Pacific Basin Shipping Limited · HKEX:2343

Pacific Basin Shipping — FY2019 Earnings Presentation

38 slides from Pacific Basin Shipping's earnings presentation, Feb 27, 2020

  1. Slide 1: Annual Report 2019

    Annual Report 2019 27 February 2020

  2. Slide 2: 2019 Performance Review

    2019 Performance Review 2019 Annual Results 1

  3. Slide 3: Solid Performance in Volatile Markets

    Solid Performance in Volatile Markets  We made net profit of US$25.1m in 2019 in spite of challenging market conditions and with our trading heavily impacted by IMO 2020 preparations  However, Pacific Basin continued to outperform the market even more than in previous years. We also continued to o

  4. Slide 4: 2019 Results Highlights – Net Profit US$25.1m

    2019 Results Highlights – Net Profit US$25.1m US$m 2019 2018 US$m Change EBITDA 230.7 215.8 +14.9 Underlying profit 20.5 72.0 -51.5 P&L Net profit 25.1 72.3 -47.2 Dividends HK2.1¢ HK6.2¢ Available liquidity 382.8 341.7 +41.1 B/S Net gearing 35% 34% Fleet Owned1/Total 116 / 200 111 / 217  We took de

  5. Slide 5: Strong Outperformance in 2019

    Strong Outperformance in 2019 US$/day Handysize Supramax Market (BHSI/BSI) index net rate 6,830 9,450 28K BHSI (Handysize) 2019 PB daily TCE net rate 9,630 11,720 and BSI (Supramax) down 17% and 13% PB outperformance 41% / 2,800 24% / 2,270 YOY respectively Revenue Days 48,220 33,620 PB Handysize an

  6. Slide 6: A Volatile Year Followed by Coronavirus Disruption

    A Volatile Year Followed by Coronavirus Disruption Handysize (BHSI 28,000 dwt) Supramax (BSI) Market Spot Rates in 2016-2020 Market Spot Rates in 2016-2020 US$/day net* US$/day net* 10,000 15,000 2017 8,000 2018 12,000 2018 2017 6,000 2019 9,000 2016 4,000 6,000 25 Feb 2020 2019 25 Feb 2020 2016 $5,

  7. Slide 7: Pacific Basin Continues to Outperform on Every Level

    Pacific Basin Continues to Outperform on Every Level Handysize Performance vs. Market 1 Handysize Outperformance vs. Peer Group (1Q-3Q19) 2 US$/day US$2,020/day average premium US$/day in last 5 years 3,000 14,000 12,000 2,500 $9,630 10,000 2,000 8,000 1,500 6,000 $6,830 1,000 4,000 2,000 500 0 0 20

  8. Slide 8: Key Market Drivers

    Key Market Drivers 2019 Annual Results 7

  9. Slide 9: Minor Bulk Demand Growth is Healthy

    Minor Bulk Demand Growth is Healthy Annual Change in Dry Bulk Tonne-mile Demand Chinese Key Agricultural and Minor Bulk Imports 2019 YOY change in Iron Ore YOY change of Billion tonne-mile Coal Million tonnes 1,500 Grain 20 18 +4.8% Minor Bulk 15 1,200 10 9 +2.7% 900 7 +2.5% +2.4% 5 2 2 +2.1% 1 1 60

  10. Slide 10: Increasing Supply in 2019…

    Increasing Supply in 2019… Overall Dry Bulk Supply Development Handysize / Supramax Supply Development Mil Dwt Mil Dwt 100 Current Orderbook: Current Orderbook: 40 80 3.8% 1.7% 0.3% 5.6% 2.9% 0.6% 30 60 3.9% 20 40 3.4% 5.1% 3.7% 3.2% 2.5% 3.1% 20 10 1.9% 2.9% 2.9% 1.5% 2.4% 2.2% 0.5% 0 0 -20 -10 -40

  11. Slide 11: …However, New Ordering is Reducing

    …However, New Ordering is Reducing Supramax Vessel Values Handysize/Supramax (10-64,999 dwt) Million DWT New Ship Ordering US$ Million 70 20% 80 Ordering DWT 60 % vs Existing Fleet 70 15% 60 50 50 40 40 10% Newbuilding (62,000 dwt): US$25.5m 30 30 20 20 5% 10 10 5 years (58,000 dwt): US$16.5m 0 0% 0

  12. Slide 12: IMO 2020 Is Reducing Average Speed and Effective Supply

    IMO 2020 Is Reducing Average Speed and Effective Supply Average Bunker Prices in Handysize and Supramax Singapore and Rotterdam for Global Average Speed US$/mt Knot 3.5% HSFO and 0.5% VLSFO 600 11.3 500 11.2 400 11.1 300 11.0 200 10.9 10.8 100 10.7 0 4Q19 25-Feb 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q

  13. Slide 13: Financial Review

    Financial Review 2019 Annual Results 12

  14. Slide 14: 2019 Financial Results

    2019 Financial Results US$m 2019 2018 Revenue 1,585.9 1,591.6 Owned vessel costs 2019 2018 Voyage expenses (720.2) (710.5) Opex (167.4) (149.7) Depreciation (127.5) (114.5) Time-charter equivalent ("TCE") earnings 865.7 881.1 Finance (32.2) (32.4) Owned vessel costs (327.1) (296.6) Charter costs (45

  15. Slide 15: Handysize and Supramax Contribution

    Handysize and Supramax Contribution 2019 2018 Change Handysize contribution (US$m) 55.4 85.5 -35% Revenue days (days) 48,220 50,120 -4% TCE earnings (US$/day) 9,630 10,060 -4% Owned + chartered costs (US$/day) 8,360 8,260 -1% Supramax contribution (US$m) 23.1 42.1 -45% Revenue days (days) 33,620 29,

  16. Slide 16: Handysize – Vessel Costs US$8,360/day

    Handysize – Vessel Costs 2019 Daily Vessel Costs - Handysize Owned Chartered # US$8,360/day Blended Daily P/L Costs before G&A Overheads US$/day (2018: US$8,260) 10,000 9,440 9,470 8,000 7,410 7,650 2019 Charter Costs # 740 690 Vessel Average daily 6,000 2,860 days P/L rate (US$) 2,790 Fixed in natu

  17. Slide 17: Supramax – Vessel Costs US$10,700/day

    Supramax – Vessel Costs 2019 Daily Vessel Costs - Supramax Owned Chartered # US$10,700/day Blended Daily P/L Costs before G&A Overheads (2018: US$10,740) US$/day 11,950 11,710 12,000 2019 Charter Costs # 10,000 8,580 Vessel Average daily 8,090 8,000 990 days P/L rate (US$) 1,090 Fixed in nature 6,00

  18. Slide 18: Significant Operational Leverage

    Significant Operational Leverage Handysize Supramax Sensitivity2 2019 Vessel Costs 2019 Vessel Costs avg. TCE Days incl. G&A1 avg. TCE Days incl. G&A1 (US$/d) (US$/d) (US$/d) (US$/d) Largely Owned 29,950 8,590 11,140 9,520 +/- US$1,000 daily TCE Fixed Cost LT Chartered US$35-40m 6,950 10,810 2,290 1

  19. Slide 19: US$217m Operating Cash Inflow

    US$217m Operating Cash Inflow 2019 2018 Cash as at 1 January 1 329.2 227.0 Operating activities 217.1 189.6 Investment activities Vessel acquisitions 2 (94.2) (88.7) Dry-docking (89.8) (39.2) Sales proceeds and other 40.1 11.1 Total (143.9) (116.8) Change in borrowings Financing activities 2019 2018

  20. Slide 20: Strong Balance Sheet – US$383m Available Liquidity

    Strong Balance Sheet – US$383m Available Liquidity As at 31 December 2019 US$m 2019 2018 Vessels & other fixed assets 1,875 1,808 Total assets 2,394 2,366 Total borrowings 863 961 Total liabilities 1,118 1,135 Total Equity 1,276 1,231 Net borrowings (total available liquidity US$383m) 663 619 Net bo

  21. Slide 21: Strategy and Priorities

    Strategy and Priorities 2019 Annual Results 20

  22. Slide 22: Decarbonising Shipping

    Decarbonising Shipping We support our industry’s ambitious goal to:  Improve the global fleet’s carbon efficiency by 40% by 2030 (relative to 2008)  Reduce total green house gas emissions by 50% by 2050 We are well positioned: (relative to 2008)  Modern, well-maintained Japanese ships We have joi

  23. Slide 23: Our Strategic Direction and Priorities

    Our Strategic Direction and Priorities  Maintain and grow our cargo focus and scale as both a fully integrated owner and operator – Not only owned ships, not only asset light  We will continue to pursue our Supramax fleet growth and Handysize renewal strategy, acquiring quality secondhand ships an

  24. Slide 24: 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 3 111 116 G&A Overheads 106 Average PB premium 92 US$75.7m +/- 86 over market indices in 75 80 US$1,000 US$61.2m last 5 year

  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: 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 116* Handysize and Supramax vessel, with total approx. 200 dry bulk ships on the water serving major industrial cus

  27. Slide 27: Appendix: Understanding Our Core Market

    Appendix: Understanding Our Core Market 2019 Annual Results 26

  28. Slide 28: Appendix: Pacific Basin Dry Bulk – Diversified Cargo

    Appendix: Pacific Basin Dry Bulk – Diversified Cargo Our Dry Bulk Cargo Volumes in 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 2019 Annual Results 27

  29. Slide 29: 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

  30. Slide 30: 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

  31. Slide 31: Appendix: Fleet List – 31 January 2020

    Appendix: Fleet List – 31 January 2020 www.pacificbasin.com Our Fleet 116Vessels 24 LT 60ST 200 Total owned1,2 Chartered Chartered3 Total Handysize 81 17 19 117 Supramax 34 6 41 81 Post- Panamax 1 1 0 2 Average age of core fleet: 10.8 years old 1 Including 1 vessel we committed to purchase in 2019 t

  32. Slide 32: Appendix: 2020 Future Cover

    Appendix: 2020 Future Cover Handysize Supramax Contracted Contracted Days Days 38,980 Days 39,870 Days 20,000 19,120 Days 19,700 Days 40,000 37,490 Days 15,860 Days 30,000 15,000 20,000 10,000 10,000 69% 63% 60% 50% 44% 42% 5,000 $11,400 $10,570 $11,390 $9,280 $9,370 $8,910 0 0 2018 2019 2020 2018 2

  33. Slide 33: Appendix: Charter-in Commitments

    Appendix: Charter-in Commitments As at 31 December 2019 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. 2019 Annual Results

  34. Slide 34: Appendix: Possible Market Drivers in the Medium Term

    Appendix: Possible Market Drivers in the Medium Term 2019 Annual Results 33

  35. Slide 35: 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 1,457 -1.4% Iron Ore 1,489 2.2% Coal 1,290 2.1% Coal 1,302 0.9% Major bulk total 2,747 0.3% Major bulk total 2,791 1.6% Nickel Ore 67 18% Bauxi

  36. Slide 36: Appendix: Better Supply Fundamentals for Handysize / Supramax

    Appendix: Better Supply Fundamentals for Handysize / Supramax Scheduled Average Over Over 2019 Scrapping as Orderbook Age 20 Years 15 Years % of 1 Jan 2020 as % of Existing Fleet Existing Fleet Lower Handysize – 85m dwt orderbook (25,000-41,999 dwt) 4.6% 11 11% 19% 0.6% More Supramax – 205m dwt olde

  37. Slide 37: Appendix: Supply and Demand Outlook

    Appendix: Supply and Demand Outlook Minor Bulk Demand and Handysize/Supramax Supply % YOY Change 6% Total Dry Bulk Supply and Demand 5% % YOY Change 4% 3.1% 3.0% 6% Tonne-mile Demand Growth (%) 3% 2.5% Net Fleet Growth (%), (deliveries net of scrapping) 2% 5% 2.1% 1.9% 1% 3.9% 0.5% 4% 0% 3.4% 2015 2

  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 speed for typical Handysize vessel (Hakodate 32,000 dwt) Freight rate in US$/ton 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 for t

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