Pacific Basin Shipping Limited · HKEX:2343

Pacific Basin Shipping — Q3 2019 Earnings Presentation

38 slides from Pacific Basin Shipping's earnings presentation, Oct 14, 2019

  1. Slide 1: 2019 Third Quarter Trading Update

    2019 Third Quarter Trading Update 14 Oct 2019 28 February 2019

  2. Slide 2: Market Strengthened Significantly in 3Q19

    Market Strengthened Significantly in 3Q19 Cover as at 11 Oct 2019 US$/day Handysize Supramax PB daily TCE net rate 3Q19 9,480 11,580 Our fleet development in 3Q19: 3Q19 Market (BHSI/BSI) index net rate 3Q19 7,990 11,890  In 3Q, we operated an PB outperformance 19% / 1,490 -3% / -3101 average of 236

  3. Slide 3: Increasing Earnings on Stronger Market Conditions

    Increasing Earnings on Stronger Market Conditions Cover as at 11 Oct 2019 PB 4Q19 PB Handysize TCE Performance PB 4Q19 PB Supramax TCE Performance US$/day net* covered US$/day net* covered TCE: TCE: US$13,660 12,000 US$11,450 14,000 PB Handysize PB Supramax Baltic Handysize Index (BHSI) Baltic Supra

  4. Slide 4: Market Strengthened Significantly in 3Q19

    Market Strengthened Significantly in 3Q19 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* 16,000 11 Oct 2019 12,000 11 Oct 2019 14,000 $12,920 $9,050 10,000 2017 12,000 2018 8,000 2018 10,000 2017 2016

  5. Slide 5: Minor Bulk Expected to Drive Demand into 2020

    Minor Bulk Expected to Drive Demand into 2020 Overall Dry Bulk Tonne-miles Demand Growth Since 2010 Annual Change in Dry Bulk Tonne-miles Demand Annual change in Iron Ore 16% Billion tonne Coal 1,500 14% 13.7% Grain +4.8% Minor Bulk 12% 1,200 10% +2.8% +2.9% 900 +1.4% +3.1% 8% 600 +2.1% +3.6% +1.4%

  6. Slide 6: Supply Developments Favour Smaller Vessels

    Supply Developments Favour Smaller Vessels Overall Dry Bulk Supply Development Handysize / Supramax Supply Development Mil Dwt Mil Dwt Current Orderbook: Current Orderbook: 100 35 1.8% 5.9% 2.8% 1.3% 4.0% 1.3% 30 49% 80 37% 25 48% 60 42% 36% 20 37% 41% 34% 5.7% 40 15 3.8% 17% 3.7% 4.9% 3.2% 3.3% 21%

  7. Slide 7: Better Supply Fundamentals for Handysize

    Better Supply Fundamentals for Handysize Scheduled Average Over Over YTD Scrapping as Orderbook Age 20 Years 15 Years % Existing Fleet as % of as at 1 Oct 2019 Existing (Annualised) Fleet Lower Handysize – 85m dwt orderbook (25,000-41,999 dwt) 5.2% 10 10% 18% 0.5% More Supramax – 203m dwt older 7.2%

  8. Slide 8: 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 6% 5.0% 8% 4.6% Tonne-mile Demand Growth (%) 5% Net Fleet Growth (%), (deliveries net of scrapping) 3.7% 4% 6% 3% 2.5% 2.4% 1.8% 2% 4% 3.2% 3.0% 1% 2.9% 0% 2.

  9. Slide 9: 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): Newbuilding (62,000 dwt): 30 US$23.8m 40 US$25.8m 20 30 20 10 5 years (37,000 dwt): US$17m 10 5 years (58,000 dwt): US$17m 0 0 05 06 07 08 09 10 1

  10. Slide 10: Unusually Many Ships Positioned to the Pacific Region

    Unusually Many Ships Positioned to the Pacific Region No. of Vessels in Pacific Region No. of Vessels No. of Vessels Handysize Supramax 1,550 2,300 1,525 2,250 2019 1,500 2019 2,200 2018 1,475 2,150 2017 1,450 2,100 2016 1,425 2,050 2016 1,400 2018 2,000 1,375 2017 1,950 1,350 1,900 Jan Feb Mar Apr

  11. Slide 11: Cautiously Optimistic on Minor Bulk Market

    Cautiously Optimistic on Minor Bulk Market  Following the increase in market freight rates in Aug and early Sep, rates moderated as Chinese import activity wound down for the Golden Week holidays, but rates are still at around the peak levels of last year and Pacific rates have improved in the last

  12. Slide 12: 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$1,970 US$1,4

  13. Slide 13: 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 G&A Overheads +/- Average PB premium 111 1153 US$75.7m US$1,000 106 over market indices in 92 daily TCE 86 US$61.0m last 5 y

  14. Slide 14: 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,

  15. Slide 15: Appendix: Pacific Basin Overview

    Appendix: Pacific Basin Overview  World’s largest owner and operator of modern Handysize & Supramax ships  Cargo system business model – consistently outperforming market rates  Own 115* vessels, with total 240+ dry bulk ships on the water serving major industrial customers around the world  Hon

  16. Slide 16: Appendix: Understanding Our Core Market

    Interim 2019 Appendix: Understanding Our Core Market 3Q19 Trading Update 15

  17. Slide 17: Business Foundation: Our People, Our Record, Our Fleet

    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

  18. Slide 18: 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

  19. Slide 19: 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

  20. Slide 20: Appendix: 2019 and 2020 Future Cover

    Appendix: 2019 and 2020 Future Cover Contracted Handysize Contracted Supramax Days Days 32,640 Days 48,330 Days 47,320 Days 28,230 Days 4Q 74% 4Q 68% 4Q 67% 78% $13,660 35,960 Days 4Q $11,970 $10,560 $11,450 25,720 94% 15,050 Days 36,900 93% 22,940 $11,540 37,540 days days $9,620 days Days 100% 100%

  21. Slide 21: Appendix: Pacific Basin Dry Bulk – Diversified Cargo

    Appendix: Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 1Q-3Q 2019  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 3Q19 Trading Update 20

  22. Slide 22: Appendix: Fleet List – 30 Sep 2019

    Appendix: Fleet List – 30 Sep 2019 www.pacificbasin.com Our Fleet 115 Vessels 27LT 95ST 237 Total owned1 Chartered2 Chartered3 Total Handysize 82 20 34 136 Supramax 32 6 61 99 Post- Panamax 1 1 0 2 Average age of core fleet: 8.9 years old 1 We sold 2 older smaller Handysize vessels and committed to

  23. Slide 23: Appendix: Competitive at Every Level

    Interim 2019 Appendix: Competitive at Every Level 1H19 1 TCE/day HS: US$9,170/day  Outperforming indexes and most publicly reporting companies SM: US$10,860/day  Cargo focused business model with 90% plus laden percentage 2 Opex/day US$3,9901/day  Scale, focus and sister ship effects  In-house m

  24. Slide 24: Appendix: Our Strategic Direction and Priorities

    Interim 2019 Appendix: 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

  25. Slide 25: Appendix: 2019 Interim Results Highlights

    Appendix: Interim 2019 2019 Interim Results Highlights US$m 1H19 1H18 Change Net profit 8.2 30.8 -22.6 Underlying (loss) / profit (0.6) 28.0 -28.6 P&L EBITDA 101.11 99.3 Dividends - HK2.5¢ US$m 30 June 19 31 Dec 18 Cash 313.82 341.8 -8% B/S Net gearing 37% 34% +3% Fleet Owned fleet / Total fleet4 11

  26. Slide 26: Appendix: US$8.2m Net Profit in 1H19

    Interim 2019 Appendix: US$8.2m Net Profit in 1H19 Six months ended 30 June US$m 2019 2018 Revenue 767.1 795.6 Owned vessel costs 2019 2018 Voyage expenses (360.5) (360.6) Opex (80.1) (72.5) Depreciation (60.1) (56.3) Time-charter equivalent ("TCE") earnings 406.6 435.0 Finance (16.5) (15.9) Owned ve

  27. Slide 27: Appendix: Explanation of New Lease Accounting Standard

    Appendix: Interim 2019 Explanation of New Lease Accounting Standard (HKFRS 16 “Leases”) US$m 1H19 What are the Changes? Before HKFRS 16 As reported  EBITDA as the charter- P&L hire costs are replaced Leases > 12 months Revenue 768.8 (1.7) 767.1 by interest and depreciation Balance Sheet: EBITDA 78.

  28. Slide 28: Appendix: Handysize and Supramax Contributions

    Interim 2019 Appendix: Handysize and Supramax Contributions Six months ended 30 June 2019 2018 Change Handysize contribution (US$m) 21.2 38.4 -45% Revenue days (days) 24,450 25,210 -3% TCE earnings (US$/day) 9,170 9,750 -6% Owned + chartered costs (US$/day) 8,160 8,150 0% Supramax contribution (US$m

  29. Slide 29: Appendix: Handysize Vessel Costs (P/L)

    Interim 2019 Appendix: Handysize Vessel Costs (P/L) As at 30 Jun 2019 1H19 Daily Vessel Costs (US$/day) Owned Long-Term Short-Term & Chartered Index Chartered US$/day 1H19 Vessel Days Distribution 12,000 10,920 540 10,000 8,860 8,360 8,530 540 ST & Index 8,000 950 940 Chartered 740 740 27% 6,000 2,7

  30. Slide 30: Appendix: Supramax Vessel Costs (P/L)

    Interim 2019 Appendix: Supramax Vessel Costs (P/L) As at 30 Jun 2019 1H19 Daily Vessel Costs (US$/day) Owned Long-Term Short-Term & US$/day Chartered Index 14,000 Chartered 13,110 1H19 Vessel Days Distribution 12,000 540 11,400 540 10,000 9,040 9,160 950 940 8,000 1,090 1,060 Owned 6,000 12,5701 10,

  31. Slide 31: Appendix: Significant Operational Leverage

    Interim 2019 Appendix: Significant Operational Leverage Handysize Supramax Sensitivity* 1H19 Vessel Costs 1H19 Vessel Costs avg. TCE Days incl. G&A avg. TCE Days incl. G&A (US$/d) (US$/d) (US$/d) (US$/d) Largely Owned 14,890 8,530 5,200 9,160 +/- US$1,000 daily TCE Fixed Cost LT Chartered US$35-40m

  32. Slide 32: Appendix: Strong Balance Sheet and Liquidity

    Interim 2019 Appendix: Strong Balance Sheet and Liquidity US$m 30 Jun 19 31 Dec 18 Vessels & other fixed assets 1,848 1,808 Total assets 2,530 2,366 Total borrowings 1,001 961 Total liabilities 1,292 1,135 Total Equity 1,238 1,231 Net borrowings (total cash US$3141m) 687 619 Net borrowings to net bo

  33. Slide 33: Appendix: Maintaining Strong Cash Position Following Repayment of Convertible Bonds

    Appendix: Interim 2019 Maintaining Strong Cash Position Following Repayment of US$125m Convertible Bonds As at 30 Jun 2019 Cash Flow in 1H19 (Adjusted for HKFRS 16 “Leases”) Schedule of Repayments of Borrowings * Cash and deposit balance Cash inflow Cash outflow Secured borrowings (US$879.4m) Conver

  34. Slide 34: Appendix: Inward Charter-in Commitments

    Interim 2019 Appendix: Inward Charter-in Commitments As at 30 June 2019 3Q19 Trading Update 33

  35. Slide 35: Appendix: Dry Bulk Outlook in the Medium Term

    Interim 2019 Appendix: Dry Bulk Outlook in the Medium Term 3Q19 Trading Update 34

  36. Slide 36: Appendix: New Regulations Benefitting Stronger Companies

    Appendix: New Regulations Benefitting Stronger Companies New Regulations Content Impact on the Industry PB actions IMO Ballast Water  IMO and USCG  Capex for shipowners  40 PB owned vessels fitted Treatment: requirement  Increased scrapping  Retrofitting remaining owned Handysize and Installati

  37. Slide 37: Appendix: Dry Bulk Demand in 2019 and 2020 Forecast

    Appendix: Dry Bulk Demand in 2019 and 2020 Forecast 2019E Dry Bulk Trade Volumes 2020F Dry Bulk Trade Volumes Million Tonnes YOY Million Tonnes YOY Iron Ore 1,455 -1.4% Iron Ore 1,487 2.2% Coal 1,278 1.2% Coal 1,296 1.4% Major bulk total 2,733 -0.2% Major bulk total 2,783 1.8% Nickel Ore 69 21% Baux

  38. Slide 38: 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

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