Pacific Basin Shipping Limited · HKEX:2343

Pacific Basin Shipping — Goldman Sachs Commodities Conference 2018

41 slides from Pacific Basin Shipping's conference presentation, Sep 6, 2018

  1. Slide 1: Goldman Sachs Commodities Conference 2018 Interim Results

    Goldman Sachs Commodities Conference 2018 Interim Results Shenzhen, 6 Sep 2018

  2. Slide 2: Overview and Business Model

    Overview and Business Model 1

  3. 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

  4. Slide 4: Understanding Our Core Market

    Understanding Our Core Market 2018 Interim Results 3

  5. Slide 5: Why Handysize and Supramax? Why Minor Bulk?

    Why Handysize and Supramax? Why Minor Bulk? 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  More diverse cust

  6. Slide 6: Pacific Basin Dry Bulk – Diversified Cargo

    Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 1H 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 2018 Interim Results 5

  7. 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$1,850 US$1,

  8. Slide 8: Market Review

    = hE Market Review

  9. 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 # 3 Sep 2018 US$/day net* US$/day net* $11,870 12,000 12,000 2017 3 Sep 2018 10,000 2017 10,000 $7,760 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

  10. Slide 10: 2018 Demand is Forecast to Grow 3.2% with Minor Bulks at +4.0%

    2018 Demand is Forecast to Grow 3.2% with Minor Bulks at +4.0% Annual change dry bulk demand Bn tonne-miles Demand Growth Since 2010 1,500 Less than 2017 13.1% +5.0% but comfortably above supply 1,200 289 6.2% 6.3% 6.2% 5.3% 5.0% +3.2% 2.4% 3.2% 0.8% 900 274 Iron ore +2.5% 204 10 11 12 13 14 15 16 1

  11. Slide 11: Newbuilding Deliveries Continue to Reduce

    Newbuilding Deliveries Continue to Reduce Dry Bulk Supply Development Total Ordering vs Existing Fleet Mil Dwt % % of Fleet (Dwt) 60 6 50% 40 4 40% 1.6% 20 2 Historically low 30% new ship ordering 15.4m 0 0 20% -2.2m -20 -2 10% 4.0% -40 -4 1.3% 2014 2015 2016 2017 1H18 0% 07 08 09 10 11 12 13 14 15

  12. Slide 12: 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 Jul 2018 Fleet (annualised) Lower Handysize – 82m dwt orderbook (25,000-41,999 dwt) 5.3% 9 10% 17% 0.4% More Supramax – 196m dwt older 5.6% 9 7% 15% 0.3%

  13. Slide 13: New Regulations

    New Regulations New Content Impact on the Industry PB actions Regulations IMO Ballast  International Maritime Organization  Increased capex for existing shipowners  9 owned vessels are fitted with BWTS Water (IMO) requires ballast water  Increased potential scrapping  Committed to retrofit 50 o

  14. Slide 14: Favourable Dry Bulk Supply and Demand Outlook

    Favourable Dry Bulk Supply and Demand Outlook Dry Bulk Supply and Demand % YOY Change  Clarksons Research estimate dry bulk shipping tonne-mile demand improved 8 1% yoy in 1Q18 (2.1% on an overall demand basis) 6 4.8%  2Q18 expected to show further 4 3.2% improvement, and even stronger improvement

  15. Slide 15: 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$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 04 05 06 07 08 09 1

  16. Slide 16: Financial and Operating Review

    Financial and Operating Review 15

  17. Slide 17: 2018 Interim Results - Highlights

    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 bulk mark

  18. Slide 18: 1H18 Performance and Future Cover

    1H18 Performance and Future Cover Cover as at 24 July 2018 US$/day Handysize Supramax Improvement over 1H17: Market (BHSI/BSI) index net rate 1H18 8,200 10,560 Handysize: +23% / $1,830 PB daily TCE net rate 1H18 9,750 11,730 Supramax: +32% / $2,810 PB outperformance 19% / 1,550 11% / 1,170 2018 Futu

  19. Slide 19: Competitive Owned Vessel Break-Even Levels

    Competitive Owned Vessel Break-Even Levels Handysize Supramax 1H18 PB TCE rate US$11,730/day FY18 PB TCE cover rate1 US$11,520/day 1H18 PB TCE rate US$9,750/day G&A Overheads 900 FY18 PB TCE cover rate1 900 1,090 US$9,710/day Finance Cost 750 2,810 Depreciation 3,230 Break-even Break-even ≈ US$8,300

  20. Slide 20: Strong Balance Sheet and Liquidity

    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 vessels & othe

  21. Slide 21: Outlook and Strategy

    Outlook and Strategy 20

  22. Slide 22: 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,

  23. Slide 23: 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 106 111 Market Rate 92 G&A Overheads 86 Average PB premium 75 80 US$75.7m +/- over market indices in Annualised US$57m US$1,000

  24. Slide 24: Our Outlook and Strategy

    Our Outlook and Strategy Outlook  Minor bulk freight market strengthened again in the 1H18, the favourable outlook for widely-spread global GDP growth bodes well for dry bulk demand, and supply fundamentals are now more positive  Possible market drivers in the medium term: Fully Handysize & Supram

  25. Slide 25: 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,

  26. Slide 26: 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

  27. Slide 27: 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

  28. Slide 28: Dry Bulk Demand in 2018

    Appendix: Dry Bulk Demand in 2018 Key Drivers in 1H18 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 1,503 2% Coal 1,249 3%  Stronger minor bulk demand in Atlantic drive

  29. Slide 29: 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 Mil Dwt 4.0% 35 33.2m 3.6% 2.7% 8 7.4m 39% 29.8m Shortfall 2.1% 30 29% 1.9% 5.9m 2.6% Shortfall 6 25 1.6% 5.3m 21.7m 1.5% 2.1% 4.5m 20 1.9% 17.3m

  30. Slide 30: Fleet List – Jun 2018

    Appendix: Fleet List – 30 Jun 2018 www.pacificbasin.com Our Fleet 108 Vessels 30 LT 86 ST 224 Total owned 1 Chartered Chartered 2 Total Handysize 81 21 34 136 Supramax 26 8 52 86 Post- Panamax 1 1 0 2 1 An additional 3 vessels we purchased during the period are scheduled to deliver into our fleet by

  31. Slide 31: 1H18 Performance and Future Cover

    Appendix: 1H18 Performance and Future Cover Contracted Handysize Supramax Contracted Revenue Days 47,080 Revenue Days 45,650 50,000 Days Days 30,000 27,120 Days 25,190 37,440 Days 40,000 Days 25,000 2H 2H 2H 80% 57% 54% 2H 20,000 $9,830 30,000 $8,360 $9,610 67% $11,010 FY18 FY18 12,500 79% 15,000 88

  32. Slide 32: 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

  33. Slide 33: 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

  34. Slide 34: 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

  35. Slide 35: 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

  36. Slide 36: 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

  37. Slide 37: Dry Bulk Outlook in the Medium Term

    Appendix: Dry Bulk Outlook in the Medium Term Possible market drivers in the medium term 2018 Interim Results 36

  38. Slide 38: 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

  39. Slide 39: 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 25 Increased 5% YOY 294 300 247 263 20 250 15 200 299 150 10 271 100 256 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

  40. Slide 40: 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

  41. Slide 41: 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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