Wallenius Wilhelmsen ASA Company presentation

Transcription

1 Wallenius Wilhelmsen ASA Company presentation August 2018

2 Agenda Wallenius Wilhelmsen in brief Financial performance Market and business outlook Summary and Q&A

3 Wallenius Wilhelmsen in brief Wilhelmsen Group founded in Tønsberg, Norway by Morten W. Wilhelmsen Wallenius Lines founded in Stockholm, Sweden by Olof Wallenius 1934 American Roll-on Rolloff Carrier founded by Wilhelmsen Group and Wallenius Shipping jointly 1990 Merger between Wilhelmsen group and Wallenius Shipping to form Wallenius Wilhelmsen Lines 1999 EUKOR formed as Wilhelmsen Group and Wallenius Shipping acquires the car carrier unit Hyundai Merchant Marine 2002 Wallenius Wilhelmsen changes its name from Lines to Logistics, signaling the shift towards fully integrated logistics services from factory to dealer 2006 Merger to create Wallenius Wilhelmsen ASA as a listed company incl. EUKOR, WWL, American Roll-on Roll-off Carrier (ARC), as well as Wilhelmsen and Wallenius vessels

4 The group is the undisputed market leader for vehicle logistics globally KEY FACTS & FIGURES OUR PRODUCTS & SERVICES 1) 137 vessels servicing >15 trade routes to six continents 2 MARINE TERMINAL SERVICES 1 OCEAN 1 Revenues (2017) 3 ~3.1bn USD >18M ~4.5M units for Ocean ~13.5M units in Landbased 7,500 ~1,500 Office workers ~6,000 Production workers PLANT -BASED TECHNICAL SERVICES 3 DISTRIBUTION TO PORT 4 OCEAN TRANSPORTATION 1 MARINE TERMINAL SERVICES 2 PORT-BASED TECHNICAL SERVICES 4 DISTRIBUTION TO DEALER EBITDA (2017) ~615 MUSD 2 LANDBASED 3 4 Revenues (2017) ~800 MUSD EBITDA (2017) ~100 MUSD 1) Not including Holding segment of negative about USD 10 million 4

5 The group is the clear market leader and the #1 operator globally, both in terms of capacity and number of vessels Current fleet by operator group Fleet characteristics Total capacity, CEU 1) Average max ramp capacity Capacity, kceu 1) WW Ocean GRIMALDI MOL K LINE EUKOR HAL GLOVIS NYK 0 Wallenius Wilhelmsen NYK MOL K LINE GLOVIS HAL GRIMALDI SIEM OTHER Average # of hoistable decks 1) Car equivalent units, a standardized capacity measurement unit 5

6 Wallenius Wilhelmsen has a combined fleet of 137 vessels Three distinct brands and a combined fleet of 137 vessels Average age ~12 years Owned Chartered Spot Group Total 1) No further CAPEX planned past three newbuildings with expected delivery in 2018/ 2019 (installments of USD ~120 millions remaining) Additional capacity need will be acquired in the charter market The group strives to have fleet flexibility through combination of owned and chartered tonnage Note: ARC retains a separate and independent management structure 6

7 An unrivalled and agile global RoRo network to meet changing demand 137 vessels with more than 1,300 sailings and 9,000 port calls per year Overview of key trade routes WW Ocean trade routes EUKOR trade routes ARC trade routes ARMACUPO trade routes 7

8 Diversified customer portfolio with long term contracts Size of cargo segments Main AUTO customers include HIGH all main & HEAVY OEMs globally BREAKBULK Main customers include all major OEMs globally Auto Main customers include all main OEMs globally ~71% of CBM ~29% of CBM High & Heavy Majority of volume from auto High & heavy and breakbulk maximize cubic utilization Unique handling capabilities for high & heavy and breakbulk Breakbulk 8

9 The landbased services network is also global In-plant vehicle processing centres In-plant equipment processing centres Terminals Vehicle processing centres Equipment processing centres Inland distribution networks 9

10 Our Landbased services portfolio Landbased services portfolio Main customers Main customers include Marine Terminals Technical Services Inland Distribution Auto all main OEMs globally EBITDA share: EBITDA share: EBITDA share: High & Heavy Stevedoring Custom clearance Receive and delivery Cargo handling Accessory fitting Pre delivery inspections Repairs and rectifications Storage management Primarily procurement model Breakbulk 10

11 Q Business and financial update

12 Highlights second quarter 2018 EBITDA adjusted for extraordinary items of USD 159 million Underlying positive volume development, especially for high & heavy However, ocean results impacted by lower rates, increased net bunker cost and unfavorable currency movements The newbuilding Titus was delivered end of May 2018 About USD 110 million in synergies confirmed Acquisition of 70% of Syngin Technologies for about USD 30 million 12

13 Consolidated results second quarter 2018 Q Q Q Total income Operating expenses (888) (843) (806) EBITDA EBITDA adjusted Depreciation (86) (84) (83) EBIT Net financial items (45) (5) (103) Profit before tax (17) Tax income/(expense) (4) (25) (3) Profit for the period (20) EPS (0.06) Comments EBITDA adjusted of USD 159 million, down 16% y- o-y and up 24% q-o-q driven by the ocean segment Costs of USD 3 million related to the restructuring and realization of synergies in the second quarter Net financial items of USD 45 million in the quarter Net interest expense slightly up from the previous quarter due to higher interest rates (LIBOR) and net interest-bearing debt Positive unrealized gains on interest rate hedges offset by negative movements in currency / currency derivatives Tax expense of USD 4 million in the second quarter, primarily related to income tax 13

14 Ocean segment second quarter 2018 Total income and EBITDA ocean segment 1 USD million Comments Total income EBITDA Total income was USD 842 million, up 5% y-o-y due to increased volumes and fuel compensation % +12% Adjustments -16% +23% EBITDA adjusted of USD 136 million, down 16% y-o-y Reduced contracted HMG volumes Lower rates (USD 12 million) Higher net bunker cost (USD 20 million) Unfavorable currency movements (USD 10 million) Trade imbalance and inefficiencies The negative impact from above factors partly offset by underlying strong volume development, increased high & heavy share and realization of synergies Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q Q Q Q Q Q2 18 EBITDA adjusted in the second quarter was up 23% compared to the previous quarter due to seasonality 1) Adjusted for restructuring costs and other non-recurring items 14

15 The positive volume & cargo mix development continued in the quarter Volume and cargo mix development Million CBM and % Comments Total prorated volumes 1 Cargo mix 2 Million CBM 20 18, ,9% 19,5 23,3% 18,2 25,1% 19,4 24,0% 18,0 25,3% 18,2 20,4% 15,5 24,9% 16,8 25,7% 15,2 25,4% 16,2 16,2 24,2% 22,6% +3% +12% % 18,0 18,8 18,5 17,0 16,5 29,2% 28,0% 26,0% 26,3% 26,1% Positive volume development partly offset by reduced contracted HMG volumes, up 3% y-o-y The Atlantic, Asia-South America and partly the Asia- Europe trade experienced strong growth The Oceania trade moved sideways, and the Europe-Asia and Asia-North America trade decreased (latter due to reduction in HMG volumes) Adjusted for reduced contracted HMG volumes (about 0.5 million CBM) volumes were up about 6% y-o-y 5 0 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q Volumes up 12% q-o-q due to seasonality Continued positive development for cargo mix with a high & heavy share of 29%, up from 28% in the previous quarter and 26% in same period last year 1) Prorated volume (WW Ocean, EUKOR, ARC and Armacup) 2) Calculated based on unprorated volumes. Updated figures based on aligned cargo type definition and reporting across all Ocean units 15

16 Mixed volume development for the foundation trades y-o-y Atlantic Shuttle +22% +9% EU - ASIA -4% +4% Asia - EU +5% +18% Q2 17 Q1 18 Q2 18 Q2 17 Q1 18 Q2 18 Q2 17 Q1 18 Q2 18 Asia - NA EU/NA Oceania 1) -14% +21% 2.0-1% +14% Asia - SAWC % +8% Q2 17 Q1 18 Q Q2 17 Q1 18 Q2 18 WWL trade routes EUKOR trade routes ARC trade routes Q2 17 Q1 18 Q2 18 Note: Prorated volumes on operational trade basis in CBM 1) Including Cape sailings (South Africa) 16

17 Flat development for Net freight / CBM in the second quarter Net freight / CBM development 1) Comments 44 Net freight / CBM increased by about 1% in the second quarter compared with the previous quarter due to changes in trade and cargo mix % +1% The largest volume growth in the quarter was seen in the Oceania and the Asia-Europe trades, with relatively high net freight / CBM (long distances) Furthermore, the increased high & heavy share also had a positive impact on net freight / CBM No material changes for rates No material rate changes q-o-q, but rate reductions from contract renewals in 2017 impacted the net freight index with about USD 12 million y-o-y 38 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 1) Net freight = Freight revenues adjusted for surcharge elements such as BAF, SRC, THC etc 17

18 137 vessels operated at the end of the second quarter Fleet development # of vessels Comments Owned Chartered Short Term T/C In/Out Wallenius Wilhelmsen operated a core fleet of vessels (873K CEU), representing around 22% of the global fleet in the second quarter One newbuilding (Titus) delivered end of May Three vessels from external owners chartered-in In addition, the group continued to leverage the short-term market and controlled a fleet of 137 vessels at the end of the second quarter (up from 132 vessels in Q1) The increase of 5 vessels is linked to higher volumes in certain trades causing operational imbalances to meet customer commitments Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q

19 Wallenius Wilhelmsen took delivery of MV Titus May 31 st 2018 High Efficiency RoRo (HERO) class vessel specially designed to reduce energy consumption and emissions First Chinese built LCTC in the WW Ocean fleet (Xingang yard) MV Titus is the first of a series of four Post-Panamax vessels, each with a capacity of 8,000 CEU The second vessel in the series is expected to enter service at the end of 2018 and two are scheduled for delivery in 2019 WW Ocean already has four vessels of the HERO design in operation, which have proven their ability to deliver from an operational and environmental perspective 19

20 IMO 2020 a risk and challenge for the shipping industry Implementation of the IMO % global Sulphur cap represents a challenge and risk for the shipping industry, with fuel costs expected to increase with about 50% combined with a lack of clarity around availability and quality of fuels. Wallenius Wilhelmsen is relatively well covered through Sulphur (BAF) clauses already in place for majority of the larger customer contracts and aims to introduce relevant clauses for remaining customer contracts To handle this uncertainty, Wallenius Wilhelmsen has arrived at a strategy of combining operating with different types of low Sulphur fuel and installing scrubbers on the most suitable vessels In June 2018 Wallenius Wilhelmsen decided to initiate a program to retrofit scrubbers on 20 vessels over the next few years, increasing the number of vessels in the fleet with scrubbers to 25 The average cost per scrubber instalment is estimated to USD 6-7 million. The scrubbers will be retrofitted during scheduled dry docking to minimize impact on the operations and will be financed through available cash and/or credit facilities 20

21 USD 110 million of the USD 120 million synergy target confirmed Confirmed and realized synergy development USD million Comments At the end of the second quarter about USD 110 million of synergy target was confirmed During the quarter about USD 25 million was added to confirmed synergies, mainly through ship management, fleet optimization and procurement The annualized run rate for synergies were above USD 100 million, up from about USD 80 million in the previous quarter Q Q Q Q Q Q Q The remaining part of the confirmed synergies will gradually come into effect over the next 3-6 months Fleet Optimization Ship Management Procurement SG&A savings Realized savings (annualized) 21

22 Landbased segment second quarter 2018 Total income and EBITDA landbased segment 1 USD million Comments Total income EBITDA Total income was USD 222, up 16% y-o-y primarily % -4% % +22% driven by Keen Transport and the Melbourne terminal EBITDA adjusted was USD 25 million, down 8% y-o-y Increased SG&A allocations of USD 3 million Less profitable customer and service mix for Solutions Americas Auto (VSA) Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Solutions Americas (auto) Solutions Americas (H&H) Q2 18 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Solutions APAC/EMEA Other Terminals Adjustments Q2 18 The negative impact of above factors was partly offset by improved contribution from the terminals (Melbourne terminal fully operational from Jan 2018) and Keen transport (acquired late 2017) 1) Adjusted for restructuring and other non-recurring items; 22

23 Acquisition of Syngin Technologies first step into Full Life Cycle Logistics Acquisition in brief Acquisition of Syngin Technologies (Syngin) for an expected total purchase price of about USD 30 million on a cash- and debt-free basis (EBITDA multiple of about 6x) The acquisition of Syngin marks the entry into Full Life Cycle Logistics Syngin is a leading provider of automated logistics solutions for disposition of used vehicles through an electronic marketplace (in North America) Syngin streamlines the movement of vehicles handled by fleet leasing companies and remarketers to auction houses through a virtual marketplace that matches these stakeholders with transportation providers and repair centers The combined strength of WW Solutions and Syngin represents a significant opportunity to scale the business, not only within the current scope, but also into adjacent customers and geographies Current owners will maintain an ownership stake of 30% and stay highly involved in the business for the foreseeable future 23

24 Cash flow and liquidity development second quarter 2018 Cash flow and liquidity development USD million Comments CAPEX of USD 56 million includes Instalments for newbuildings (about USD 40 million) Dry docking costs (about USD 10 million) Net financing of USD 80 million mainly relates to Regular instalments of about USD 100 million Repayment of NOK 800 million in bond debt that was refinanced in October 2017 Financing for newbuilding delivered: USD 50 million Refinancing of vessel loans that was repaid during the first quarter of about USD 90 million (linked to legal restructuring) Increased utilization of credit facilities: About USD 100 million Liquidity Q EBITDA Proceeds from sale of assets CAPEX Net financing Interest and financial derivatives Dividend to non controlling interests Taxes paid Other Liquidity Q Interest and financial derivatives negatively impacted by USD 25 million from realization of basis swaps linked to bond debt that matured in June 2018 Other includes payment of the EUR 207 million (about USD 245 million) settlement fine from European competition authorities 24

25 Balance sheet review second quarter 2018 Unaudited Balance Sheet USD billion Comments Assets Equity & Liabilities Total assets of USD 7.5 billion with equity ratio of 37.4%, up from 36.3% last quarter Net interest bearing debt of USD 3.2 billion, up by USD million driven by payment of the EUR 207 million Equity 2.8 fine from European Competition authorities and financing for the newbuilding delivered in May Continued high cash and liquidity position with USD Non current assets million in cash and about USD 275 million in undrawn credit facilities Non current liabilities 3.4 During the quarter two vessels in EUKOR were refinanced and WW Ocean Holding AS secured a new unsecured credit facility of USD 100 million which Current assets 1.3 Current liabilities 1.3 replaced similar facilities earlier placed in the operating entity WW Ocean AS 25

26 Market outlook 26

27 The market fundamentals are improving Auto steady growth H&H turning point Market balance firmer Modest growth in auto trade volumes with ~3% per year Recovery in global H&H markets with double digit growth for 2017 and 2018YTD Overcapacity reduced and current orderbook at historical low 27

28 Auto sales in the second quarter were up 3.4% y-o-y Global light vehicle (LV) sales per quarter Global LV sales per main sales region 1) % -0.6% CAGR % 9% 8% APAC EUR ME AF AM Indian Subcontinent 7% East Europe 6% 5% Middle East/Africa 4% ASEAN South America Q Q Q Q Q Q Q Q Q Q Q Q % 2% North America Greater China Central Europe Sales in North America moved sideways y-o-y, but strengthened 11.0% q-o-q on seasonality 1% Western European sales increased 2.3% y-o-y, up from a seasonally strong first quarter 0% Oceania The Chinese market strengthened another 5.0% y-o-y despite abolishment of the temporary tax cut in December 2017, while declining 7.2 % q-o-q The Russian and Brazilian markets concluded another quarter of strong growth -1% West Europe Japan/Korea -2% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% Q2 18 vs Q2 17 Source: IHS Markit 1) Size of circle indicates auto sales in Q

29 Auto exports in the second quarter were up 6.5% y-o-y Global LV export per quarter Global LV export per main sales region 1) % +4.9% CAGR % 9% EUR APAC ME AF Greater China AM 8% 6% 5% North America 4% South America Q Q Q Q Q Q Q Total exports increased 6.5% y-o-y and 4.9% q-o-q Q Q Q Q Q North American exports increased 9.0% y-o-y and 2.6% q-o-q as Mexican production continued to be ramped up Exports out of Europe increased 4.6% y-o-y and 5.7% q-o-q Chinese exports grew 32.6% y-o-y and 19.8% q-o-q with continued production ramp-up 3% 2% South Asia Europe Middle East/Africa 1% 0% South Korea Japan -1% -2% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% Q2 18 vs Q2 17 Source: IHS Markit 1) Size of circle indicates auto exports in Q

30 Auto tariffs: Potential impact on Wallenius Wilhelmsen The ongoing trade tension and possibility of new tariffs for auto imports to the US represents a risk for Wallenius Wilhelmsen. Imports to the US (from outside NAFTA) were about 3.7 million units in 2017, majority of volumes imported from Europe, South Korea and Japan Wallenius Wilhelmsen is always prepared for changes in global deep-sea volumes and changing sourcing patterns A short term direct effect of 20-30% auto volume reduction is not expected to be substantial (<5% of EBITDA) as the group can reduce the fleet size and the profitability for auto volumes in certain trade lines is very low (e.g. Atlantic trade) However, the indirect effects of higher tariffs (and potential trade war) and hence reduction in auto shipments could be more negative. Increased overcapacity might lead to further pressure on rates Slower growth for global economy might decline across all cargo segments lead to further volume 30

31 Construction machinery markets continue to be very solid globally Global construction and rolling mining equipment exports 1 Market commenst 2 Machinery exports (Quantity avg. L12M) 50k 45k 40k 35k Machinery exports (Growth L3M y-o-y %) 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Global construction machinery trade growth decelerated to 15% y-o-y, but North American, European and Australian imports kept growing strongly OEM majors continued to report broad-based geographical demand growth led by Asia, with strong order development US construction spending increased and leading non-residential indicators continued to signal expansion, while housing starts and permits slowed from the previous quarter EU construction output edged up in the period, and the European construction confidence strengthened along with the Eurozone construction PMI The Australian construction industry extended its period of growth in the quarter, albeit at reduced rate, and construction confidence remained healthy despite some softening 30k 01/12 07/12 01/13 07/13 01/14 07/14 01/15 07/15 01/16 07/16 01/17 07/17 01/18-20% Machinery exports (L12M) Machinery export growth (L3M) Source: 1 IHS Markit World (major exporters excl. China (due to incomplete reporting)) construction and rolling mining equipment exports (equipment valued >20 kusd ) (Avg. units L12M (last 12 months) and L3M (last 3 months) y-o-y %). Data cut-off: Caterpillar Inc., Volvo AB, Komatsu Ltd., US Bureau of the Census, AIA, Dodge Data & Analytics, Eurostat, IHS Markit, AiGroup, NAB 31

32 Mining equipment demand continues to strengthen on replacement needs, but the geographical differences remain significant Global mining equipment deliveries and iron ore price 1 Regional mining equipment deliveries Equipment deliveries (Indexed) Q09 Equipment deliveries Iron ore price 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 Iron ore price (USD/t) North America -64 % 0 2Q12 2Q14 2Q16 2Q Latin America -76 % 0 2Q12 2Q14 2Q16 2Q Europe -5 % Asia 0 2Q12 2Q14 2Q16 2Q18-48 % 0 2Q12 2Q14 2Q16 2Q Africa -56 % Oceania 0 2Q12 2Q14 2Q16 2Q18-77 % 0 2Q12 2Q14 2Q16 2Q18 Metal prices remained supportive of equipment demand in the quarter OEMs reported another quarter of strong y-o-y sales growth, with broad-based geographical demand and positive order development Global surface mining equipment deliveries continued to strengthen from last year, but edged down q-o-q as North American deliveries slowed sharply Europe and Asia remained the biggest destinations in the quarter, with volumes driven by intra-regional sourcing Oceania and Africa recorded the strongest growth from a year ago, while the sequential momentum was driven by Africa and Latin America All regions except Europe remain approximately 50% or more below peak Source: 1 The Parker Bay Company Surface Mining Equipment Index (Indexed value of large surface mining equipment deliveries, 2007 = 100), MarketIndex Average quarterly iron ore price (USD/t) (not adjusted for trading days) 2 The Parker Bay Company Value of large surface mining equipment deliveries (USD million, avg. last 12 months) 32

33 Agriculture machinery markets continue to be mixed as farm fundamentals remain under pressure Global agriculture equipment exports 1 Tractor sales and registrations 2 Machinery exports (Quantity avg. L12M) Machinery exports (Growth L3M y-o-y %) Sales/registrations (Growth y-o-y %) 35k 35% 30% Sales/registrations (YTD) 30% 20% Sales/registrations (2Q18) 30k 25% 20% 15% 10% 0% 10% -10% 25k 20k 01/12 07/12 01/13 07/13 01/14 07/14 01/15 07/15 01/16 07/16 01/17 07/17 01/18 5% 0% -5% -10% -15% -20% -20% Australia UK Germany France Brazil US US sales continue to show signs of stabilization on replacement needs European markets were mixed, and farmers are facing softening EU milk prices and drought conditions in Eastern Europe Australian sales remained healthy, but heightened concerns over drought has taken farmer confidence to a five-year low Machinery exports (L12M) Machinery export growth (L3M) The Brazilian market contraction ended in the quarter, and the midyear market reset of financing rates could provide some tailwind Source: 1 IHS Markit World (major exporters excl. China (due to incomplete reporting)) agriculture equipment exports (equipment valued >20 kusd ) (Avg. units L12M (last 12 months) and L3M (last 3 months) y-o-y %). Data cut-off: TMA, KBA, Axema, ANFAVEA, AEA, Seaport Registrations: UK (+50Hp), Germany (+70 kw), France (Standard tractors). Sales: Australia (+100Hp April and May only), Brazil (All tractors), US (+100Hp, 4WD) (Units YTD and 2Q18, y-o-y %) 33

34 9/15 12/15 3/16 6/16 9/16 12/16 3/17 6/17 9/17 12/17 3/18 6/18 No new order activity or open vessels were reported in the second quarter Car Carrier Fleet Orderbook # vessels equal or above 4000 CEU Open Vessels and Time Charter Rates # of vessels and USD/day 24 9 Orderbook TC Rate, $/day Number of vessels CEU 5000 CEU CEU CEU The current orderbook counts 24 vessels 1 Five car carriers have been delivered in 2018, with one delivery in the second quarter Time charter rates continued to rise in the second quarter No open vessels were reported in the period Current markets and earnings do not justify new ordering activity However, necessary replacement may start to feature Source: Clarksons Platou 1 Vessels equal or above 4000 CEU 34

35 Outlook

36 Outlook Current positive volume and cargo mix development expected to continue, but underlying reduced HMG contractual volumes will continue to impact results Increased realization of synergies will positively impact results Tonnage supply/demand balance has improved, but rates remain at a non sustainable level Negative rate impact of USD ~7 million y-o-y expected in the third quarter (limited effect q-o-q) Current bunker prices indicate about USD 10 million in higher net bunker costs in the third quarter compared to same period last year (changes during the quarter not accounted for) Challenges with trade imbalances expected to continue short term 36

37 Thank you!