refinery 102 closure (AUS) 73 625 628 614 118 596 Lytton 1
Slide 49: Positive TCE Impact from Scrubber Investments
TORM EXPECTS A POSITIVE TCE IMPACT ON THE TORM FLEET DUE TO THE SCRUBBER INVESTMENTS Avg. fuel Compliant fuel and TCE impact per Annual TCE impact Vessel type consumption, HSFO fuel spread vessel, USD/day2) per vessel, USDm tons/day1) assumption, USD/t MR Eco vessel ~11 × 100 = ~1,100 0.4 MR Non-eco
Slide 50: Oaktree Is the Majority Shareholder with Free Float of 30%
OAKTREE IS THE MAJORITY SHAREHOLDER WITH A REMAINING FREE FLOAT OF 30% Share information Estimated shareholdings as of May 20211) (%) TORM’s shares are listed on Nasdaq in Copenhagen and Nasdaq in New York under 100 the tickers TRMD A and TRMD, respectively. 15 Shares 15 • 76.7m A-shares, one B-shar