presentation of full-year and q4 2014 results 4 march 2015 · •refinery capacity net addition in...
TRANSCRIPT
Presentation of Full-year and Q4 2014 results
4 March 2015
2
Safe Harbor Statement
Matters discussed in this presentation may constitute forward-looking statements.
Such statements reflect TORM's current expectations and are subject to certain risks and uncertainties that could negatively impact
TORM's business.
To understand these risks and uncertainties, please read TORM's announcements to NASDAQ OMX Copenhagen.
The presentation may include statements and illustrations concerning risks, plans, objectives, goals, strategies, future events or
performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking
statements in this presentation are based upon various assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, TORM's examination of historical operating trends, data contained in our records and other data available from
third parties. As many of these factors are subject to significant uncertainties and contingencies which are difficult or impossible to predict
and are beyond our control, TORM makes no warranties or representations about accuracy, sequence, timeliness or completeness of the
content of this presentation.
3
Highlights for 2014
2014
Results
Tanker
Bulk
Guidance
• Seasonal market improvements further supported by the opening of several long-haul
arbitrage trades and a declining crude oil price
• On average, TORM’s freight rates for Q4 2014 improved by 42% y-o-y
• Tanker segment 2014 gross profit of USD 123m (USD 172m)
• Freight rates remained under pressure throughout 2014
• Bulk segment 2014 gross profit of USD 0m (USD -22m)
Highlights
Finance
Tanker market Dry bulk market
Sale &
Purchase
• Price for modern tonnage was flat in Q4 2014, but with few transactions
Restructuring
process
• During October 2014, TORM has entered into an agreement with a group of its lenders,
representing 61% of TORM’s ship financing, and Oaktree Capital Management regarding
a possible restructuring of TORM
• Full year EBITDA of USD 77m (USD 96m), and Q4 had a positive EBITDA of USD 29m
• Profit before tax of USD -283m including impairments of USD 192m, which is fully aligned
with guidance
• Positive operating cash flow of USD 27m after full interest payments of USD 35m
• The financial results for 2015 are subject to considerable uncertainty related to the
completion of the proposed Restructuring Agreement
• Consequently, TORM has decided not to provide earnings guidance for 2015
4
Full-year and Q4 2014 results
• Q4 EBITDA of USD 29m (USD 25m) despite 22% fewer product tanker earning days
• Full-year EBITDA of USD 77m (USD 96m), which is in line with guidance
• 2014 results before tax of USD -283m (USD -166m) including impairments of USD 192m
(USD 60m)
•Positive operating cash flow of USD 27m after full interest payment of USD 35m
Finance
Tanker market Dry bulk market
Highlights
USDm Q4 2014 Q4 2013 2014 2013 2012 2011
P&L
Gross profit 38 37 123 150 (93) 81
Sale of vessels 0 0 0 0 (26) (53)
EBITDA 29 25 77 96 (195) (44)
Profit before tax (12) (80) (283) (166) (579) (451)
Balance
Equity (164) 118 (164) 118 267 644
NIBD 1,394 1,718 1,394 1,718 1,868 1,787
Cash and cash equivalents 45 29 45 29 28 86
Cash flow statement
Operating cash flow (3) 21 27 68 (100) (75)
Investment cash flow (6) (12) 313 93 0 168
Financing cash flow 23 (10) (324) (161) 42 (128)
5
Product tanker freight rates Highlights
Finance
Tanker market Dry bulk market
East (Q4 2014)
In the East, the earnings for the LRs peaked in
November due to continued strong demand
and LR2 congestion
West (Q4 2014)
In the West, a decrease in the price for light
distillates opened up further arbitrage in the
Atlantic Basin. Unplanned maintenance
of South American refineries led to increased
import demand and ton-mile
Source: Clarksons 9 Oct 2014. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MR: average basket of Rotterdam->NY, Bombay-
>Chiba, Mina Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sidney
Freight rates in ‘000 USD/day
6
0
5.000
10.000
15.000
20.000
25.000
30.000
LR2
+2% -8% -24%
0
5.000
10.000
15.000
20.000
LR2
+24%
Tanker Division spot rates versus benchmark
Source: Clarksons, Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba), MR: average basket of Rotterdam->NY, Bombay->Chiba, Mina Al
Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sidney, Handysize: average basket of Augusta->Lavera, Tuapse->Agioi Theodoroi
-8%
MR LR1
Benchmark (roundtrip)
TORM avg. Earning
TORM spot vs. benchmark Q4 2014 (USD/day)
TORM spot vs. benchmark last 12 months (USD/day)
-16%
MR Handysize LR1
Benchmark (roundtrip)
TORM avg. Earning
Note: Benchmarks are not one-to-one comparisons as they do not take broker commission, armed guards and low sulphur fuel costs into account.
Highlights
Finance
Tanker market Dry bulk market
+17% +25%
Handysize
7
Demand outlook for the product tanker market
Sources: EIA, IEA, JBC, WoodMackenzie, TORM Research
* Based on EIA weekly import and export figures; includes gasoline, distillate fuel oil and jet fuel
•US CPP exports to Latin
America increased in Q4
driven by unplanned refinery
outages (e.g. Venezuela)
•European gasoline exports
got a boost from unusually
strong refinery margins, as
Brent crude price dropped
•Naphtha flows from West to
East remained strong amid
feedstock switching from
naphtha to LPG in Europe
•Refinery capacity net
addition in 2015 are
estimated to reach around 2
mbbl/day, driven by the
start-up of Yanbu and
Ruwais2 refineries in the
Middle East
•Further refinery
consolidation is expected in
Europe and the OECD
Pacific
Refinery expansions favoring tonne-mile
US imports and exports of clean petroleum products*
Highlights
Finance
Tanker market Dry bulk market
Net distillation capacity additions and expansions, mbbl/day
‘000 b/d
Refinery expansions favoring ton-mile
8
Supply outlook for the product tanker fleet
Net fleet growth y-o-y in % of total fleet (no. of vessels)
Highlights
Finance
Tanker market Dry bulk market
• The total product tanker
fleet grew by 3.4% in 2014
and is forecasted to grow
by 5.7% in 2015 (in terms
of no. of vessels), with the
LR2 and MR segments
leading the growth
• Minimal ordering activity
during 2012-2013 in the
LR1 segment results in
barely 1% fleet growth in
2015
• The Handysize segment
contains most likely
scrapping candidates, but
after years of negative
fleet growth, growth pace
is expected to pick up
Note: Increase calculated basis number of vessels. The number of vessels by the beginning of 2015 was: LR2 259, LR1 328, MR 1,397, Handy 651
Note: Net fleet growth: Gross order book adjusted for expected scrapping and delivery slippage
Source: TORM Research
9
Product tanker vessel prices
• Product tanker ordering
activity picked up in Q4
2014 compared to the
previous quarter, driven by
the LR1 segment
• Overall ordering activity in
2014 remained 56% below
the 7-year high level in
2013, with the LR1 and LR2
sectors together accounting
for 63% of total capacity
ordered
• Price for modern tonnage
fell slightly in Q4 2014,
before picking up at the
start of 2015
Source: Clarksons
USDm
MR - 5 yr. Second-Hand
MR - Newbuilding
USDm
MR - 5 yr. Second-Hand
USDt
MR 1Yr T/C
Vessel price development
Highlights
Finance
Tanker market Dry bulk market
10
Dry bulk market
Source: Clarksons
Highlights
Finance
Tanker market Dry bulk market
• Spot rates for the relevant bulk segments remained under pressure in Q4 2014, and the average
Panamax spot rates for 2014 were USD/day 7,800 (or 20% below 2013 level)
• TORM continued to employ its Panamax fleet in the period market and obtained TCE earnings
of USD/day 10,477 in 2014
Panamax freight rates in ‘000 USD/day
11
Dry bulk order book and vessel prices
* Calculated basis dwt. Number of vessels primo 2015: Cape 1,507; P-PMX 530; PMX 2,005, SMX 3,162; Handy 3,065.
Source: TORM Research, Clarksons
Finance
Tanker market Dry bulk market
Highlights
Panamax newbuilding and second-hand prices (USDm)
Net fleet growth y-o-y as percent of existing fleet primo 2014*
-5
5
15
25
2014 2013 2012
SMX PMX P-PMX Cape Handy
2015F
12
TORM has a fully integrated business model
TORM has maintained a fully
integrated business model…
0 2 4 6 8 10 12 14 16 18 20 22 24
-43% 2014
2013
2012
2011
2010
2009
2008
-10%
Finance
Tanker market Dry bulk market
Highlights
… but TORM’s cost program has trimmed admin
expenses significantly
Admin. expenses (quarterly avg. in USDm)
• TORM has a fully integrated
business model to obtain the
highest possible
‒ trading flexibility
‒ earning power
• TORM manages
‒ ~90 vessels commercially
‒ 65+ vessels technically
• Global reach ensures proximity
to customers
• Outsourced technical and
commercial management
would affect other line items of
the P&L
13
TORM’s financial position Finance
Tanker market Dry bulk market
Highlights
Newbuilding
CAPEX
• TORM has no newbuildings on order
Debt situation • TORM has a total debt of USD 1.44bn incl. drawn part of Working Capital Facility
• TORM’s Working Capital Facility of USD 50m has been extended until 31 March
2015. The extension is subject to continued progress in the recapitalization process
USD bn. as of 31 December 2014
Liquidity
• As at 31 December 2014, TORM’s cash and cash equivalents were USD 65m
consisting of
‒ USD 45m in cash
‒ USD 20m in undrawn Working Capital Facility
Total
1.44
2016
1.33
2015
0.11
14
TORM’s forecast for 2015 Finance
Tanker market Dry bulk market
Highlights
2015 forecast
Earnings
sensitivity for
2015 per 31
December 2014
Coverage per
31 December
2014
0%0%4% 0%0%
64%
2017 2016 2015
Bulk Tanker
Rates
(USD/day) 23,140 8,454 n.a. n.a. n.a. n.a.
USDm Change in freight rates (USD/day)
Segment -2,000 -1,000 1,000 2,000
Tankers -32 -16 16 32
Bulk -1 -1 1 1
Total -33 -17 17 33
• The financial results for 2015 are subject to considerable uncertainty related to the
completion of the proposed Restructuring Agreement
• Consequently, TORM has decided not to provide earnings guidance for 2015
15
Appendix
16
Seafarers: ~2,700
• 1,350 Filipino seafarers
• 1,050 Indian seafarers
• 175 Danish seafarers
• 125 Croatian seafarers
TORM Offices: ~275
A world leading product tanker
company
• 125+ years of history
• A leading product tanker owner
• Presence in dry bulk as
operator
Listed on NASDAQ OMX
Copenhagen
Key facts Global footprint based on regional power and presence
TORM employees:
TORM at a glance
17
Product tankers have coated tanks and have specially designed cargo
systems with flexibility to transport a wide range of different products
11
Oil product supply chain
Exploration Transportation Refining Transportation Storage/distribution
Crude
oils
~12%
Fuel oils
~12%
Diesels
~6%
Gas oils
/ Gas-
olines
~38%
Karo-
senes /
Jet fuel
~8%
Clean
conden-
sates
~3%
Naph-
thas
~19%
MTBEs
~0%
Veg. oils
~1%
Biofuel
~0%
Ethanol
~0%
”Dirty products” Less refined
”clean products”
More refined
”clean products”
Percentages = TORM volumes for 12-month-period
(Q4 2013 – Q3 2014)
18
Management team with an international outlook and many
years of shipping experience
Executive management
Jacob Meldgaard
▪ CEO of TORM since April 2010
▪ Previously Executive Vice President of the Danish shipping company NORDEN where he was in charge of the company’s dry cargo division
▪ Prior to that he held various positions with J. Lauritzen and A.P. Møller-Mærsk
▪ More than 20 years of shipping experience
Mads Peter Zacho
▪ Chief Financial Officer Tina Revsbech
▪ Head of Tanker Division
Christian Riber
▪ Head of Human Resources
Lars Christensen
▪ Head of Sale & Purchase Division incl.
Bulk activities
Executive Management
Senior Management
Christian Søgaard-Christensen
▪ Head of Investor Relations and
Corporate Support
Jesper S. Jensen
▪ Head of Technical Division
19
TORM completed the restructuring with banks and time charter
partners on 5 November 2012
Banks
Maturities for all debt amended to 31
December 2016
***
Majority owners of the Company
New capital
USD 100m in working capital
Newbuilding program
Elimination of newbuilding program
completed
TORM
Cost and cash initiatives with a cumulative effect of at least USD 100m over three years
***
Cost program in place and identified initiatives under implementation
T/C-in partners
T/C-rates adjusted to market
level or contracts terminated
***
Co-owners of the Company
Compre-
hensive
finance
solution
for TORM
20
20
The TORM share
TORM’s shares are listed on NASDAQ OMX
Copenhagen under the ticker TORM
Shares
• One class of shares, each carrying one vote
• Share capital of 728m shares of DKK 0.01 each
For further company information, visit TORM at
www.torm.com
Share information Ownership structure (31 December 2014*)
5.5%
6.2%
11.3%
11.5%
13.7%
51.8%
DBS Bank
Deutsche Bank
Nordea Bank
Danske Bank
HSH Nordbank
Other
* Based on public filings
21
21
Industry cooperation and transparency is key to TORM’s
Corporate Social Responsibility
Set climate targets:
• 20% reduction of CO2 emissions pr. vessel by 2020
(starting point in 2008), in g/ton-km
• 25% reduction of CO2 emissions from offices per
employee by 2020
(starting point in 2008), ton-employee
TORM has set and communicated on climate targets
•Danish Shipowners’ Association -
As part of DSA,TORM is pushing for
international regulation and
standards on e.g. emissions through
the International Maritime
Organization
• Maritime Anti Corruption Network –
TORM is founding member of a global
business network working towards a
maritime industry free of corruption that
enables fair trade
• UN Global Compact –
TORM became signatory to the
UNGC in 2009 as the first Danish
shipping company
TORM is actively participating in…
Target:
6.4
2014
7.0
2008
8.0
-13%
Target:
2.2
2008 2014
2.3 3.1
-25%
22
Detailed key figures overview
22
USDm 2014 2013 2012 2011 2010 2009
Revenue 624 992 1,121 1,305 856 862
EBITDA 77 96 (195) (44) 97 203
Profit/(loss) before tax (283) (166) (579) (451) (136) (19)
Balance
Total assets 1,384 2,008 2,355 2,779 3,286 3,227
Equity (164) 118 267 644 1,115 1,247
NIBD 1,394 1,718 1,868 1,787 1,875 1,683
Cash and cash equivalents 45 29 28 86 120 122
Cash flow statement
Operating cash flow 27 68 (100) (75) (1) 116
Investment cash flow 313 93 0 168 (187) (199)
Financing cash flow (324) (161) 42 (128) 186 37
Financial related key figures
EBITDA margin 12% 10% (17%) (3%) 11% 24%
Equity ratio - 6% 11% 23% 34% 39%
Return on invested capital (ROIC) (14%) (5%) (20%) (14%) (3%) 2%
23
Large product tanker fleet PER 31.12.2014
# of vessels
Q3 2014 Changes Q4 2014 2015 2016 2017
Owned vessels
LR2 5.0 - 5.0
LR1 7.0 - 7.0
MR 20.0 - 20.0
Handysize 11.0 - 11.0
Tanker Division 43.0 - 43.0 - - -
Panamax 2.0 - 2.0
Handymax - - -
Bulk Division 2.0 - 2.0 - - -
Total 45.0 - 45.0 - - -
T/C-in vessels with contract period >= 12 months
LR2 2.0 - 2.0
LR1 - - -
MR 5.0 - 5.0 -3.0
Handysize - - -
Tanker Division 7.0 - 7.0 -3.0 - -
Panamax 5.0 -1.0 4.0 -2.0
Handymax 1.0 - 1.0 -1.0
Bulk Division 6.0 -1.0 5.0 -3.0 - -
Total 13.0 -1.0 12.0 -6.0 - -
T/C-in vessels with contract period < 12 months
LR2
LR1
MR
Handysize
Tanker Division - - -
Panamax - -
Handymax - - -
Bulk Division - - -
Total - - -
Commercial management 40.0 -18.0 22.0 3.0
Total fleet 98.0 -19.0 79.0
Current fleetNewbuildings and T/C-in deliveries
with a period >= 12 months
24
Earning days, T/C cost and coverage for 2015, 2016 and 2017
Owned days
PER 31.12.2014
T/C-in days at fixed
rate
T/C-in days at
floating rate
Total physical days
Coverage
2015 2016 2017 2015 2016 2017
Owned days
LR2 1,782 1,815 1,825
LR1 2,510 2,546 2,555
MR 7,077 7,155 7,186
Handysize 3,797 3,960 4,015
Tanker Division 15,166 15,476 15,581
Panamax 726 728 730
Handymax - - -
Bulk Division 726 728 730
Total 15,892 16,204 16,311
T/C-in days at fixed rate T/C-in costs, USD/day
LR2 - - - - - -
LR1 - - - - - -
MR 752 104 - 15,697 16,000 -
Handysize - - - - - -
Tanker Division 752 104 - 15,697 16,000 -
Panamax 1,245 760 730 12,458 11,000 11,000
Handymax - - - - - -
Bulk Division 1,245 760 730 12,458 11,000 11,000
Total 1,997 864 730 13,678 11,600 11,000
T/C-in days at floating rate
LR2 726 684 730
LR1 - - -
MR - - -
Handysize - - -
Tanker Division 726 684 730
Panamax - - -
Handymax 41 13 -
Bulk Division 41 13 -
Total 767 697 730
Total physical days Covered days
LR2 2,509 2,499 2,555 116 - -
LR1 2,510 2,546 2,555 73 - -
MR 7,829 7,259 7,186 194 - -
Handysize 3,797 3,960 4,015 322 - -
Tanker Division 16,644 16,263 16,311 705 - -
Panamax 1,971 1,488 1,460 1,283 - -
Handymax 41 13 - - - -
Bulk Division 2,011 1,501 1,460 1,283 - -
Total 18,656 17,764 17,771 1,987 - -
Coverage rates, USD/day
LR2 5% 0% 0% 20,486 - -
LR1 3% 0% 0% 40,138 - -
MR 2% 0% 0% 25,949 - -
Handysize 8% 0% 0% 18,532 - -
Tanker Division 4% 0% 0% 23,140 - -
Panamax 65% 0% 0% 8,454 - -
Handymax 0% 0% 0% - - -
Bulk Division 64% 0% 0% 8,454 - -
Total 11% 0% 0% 13,661 - -
Covered, %