Slide 1: Q3 2020 Results
11 N O V E M B E R 2 0 2 0 Q3 2020 RESULTS 1
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 Q3 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 3
Slide 4: TORM at a Glance
TORM AT A GLANCE A world-leading product tanker company Fleet overview* 72 Owned 4 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 +2
Slide 5: Q3 2020 Financial Highlights
Q3 2020 FINANCIAL HIGHLIGHTS 5
Slide 6: The Reference Company in the Product Tanker Segment
THE REFERENCE COMPANY IN THE PRODUCT TANKER SEGMENT TORM is a large-scale tanker owner, TORM’s superior integrated active in all key product tanker operating platform includes segments in order to meet customer in-house technical and commercial management needs. as preferred by customers. Our produc
Slide 7: TORM Commercially Outperforms Peers in Its Key MR Segment
TORM COMMERCIALLY OUTPERFORMS PEERS IN ITS KEY MR SEGMENT CORRESPONDING TO USD 36M IN Q1-Q3 2020 MR reported TCE, USD/day Q3 2020 performance: • TORM: USD/day 15,077 • Peer average: USD/day 14,016 TORM MR USD 14m USD 36m USD 20m USD 24m USD 36m premium* Note: Peer group is based on Ardmore, d’Amico
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) -18% Compared to the full year 2014, TORM has reduced 7,655 7,193 the OPEX cost base by 6,771 6,673 approx. USD 36m on an 6,389 6,371 6,280
Slide 10: CSR Highlights
CSR HIGHLIGHTS TORM remains committed to taking an active GENDER DIVERSITY FUEL role in caring for communities and our EFFICIENCY environment. It is not just our shared duty, but our shared responsibility. Therefore, IMPROVEMENT TORM continues the work to combat carbon, IN THE SHORE-BASED sulfur and
Slide 11: Industry Cooperation and Transparency Are Key to TORM's CSR
INDUSTRY COOPERATION AND TRANSPARENCY ARE KEY TO TORM’S CORPORATE SOCIAL RESPONSIBILITY AND INDUSTRY INITIATIVES TORM is committed to support… UN Sustainable TORM supports the SDGs based on an assessment of our CSR activities Development Goals and areas of impact. UN Global TORM became signatory to
Slide 12: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS Q3/Q1-Q3 FINANCIAL HIGHLIGHTS VESSEL INVESTMENTS TORM sold two older MR vessels during Q3 2020. After Q3 ended, TORM has acquired two Hyundai MIPO Q3 2020 TCE of USD/day 16,762 Q1-Q3 2020 TCE of USD/day 21,942 2010-built deepwell MR vessels for a total consideration of USD 3
Slide 13: Equity Investment Highlights
EQUITY INVESTMENT HIGHLIGHTS 13
Slide 14: Agenda
AGENDA 1 Introduction to TORM and Q2 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 14
Slide 15: COVID-19 Related Factors Leaving Product Tanker Freight Rates Ice Cold
COVID-19 RELATED FACTORS LEAVING PRODUCT TANKER FREIGHT RATES ICE COLD LR2 (TC1) TORM MR (spot) USD/day MR (avg.) TORM MR covered Q4 2020 as of 9 November 2020 170,000 Q3 2020 80,000 • Unwinding of product tanker floating 75,000 storage, limiting demand for transportation and releasing tonnage to 70
Slide 16: Oil Market Moved from Stockbuilding to Stockdrawing Phase
THE OIL MARKET HAS MOVED FROM STOCKBUILDING TO STOCKDRAWING PHASE • The COVID-19 pandemic led to an Pre-COVID-19 unprecedented oil demand Jan 2020 destruction • Initially, refinery runs have been Refined product lagging declines in demand, leading stocks build to unprecedented inventory builds bring
Slide 17: Floating Storage Has Come Down
FLOATING STORAGE HAS COME DOWN AS A FIRST STEP TOWARDS REBALANCING Vessels in floating storage Mn dwt 20 LR2 • At its peak in early May, 14% of the LR1 clean trading tonnage was tied up in MR floating storage, with ~90% of this 15 being in logistical floating storage and the remainder being committe
Slide 18: Onshore Inventories Have Started to Decline
ONSHORE INVENTORIES HAVE STARTED TO DECLINE AFTER UNPRECEDENTED BUILDS CPP inventories in key trading hubs* Middle distillates • The COVID-19 caused demand Mn bbl Mn bbl Light distillates destruction and resulted in a counter-seasonal growth of CPP inventories in the US, ARA and Singapore to an all-
Slide 19: Shift in Fleet Balance Towards the East
SHIFT IN THE FLEET BALANCE TOWARDS THE EAST LED TO A STRONG OUTPERFORMANCE OF THE WESTERN MARKET IN Q3 No of MR vessels East West • COVID-19-related decline in 850 oil demand in the West led to record high West-East light 800 distillate flows in Q2 750 • Reduced exports from China and North Asia due
Slide 20: Oil Demand in China and India on the Rebound
OIL DEMAND IN CHINA AND INDIA ON THE REBOUND, ILLUSTRATING A POTENTIAL POST-COVID-19 SITUATION While oil demand recovery in the West has stalled… Oil demand growth Y-o-Y, % Europe United States 10 10 0 0 • China’s oil demand has recovered -3 -3 -3 -2 to pre-COVID-19 levels on -10 -8 -10 -13 -12 -11
Slide 21: Low Tonnage Supply Growth Alleviating Effects from Destocking
LOW TONNAGE SUPPLY GROWTH ALLEVIATING EFFECTS FROM DESTOCKING Product tanker order book at historical low level as % of total fleet 56% • The order book to fleet ratio is at a historical low of 7% • Similarly, crude tanker order book is at a historical low of 37% 8%, indicating potentially lower mar
Slide 22: 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 58 kb/d 55 kb/d 295 kb/d 280 kb/d 137 kb/d 335 kb/d 200 kb/d 190 kb/d 115 kb/d 267 kb/d 1,030 kb/d 250 kb/d 200 kb/d 1,560 k
Slide 23: Share of Tonnage in the Dirty Trade Remains Relatively High
DESPITE SOME LR2 CLEANING-UP, THE SHARE OF TONNAGE IN THE DIRTY TRADE REMAINS RELATIVELY HIGH USD/day % Aframax rate premium to LR2 • Over Q4 2019 and Q1 2020, the 40,000 Share of LR2s in dirty trades (rhs) 55 product tanker market was 30,000 supported by around 40 LR2s 50 switching to dirty trades,
Slide 24: Middle East Refinery Capacity Additions Expected to Have Positive Impact
MIDDLE EAST REFINERY CAPACITY ADDITIONS EXPECTED TO HAVE A POSITIVE LONG-TERM IMPACT Middle East refinery capacity net additions (m b/d) Forecasted Realized 1.03 0.34 2021-24 avg.=0.38 mb/d 0.25 0.16 0.14 0.00 2015-19 avg. 2020F 2021F 2022F 2023F 2024F • As oil product demand increases, the ton-mile
Slide 25: Medium and Long Term Drivers Remain Positive
MEDIUM AND LONG TERM DRIVERS REMAIN POSITIVE Key medium- to long-term market drivers • Economic stimulus supporting recovery in oil demand in 2021 and restoring some of the trades distorted by the COVID-19 once the initial stock draw is over • Refinery consolidation in the West/OECD Asia and capacit
Slide 26: Vessel Values Follow Declines in Market Rates
VESSEL VALUES FOLLOW DECLINES IN MARKET RATES ‘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-16 Jan-17 Jan-18 Jan-19 Jan-20 Newbuilding 5 yr. Second-Hand 1 Yr T/C Source: Clarksons. T/C rate for
Slide 27: Agenda
AGENDA 1 Introduction to TORM and Q2 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 27
Slide 28: Q3 2020 Financials
Q3 2020 FINANCIALS USDm Q3 2020 Q3 2019 Q1-Q3 2020 Q1-Q3 2019 2019 P&L TCE earnings 110 84 443 299 425 Gross profit 63 43 309 172 252 Sale of vessels 1 0 1 1 1 EBITDA 43 32 264 134 202 Profit before tax 1 -9 129 20 167 Profit before tax excl. impairment reversal 1 -9 129 20 47 Balance sheet Equity 1
Slide 29: Spot-Orientation Provides Significant Operating Leverage
SPOT-ORIENTATION PROVIDES SIGNIFICANT OPERATING LEVERAGE Significant operational leverage Unfixed days as of 30 September 2020 LR2 MR (% of total days) LR1 Handy 26,448 (99%) 23,311 (90%) 4,170 2,259 3,177 2,715 4,241 (66%) 17,610 18,374 166 3,466 461 148 726 726 2020 2021 2022 Q4 2020 coverage refl
Slide 30: Net Asset Value Estimated at USD 867M, Net Loan-to-Value 49%
NET ASSET VALUE ESTIMATED AT USD 867M WHILE NET LOAN-TO-VALUE OF JUST 49% 30 September 2020 figures, USDm Net LTV of 49% 1,621 867 867 30 12 86 157 Value of vessels Outstanding debt Committed Cash Working Capital Other* Net Asset Value (incl. newbuildings) CAPEX • Net Loan-to-Value was 49% ensuring
Slide 31: Well-Positioned to Service Future CAPEX Commitments
WELL-POSITIONED TO SERVICE FUTURE CAPEX COMMITMENTS AND FURTHER LEVERAGE MARKET OPPORTUNITIES Liquidity and CAPEX as of 30 September 2020 USDm Available liquidity CAPEX commitments 289 Retrofit scrubbers Newbuildings incl. scrubber 11 76 45 157 94 4 9 86 86 5 0 5 Cash Available LR2 Scrubber Total 20
Slide 32: Favorable Financing Profile with No Major Near-Term Maturities
FAVORABLE FINANCING PROFILE WITH NO MAJOR NEAR- TERM MATURITIES Scheduled debt repayments as of 30 September 2020 – adjusted for USD 150m CO2 emission-linked refinancing concluded during Q4 USDm Financial lease 875 10 Mortgage debt 12 20 147 90 13 90 13 90 27 88 38 728 69 33 280 Oustanding ROY 2020
Slide 33: Agenda
AGENDA 1 Introduction to TORM and Q2 2020 highlights 2 Product tanker market overview and outlook 3 Financial metrics 4 Asset management & scrubber investments 33
Slide 34: TORM Is a Long-Term Industrial Player
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 35: 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 (incl. scrubb
Slide 36: 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 37: Two Main Options to Comply with 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 ~4,400 ~500 50 vessels installations vessels vessels sass (11%) (15%) (66%) Existing fleet on the Shipowners’ sulfur water regulation com
Slide 38: Scrubber Installations Across Shipping Segments
SCRUBBER INSTALLATIONS ACROSS SHIPPING SEGMENTS Product tankers to be fitted with scrubbers (% of current fleet) No. of vessels 300 In service and fitted with scrubber/in yard 16% In service and reported for retrofit 250 On order and to be fitted with scrubber 200 150 30% 100 50 10% 3% 0 LR2 Panamax
Slide 39: TORM's Scrubber JV
50 SCRUBBER INSTALLATIONS WILL BE CONDUCTED SUPPORTED BY TORM’S SCRUBBER JV TORM’s scrubber JV, ME Production China Ownership share: 27.5% ME • One of the largest risks with scrubber Production installations is the potential delay during both China the production and the installation phase • Due to
Slide 40: Fuel Spread Has Narrowed Along with Lower Crude Oil Price
FUEL SPREAD HAS NARROWED ALONG WITH LOWER CRUDE OIL PRICE Price spread between 0.5% compliant fuels and 3.5% HSFO, Rotterdam delivery vs Brent USD/t USD/bbl • The spread 320 70 VLSFO-HSFO spread (spot) between 0.5% 300 compliant fuel Brent (RHS) 65 280 and 3.5% HSFO 260 60 is currently 240 trading a
Slide 41: Appendix
APPENDIX TORM
Slide 42: Management Team with 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 43: Key Figures
KEY FIGURES USDm Q3 2020 Q3 2019 Q1-Q3 2020 Q1-Q3 2019 2019 Revenue 164 147 642 499 693 EBITDA 43 32 264 134 202 Profit/(loss) before tax 1 -9 129 20 167 Net profit/(loss) 1 -9 128 19 166 Net profit/(loss) excluding impairment charges 1 -9 128 19 46 Balance sheet Total assets 2,047 1,834 2,047 1,834
Slide 44: Fleet Overview
FLEET OVERVIEW # of vessels LR2 LR1 MR Handy As of 11 November 2020 on water 80 76 72 73 70 10 12 10 60 9 9 9 50 40 30 52 53 51 20 10 0 2 2 2 11 November End 2020 End 2021 Sale and leaseback 8 8 10 vessels1 1. Sale and leaseback vessels are included in the chart. 44
Slide 45: Medium-Haul and Long-Haul Trade Supported by IMO 2020
BOTH MEDIUM-HAUL REGIONAL TRADE AND LONG-HAUL TRADE ARE SUPPORTED BY THE IMO 2020 REGULATION Examples of trade routes impacted by the IMO 2020 sulfur regulation • Increased flexibility to produce additional diesel in net exporting regions and refinery expansion support long-haul and medium-haul trad
Slide 46: Product Tanker Benchmark Freight Rates
PRODUCT TANKER BENCHMARK FREIGHT RATES LR2 (TC1) MR (average) USD ‘000/day USD ‘000/day Source: Clarksons. Spot earnings: LR2: TC1 Ras Tanura-> Chiba, MR: average basket of Rotterdam->NY, Bombay->Chiba, Mina Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sydney. 46
Slide 47: IMO 2020 Effects on Clean Trading Have Not Fully Unfolded
IMO 2020 EFFECTS ON CLEAN TRADING HAVE NOT FULLY UNFOLDED MGO and VLSFO price spreads (USD/t) 90 MGO-VLSFO spread, Rotterdam MGO-VLSFO spread, Singapore 60 30 0 Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- 19 19 19 20 20 20 20 20 20 20 20 20 20 20 Bunker sales in Singapore (
Slide 48: Expected 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 49: Oaktree Is Majority Shareholder with Free Float of 29%
OAKTREE IS THE MAJORITY SHAREHOLDER WITH A REMAINING FREE FLOAT OF 29% Share information Estimated shareholdings as of November 20201) (%) TORM’s shares are listed on Nasdaq in Copenhagen and Nasdaq in New York under 100 the tickers TRMD A and TRMD, respectively. 13 Shares 16 • 74.8m A-shares, one B