scorpio bulkers - jp morgan transportation conference · 2) based on q1-19 guidance in february 14,...

Scorpio Bulkers - JP Morgan Transportation Conference March 7, 2019

2

Disclaimer

This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Scorpio Bulkers Inc.’s (“Scorpio’s”) current views with respect to future events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect” and similar expressions identify forward-looking statements. 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, management’s examination of historical operating trends, data contained in Scorpio’s records and other data available from third parties. Although Scorpio believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond Scorpio’s control, Scorpio cannot assure you that it will achieve or accomplish these expectations, beliefs, projections or future financial performance.

Risks and uncertainties include, but are not limited to, the failure of counterparties to fully perform their contracts with Scorpio, the strength of world economies and currencies, general market conditions, including fluctuations in charter hire rates and vessel values, changes in demand in the bulk carrier markets, changes in Scorpio’s operating expenses, including bunker prices, drydocking and insurance costs, the fuel efficiency of our vessels, the market for Scorpio's vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental and environmental rules and regulations or actions taken by regulatory authorities including those that may limit the commercial useful lives of tankers, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports Scorpio files with, or furnishes to, the Securities and Exchange Commission, or the Commission, and the New York Stock Exchange, or NYSE. Scorpio undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are not guarantees of Scorpio's future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.

3

Disclaimer (Cont’d)

This presentation describes time charter equivalent revenue, or TCE revenue, which is not a measure prepared in accordance with IFRS (i.e. a "Non-IFRS" measure). TCE revenue is presented here because we believe that it provide investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance. This Non-IFRS measure should not be considered in isolation from, as substitute for, or superior to financial measures prepared in accordance with IFRS.The Company believes that the presentation of TCE revenue is useful to investors because it facilitates the comparability and the evaluation of companies in the Company’s industry. In addition, the Company believes that TCE revenue is useful in evaluating its operating performance compared to that of other companies in the Company’s industry. The Company’s definition of TCE revenue maynot be the same as reported by other companies in the shipping industry or other industries.

Unless otherwise indicated, information contained in this presentation concerning Scorpio’s industry and the market in which it operates, including its general expectations about its industry, market position, market opportunity and market size, is based on data from various sources including internal data and estimates as well as third party sources widely available to the public such asindependent industry publications, government publications, reports by market research firms or other published independent sources. Internal data and estimates are based upon this information as well as information obtained from trade and business organizations and other contacts in the markets in which Scorpio operates and management’s understanding of industry conditions. This information,data and estimates involve a number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed above. You are cautioned not to give undue weight to such information, data and estimates. While Scorpio believes the market and industry information included in this presentation to be generally reliable, it has not independently verified any third-party information or verified that more recent information is not available.

4

Company Highlights

Owns 56 mid-size dry bulk fuel-efficient

‘Eco’ vessels with an average age of 3.1

years

Marshall Islands incorporated and HQ in

Monaco, and NYSE-listed under the ticker

“SALT”

Trades vessel on the spot market through

the Scorpio Ultramax and Scorpio

Kamsarmax pools

Meeting IMO 2020 regulations by installing

scrubbers throughout its fleet (75%

installed by June 2020)

Invested $100 million in purchase of 5.4

million shares in Scorpio Tankers, Inc

(NYSE: STNG)

1

2

3

4

5

5

8.7

6.9

9.3

8.4

8.7

10.1

7.4

3.1

28

29

30

39

46

47

72

56

0 20 40 60 80

Genco

GoldenOcean

Diana

SafeBulkers

Eagle Bulk

Navios MH

Star Bulk

ScorpioBulkers

# of Owned Handymax/Panamax Vessels Average Age

Investment Highlights

Youngest Eco fleet

Investment in STNG

Scrubber-fitted for IMO 2020

Insider ownership

and liquidity

A leading position in

mid-size segment

Significant operating leverage

6

Q4-2018 Highlights

Q4-2018Financial Results

EBITDA of $23.3 million

Cash flow from operations of $20.2 million

Liquidity $74.3 million in cash as of January 25, 2019

IMO 2020Company is installing exhaust gas cleaning systems (“scrubbers”) in 2019and 2020 on all of its vessels at an estimated total cost of $127.1 million

Investment in Scorpio Tankers Inc. Company owns 5.4 million shares in STNG

Dividend Dividend of $0.02 per share declared on January 25, 2019

Stock Buyback Program During Q4 2018, 4.5 million shares were purchased by the Company

7

-$17.0

-$5.8-$1.3

$0.9

$7.3$10.8 $12.4

$22.9$20.4

$28.1 $28.8

$23.3

-$30

-$20

-$10

$0

$10

$20

$30

$40

Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18

$3,404

$5,303

$6,791$7,303

$8,608 $8,733$9,053

$11,527

$10,764

$11,973 $12,087$12,523

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18

$10.2

$17.4

$23.9$26.8

$34.7$37.7 $38.6

$51.1$54.3

$60.6$62.5

$65.2

$0

$10

$20

$30

$40

$50

$60

$70

Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18

Financial Performance Summary

EBITDA

Blended TCE ($/day) Revenue

Figures in $USD millions except Blended TCE.

(1) Accounting treatment includes lack of liquidity discount as per US GAAP

Balance Sheet

Cash 67

Vessels, net 1,507

Investment in STNG (1) 92

Total Assets 1,703

Total Debt 828

Total Liabilities 843

Shareholders Equity 860

Total Liabilities & Shareholders Equity 1,703

8

$11,072

$12,913

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19*

Ultramax Kamsarmax

Historical Rates

February 10,

2016 BDI hits

40 year low

* Projections based on 56% and 60% of the days for the Ultramax fleet and Kamsarmax fleet, respectively as of January 23, 2019.

9

Anticipated Rate Recovery

Source: Clarksons Research Services, February 2019

Baltic Supramax Avg of 10 T/C Routes; Baltic Panamax Avg of 4 T/C Routes

FFA market based on assessment on March 4, 2019

FFA MarketBaltic Indices

$/d

ay

4,000

6,000

8,000

10,000

12,000

14,000

Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Q2-19 Q3-19 Q4-19

Baltic Panamax Earnings Baltic Supramax Earnings FFA - Panamax FFA - Supramax

10

$12,000

$14,750

$9,500

$15,000

$18,000$17,000

$19,000

$24,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

HM MR LR1 LR2

$/D

ay

Q1-18 Q1-19

1) Based on Q1-18 guidance in February 14, 2018 in Company’s earning release

2) Based on Q1-19 guidance in February 14, 2019 in Company’s earning release

3) Stock price has been retroactively adjusted to reflect the one for ten reverse stock split which took effect on Jan 18, 2019; (2) LR2/LR1 benchmark voyage: Ras Tanura – Chiba earni

% of days fixed Q1-18 % of days fixed Q1-19

50%

60%

60%

55%

55%

60%

60%

60%

(1)(2)

STNG Stock Price

STNG Q1 TCE YoY Guidance Comparison (February 14, 2019)

Oct 12th, 2018

$18.50 (3)

Mar 4th, 2019

$18.76

Change

1%

11

$36

$77

$118

$180

$282

$0

$50

$100

$150

$200

$250

$300

$8,000 $10,000 $12,000 $15,000 $20,000

Mill

ions (

$ U

SD

)

TC Rate ($/day)

EBITDA EBITDA/Share of $4.00

Significant Operating Leverage

An increase in rates from $8,000 to $12,000 (50%)

translates to a 224% increase in EBITDA

Historical One Year Time Charter Rates: 2009-2019

Feb-19 Min Avg Max

Ultramax $10,156 $4,875 $11,858 $24,375

Kamsarmax $11,531 $5,363 $13,016 $29,625

1) Based on 56 owned vessels; OPEX and Cash G&A based on 2018 Q4 press release

Source: Clarksons Research Services

EBITDA Generation in Different Operating Environments (1)

EBITDA/Share of $0.50




12

All of SALT’s Vessels are fitted with BWTS

BWTS Piping in Engine RoomBWTS Filtering Unit

• The IMO will require all vessels trading internationally to install ballast water treatment systems

(BWTS) after September 8, 2019 at their next special survey.

• BWT systems for small to mid size modern vessels cost at least $450,000 per vessel based on

$350,000 for equipment and $100,000 for installation

• Retrofits on older, existing ships, can be more challenging and expensive as they were designed

without the space in the engine room to fit BWTS

13

IMO 2020 Regulations & Company Strategy

• The International Maritime

Organization (IMO) will require

shipowners to reduce sulfur emissions

from 2020

• To comply, shipowners will have to

decide between:

• Installing a scrubber to enable

the vessel to burn HSFO;

• Paying the premium to

consume compliant fuels with

a sulfur content <0.5% (MGO

and LSFO)

• LNG as bunker fuel

• The Company plans to install scrubbers

on all of its owned and finance leased

Kamsarmax and Ultramax vessels

between Q2-2019 and Q4-2020

• The majority of scrubber installations will

be coordinated with scheduled dry

docks, reducing the amount of off hire

• The Scrubbers and their installation will

cost between $2.0 - $2.5 million per

vessel, and the Company anticipates

that between 60-70% of these costs will

be financed

What is IMO 2020? How Scorpio will Comply

14

Scrubber Fuel Savings

1) Based on average Scorpio ECO vessel consumption in 2018

Consumption figures below assume that: • Scrubbers do not operate during any port activities• Each voyage has a load and discharge port in an ECA, i.e. scrubber does not operate in ECA waters

Scrubber Fuel SavingsAnnual ECO Vessel Fuel Consumption (MT/year) (1)

$847,200

$1,002,000$1,059,000

$1,252,500

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Ultramax Kamsarmax

MGO-HSFO Spread $200 MGO-HSFO Spread $250Sailing (Ballast & Laden) Ultramax Kamsarmax

Non ECA 4,032 4,830

Waiting/Idle

Non ECA 462 450

Less: Scrubber Consumption (258) (270)

Total Non ECA Consumption (MT) 4,236 5,010

MGO-HSFO Spread ($/MT) $200 $200

Annual Scrubber Savings $847,200 $1,002,000

15

$287

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$/M

T

MGO Rotterdam (S/MT) HSFO Rotterdam (S/MT) RotterdamMGO-HSFO Spread ($/MT)

Historical MGO & HSFO Spread

Source: Clarksons Research Services February 2019

$143

$144

Feb 2016 Brent Crude Price: $32/bbl

Apr 2011 Brent Crude Price: $123/bbl

Rotterdam Historical Bunker Prices

MGO Rotterdam

HSFO Rotterdam

Rotterdam MGO-HSFO Spread

Brent Crude Oil Price (bbl)

Apr-2011 $1,017 $642 $375 $123

Feb-2016 $287 $144 $143 $32

$375

$642

$1,017

16

150

170

190

210

230

250

270

290

310

330

Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22

($/m

t)Forward Curve Supports Scrubber Installation

Source: Bloomberg, March 1, 2019

Pre-2020Average of $235/mt

2020-2022 Average of $285/mt

Spread Between Rotterdam 3.5% HSFO vs 0.1% Low Sulfur Gasoil

17

Scrubber Installation Schedule 2019 and 2020

9

1

119

433

1

4

16

4

15

3

10

5

12

8

3

0

4

8

12

16

20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2019 2020

Ultramax Kamsarmax

Estimated Paymentsby Year

2018 $1.2 million

2019 $58.9 million

2020 $66.1 million

2021 $0.9 million

Total $127.1 million

75% of the Company’s vessels will

have scrubbers installed by June 2020,

100% by December 2020

Note: A portion of the installation payments are due-post delivery; hence, payments in 2021 are for 2020 installations.

18

Market Update

19

Number

OwnedVessel Type DWT

Handysize/Handymax < 50,000

37 Supramax/Ultramax 50,000-64,000

19 Panamax/Kamsarmax 65,000-100,000

Capesize/VLOC >100,000

Fleet Focused on Mid Size Asset Classes

Major Bulks: Iron ore, coal, grain

Minor Bulks: Bauxite, steel, scrap, cement, salt, forest products, potash/fertilizer, coke, nickel ore, sugar.

Coal, 58%

Grain, 16%

Minerals, 6%

Ore, 13%

Steel, 1%Other, 6%

Coal, 34%

Grain, 15%

Minerals, 16%

Ore, 6%

Steel, 10%

Fertiliser, 6%

Salt, 4%

Logs, 1%Cement,

5%

Other, 3%

20

Asset Values Remain Stable

Figures in US$ millions, Source: Clarksons Research Services, February 2019

Resale defined as to be delivered before year end and less than one year old.

$15

$20

$25

$30

$35

$40

Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19

Ultramax NB Kamsarmax NB Ultramax Resale Kamsarmax Resale

21

Dry Bulk Market Continues to Grow


(e) = estimate; (f) = forecast

2009-2018

Iron Ore Coal Grains Minor Bulks Total Dry Bulk

CAGR 5.7% 5.0% 5.4% 4.1% 4.9%

Mill

ion

To

nn

es 3,402

3,826

4,077

4,317

4,581

4,831 4,829 4,901 5,100

5,220 5,357

-

1,000

2,000

3,000

4,000

5,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (e) 2019 (f)

Iron Ore Coal Grain Minor Bulk

22

Key Indicators Still Supportive: Coal

Source: Bloomberg, February 2019

India Electricity ProductionChina Electricity Production

China Thermal Coal Total Inventory at Ports India Coal Stocks

80

100

120

140

160

180

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

(TW

h)

300

400

500

600

700

Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

(TW

h)

10,000

15,000

20,000

25,000

30,000

35,000

Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19

(Th

ou

san

d T

on

s)

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19

(Th

ou

san

d T

on

s)

23

(1) Bloomberg

Key Indicators Still Supportive: Steel

Global crude steel

production excluding

China was ~861.5 million

tons in 2018, a 2.5%

increase from 2017

Global Crude Steel Production Outside of China

China Crude Steel Production

Chinese crude steel

production was ~ 927.5

million tons in 2018, a

7.3% increase from 2017

60

65

70

75

80

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19

(Mill

ion

To

ns)

50

55

60

65

70

75

80

85

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19

(Mill

ion

To

ns)

24

Key Indicators Still Supportive: Grain

Wheat, 181.2 Wheat, 178.7

Coarse Grain, 183.0

Coarse Grain, 201.0

Soybean, 153.0

Soybean, 154.4

Soymeal, 64.5 Soymeal, 66.8

0

100

200

300

400

500

600

700

2017/18 (est) 2018/19 (proj)

(Mill

ion

To

nn

es)

Global Agricultural Product Trade Forecast (1) China Soybean Imports by Country

(1) USDA Outlook, February 2019

• USDA predicts a 3% increase in the global agricultural product trade in 2018/2019• China agreed to purchase an additional 10 million tons of US soybean cargoes due to

the positive development in the US-China trade negotiation

0

1

2

3

4

5

6

7

8

9

10

Jan-16 Jan-17 Jan-18 Jan-19

Mill

ion

s To

nn

es

From the US From Brazil From other countries

25

Limited Current Orderbook for Mid-Sized Vessels


46101

155112 120

280

567

361

136

455

214

109

504

278

143

24

103 8728

91

148

99 101

169

358

238

81

473

152

81

203

151

81

6

145

9716

74

192

303

211 221

449

925

599

217

928

366

190

707

429

224

30

248

184

0

100

200

300

400

500

600

700

800

900

1,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

# o

f V

esse

ls

Newbuilding Orders Per Year: 2001-2019

Handymax/Ultramax Panamax/Kamsarmax

26

Scrapping Expected to Increase

Breakeven for 20-Yr Panamax (1)

(1) Illustrative example of a 20-yr old Panamax vessel in a 2.5-yr non-discounted cash flow model; Assumes 350 revenue days; $1.5m and 30 days for special survey; $500k for BWTS; $2.5m for scrubber;

30 ton/day of fuel consumption; LSFO-HSFO spread at $200/mt; OPEX + G&A at $7,000/day


Scrap Value vs Operating Cost (1)

$200

$250

$300

$350

$400

$450

$500

Jan

-16

Mar

-16

May

-16

Jul-

16

Sep

-16

No

v-1

6

Jan

-17

Mar

-17

May

-17

Jul-

17

Sep

-17

No

v-1

7

Jan

-18

Mar

-18

May

-18

Jul-

18

Sep

-18

No

v-1

8

Jan

-19

($/L

dt)

$9,900

$6,400

$6,300

$6,300

$16,200

$12,700

$0

$5,000

$10,000

$15,000

$20,000

Non-Scrubber Scenario Scrubber Scenario

Daily Breakeven Daily Scrap Value 3-yr TC rates

Scrap price($ / Ldt)

6.05.3

4.5

0.5

1.5

2.5

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

20-YrPanamax

Scrap Value TotalOperating

Cost

ScrubberCost

DD Cost BWTS Cost

(in

Mill

ion

s)

23% 22% 26%19%

52%43%

43%43%

14%

17% 14%14%

6%11% 9%

8%

4%8% 9%

16%

0%

20%

40%

60%

80%

100%

Cape Panamax Handymax Handysize

0-4 5-9 10-14 15-19 20+

Bulker Fleet Age Profile

27

Limited Net Fleet Growth in Mid Size Segments

Source: Clarksons Research Services, February, 2019

Ultramax scrapping assumption in 2019-2021: 10-year average of 2.7m dwt; Kamsarmax scrapping assumption in 2019-2021: 10-year average of 4.6m dwt

Assuming slippage rate of 20% in 2019-2021

2.3%2.2%

-0.1%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-15

-10

-5

0

5

10

15

20

25

30

35

40

45

50

(mill

ion t

onn

es)

Demolition Delivery Net Fleet Growth

ForecastActual

scorpio bulkers - jp morgan transportation conference · 2) based on q1-19 guidance in february 14,...

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