Pacific Basin Shipping Limited · HKEX:2343
Pacific Basin Shipping — Q1 2019 Earnings Presentation
39 slides from Pacific Basin Shipping's earnings presentation, May 17, 2019
Slide 1: Pacific Basin 1Q19 Trading Update
2 Pacific Basin 1919 Trading Update 17 May 2019
Slide 2: Overview
Overview Pacific Basin 2
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 114* Handysize and Supramax vessel, with total 230+ dry bulk ships on the water serving major industrial customers around the
Slide 4: Understanding Our Core Market
Understanding Our Core Market Pacific Basin 4
Slide 5: Pacific Basin Dry Bulk – Diversified Cargo
Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 1Q19 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 6: Fleet List – 31 March 2019
Fleet List – 31 March 2019 www.pacificbasin.com Our Fleet 112 27 95 234 Vessels LT ST Total owned Chartered Chartered * Total Handysize 82 19 41 142 Supramax 29 7 54 90 Post- Panamax 1 1 0 2 Average age of core fleet: 8 years old An additional 3 vessels purchased and scheduled to deliver in next 3 m
Slide 7: 2019 First Quarter Trading Update, Market Review and Outlook
2019 First Quarter Trading Update, Market Review and Outlook Pacific Basin 7
Slide 8: Strong PB Performance Despite Market Headwinds
Strong PB Performance Despite Market Headwinds Cover as at 8 April 2019 US$/day Handysize Supramax Market (BHSI/BSI) index net rate 5,730 7,540 BHSI (Handysize) and 1Q BSI (Supramax) down PB daily TCE net rate 9,080 10,400 29% and 26% YOY respectively vs PB outperformance 58% / 3,350 38% / 2,860 PB
Slide 9: Market has Experienced a Weak Start in 2019
Market has Experienced a Weak Start in 2019 Baltic Handysize Index (BHSI) Baltic Supramax Index (BSI) Market Spot Rates in 2016-2019 Market Spot Rates in 2016-2019 US$/day net* US$/day net* 14,000 16 May 2019 12,000 $8,320 16 May 2019 12,000 $5,440 2018 10,000 2017 10,000 2017 8,000 2018 8,000 2016
Slide 10: Minor Bulk Expected to Drive Demand in 2019
Minor Bulk Expected to Drive Demand in 2019 Overall Dry Bulk Tonne-miles Demand Growth Since 2010 Annual Change in Dry Bulk Tonne-miles Demand Annual change dry bulk demand Iron Ore 16% Bn tonne-miles Coal 13.4% 1,500 +4.7% 14% Grain Minor Bulk 12% 1,200 +3.1% +2.9% 10% 900 +1.7% +1.8% 8% +2.2% +1.9
Slide 11: Better Supply Fundamentals for Handysize / Supramax (I)
Better Supply Fundamentals for Handysize / Supramax (I) Overall Dry Bulk Supply Development Handysize / Supramax Supply Development Mil Dwt Current Orderbook: Mil Dwt Current Orderbook: 100 Total: 11.1% 35 Total: 6.8% 80 30 37% 49% 4.3% 5.1% 1.7% 3.3% 2.8% 0.7% 42% 48% 25 60 36% 37% 20 41% 34% 40 19
Slide 12: Better Supply Fundamentals for Handysize / Supramax (II)
Better Supply Fundamentals for Handysize / Supramax (II) Scheduled Average Over Over YTD Scrapping as Orderbook Age 20 Years 15 Years % of Existing Fleet as % of as at 1 Apr 2019 Existing (annualised) Fleet Lower Handysize – 84m dwt orderbook (25,000-41,999 dwt) 5.6% 10 11% 19% 0.2% More Supramax –
Slide 13: New Regulations Benefitting Stronger Companies
AR18 Results New Regulations Benefitting Stronger Companies New Regulations Content Impact on the Industry PB actions IMO Ballast Water IMO and USCG requirement Capex for shipowners 14 PB owned vessels fitted Treatment: Increased scrapping Retrofitting 97 owned vessels Installation with sy
Slide 14: Favourable Minor Bulk Supply and Demand Outlook
Favourable Minor Bulk Supply and Demand Outlook Total Dry Bulk Supply and Demand Minor Bulk Demand and Handysize/Supramax Supply % YOY Change 8% Tonne-mile Demand Growth (%) 6% 5.1% Net Fleet Growth (%), (deliveries net of scrapping) 5% 4.2% 6% 4% 4.2% 4.7% 3% 2.5% 1.9% 2% 4% 3.1% 2.9% 2.5% 1% 0.8%
Slide 15: Secondhand Values Remain Attractive
Secondhand Values Remain Attractive Handysize Vessel Values Supramax Vessel Values US$ Million US$ Million 60 80 50 70 60 40 50 Newbuilding (38,000 dwt): 30 US$24m 40 Newbuilding (62,000 dwt): US$26m 30 20 20 10 10 5 years (37,000 dwt): US$17m 5 years (58,000 dwt): US$17m 0 0 04 05 06 07 08 09 10 11
Slide 16: Uncertain Short-term Outlook but Long-term Fundamentals Remain Positive
Uncertain Short-term Outlook but Long-term Fundamentals Remain Positive Market is now softening as it did same time last year, and the global growth outlook has been revised downwards. Some key factors are likely to make the remaining market more volatile this year: IMF’s current 2019 GDP forecast
Slide 17: Financial Review
Financial Review Pacific Basin 17
Slide 18: Significant Improvement in 2018 Financial Results
AR18 Results Significant Improvement in 2018 Financial Results As at 31 December 2018 US$m 2018 2017 Revenue 1,591.6 1,488.0 Owned vessel costs 2018 2017 Voyage expenses (710.5) (701.5) Opex (149.7) (139.3) Depreciation (114.5) (107.6) Time-charter equivalent ("TCE") earnings 881.1 786.5 Finance (32
Slide 19: Improvement in Handysize and Supramax Segments
AR18 Results Improvement in Handysize and Supramax Segments As at 31 December 2018 2018 2017 Change Handysize contribution (US$m) 85.5 31.4 +172% Revenue days (days) 50,120 53,360 -6% TCE earnings (US$/day) 10,060 8,320 +21% Owned + chartered costs (US$/day) 8,260 7,660 -8% Supramax contribution (US
Slide 20: Handysize – Good Control of Owned Vessel Costs
AR18 Results Handysize – Good Control of Owned Vessel Costs As at 31 December 2018 2018 Daily Vessel Costs - Handysize Owned Chartered # US$8,260/day Blended Daily P/L Costs before G&A Overheads (2017: US$7,660) US$/day 10,000 9,440 7,850 2018 Charter Costs # 8,000 7,480 7,410 810 740 Vessel Average
Slide 21: Supramax – More Owned Ships with Lower Daily Cost
AR18 Results Supramax – More Owned Ships with Lower Daily Cost As at 31 December 2018 2018 Daily Vessel Costs - Supramax Owned Chartered # US$10,740/day Blended Daily P/L Costs before G&A Overheads (2017: US$9,000) US$/day 11,950 12,000 10,000 9,240 2018 Charter Costs # 8,210 8,090 Vessel Average da
Slide 22: Significant Operational Leverage
AR18 Results Significant Operational Leverage Handysize Supramax Sensitivity2 2018 Vessel Costs 2018 Vessel Costs avg. TCE Days incl. G&A1 avg. TCE Days incl. G&A1 (US$/d) (US$/d) (US$/d) (US$/d) Largely Owned 29,470 8,360 9,420 9,040 +/- US$1,000 daily TCE Fixed Cost LT Chartered US$35-40m 7,450 9,
Slide 23: Strong Balance Sheet and Liquidity
AR18 Results Strong Balance Sheet and Liquidity As at 31 December 2018 US$m 2018 2017 Vessels & other fixed assets 1,808 1,798 Total assets 2,366 2,232 Total borrowings 961 881 Total liabilities 1,135 1,070 Total Equity 1,231 1,161 Net borrowings (total cash US$342m) 619 636 Net borrowings to net bo
Slide 24: Extended Repayment Profile and Reduced Cost of Funding
AR18 Results Extended Repayment Profile and Reduced Cost of Funding As at 31 December 2018 Cash Flow in 2018 Schedule of Repayments of Borrowings Cash and deposit balance Cash inflow Cash outflow Secured borrowings (US$841m) Convertible bond (US$125m) * Excluding US$18m Capex in shares US$342m 8 ves
Slide 25: Strategy and Position
Strategy and Position Pacific Basin 25
Slide 26: Our Business Model Continues to Outperform
Our Business Model Continues to Outperform Our business model has been refined over many 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 is US$1,910 US$1,4
Slide 27: Competitive at Every Level
AR18 Results Competitive at Every Level 1 TCE/day Outperforming indexes and most companies who report publicly Cargo focused business model with 90% plus laden percentage 2 Opex/day US$3,850*/day in 2018 Scale, focus and sister ship effects In-house management 3 G&A/day Scale benefits an
Slide 28: Our Strategic Direction and Priorities
AR18 Results Our Strategic Direction and Priorities Maintain and grow our cargo focus and scale Continue to be both a fully integrated owner and operator – Not only owned ships, not only asset light Maintain empowered local chartering and operations close to customers – With best in class cent
Slide 29: 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 Market Rate 106 111 92 G&A Overheads +/- 86 Average PB premium 75 80 US$75.7m US$1,000 over market indices in daily TCE US$59.8m last 5
Slide 30: 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 31: Appendix: Business Foundation
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 32: 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 33: Appendix: 2019 Future Cover
Appendix: 2019 Future Cover Handysize Contracted Supramax Contracted Revenue Days Revenue Days 42,630 41,400 21,580 20,000 Days Days Days Days 2Q-4Q 2Q-4Q 14,020 29,410 days FY19 days FY19 66% 58% 73% 55% $10,690 $10,550 44% $9,210 $11,490 36% $9,710 $9,360 1Q 1Q 1Q 100% 1Q 100% 12,750 100% 11,990 1
Slide 34: Appendix: Inward Charter-in Commitments
AR18 Results Appendix: Inward Charter-in Commitments As at 31 December 2018 Note: Following the adoption of new accounting standard HKFRS16 Leases on 1 Jan 2019, charter-in operating leases of longer than 12 months will be accounted for on balance sheet as right-of-use assets and lease liabilities.
Slide 35: Appendix: Dry Bulk Demand in 2019 and 2020 Forecast
Appendix: Dry Bulk Demand in 2019 and 2020 Forecast 2019F Dry Bulk Trade Volumes 2020F Dry Bulk Trade Volumes Million Tonnes YOY Million Tonnes YOY Iron Ore 1,468 -0.5% Iron Ore 1,484 1.1% Coal 1,282 1.7% Coal 1,303 1.6% Major Bulk Total 2,750 0.5% Major Bulk Total 2,787 1.3% Nickel ore 64 12% Manga
Slide 36: Appendix: Vessel Speed Optimisation Example
Appendix: Vessel Speed Optimisation Example Higher fuel oil prices allow freight rates to increase without increasing speed and hence supply Optimal MCR / Speed Matrix on Typical Handysize Ship (Japanese-built 32,000 dwt, all weather) TCE US$/day US$ 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Slide 37: Appendix: Dry Bulk Outlook in the Medium Term
AR18 Results Appendix: Dry Bulk Outlook in the Medium Term Possible Market Drivers in the Medium Term Pacific Basin 37
Slide 38: Appendix: Sustainability
Appendix: Sustainability Applying sustainable thinking in our decisions and the way we run our business 2018 CSR Report Creating long-term value through good corporate www.pacificbasin.com/ar2018 governance and CSR Corporate Social Responsibility (CSR) Guided by strategic objectives on (i) wor
Slide 39: 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
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