Q3 2015 results 11 November 2015
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. 2
Agenda TORM Q3 Highlights Product Tanker Market Overview and Outlook TORM Q3 Financial and Operating Performance 3
Highlights for Q3 2015 Reported Pro forma Pro forma Pro forma USDm Q3 2015 Q3 2015 Q3 2015 Q3 2014 Q1-Q3 2015 Results 96 105 26 257 EBITDA 65 81 -4 169 Profit before tax • The product tanker freight rates across segments has been USD/day ~26,000 in Q3 which are the highest freight rates earned since 2008 Tanker • The Tanker segment reported a gross profit of USD 104m in Q3 2015 (PF USD 114m) • During Q3, TORM purchased three modern second-hand MR vessels (2007, 2010 and 2012 built) for a total consideration of USD 80m S&P (Tanker) • The value of TORM’s product tanker fleet increased by USD 77m (~5%) during Q3 • Planned wind-down of dry bulk activities completed with redelivery of last T/C-in vessel and sale of our last two Panamax vessels Dry bulk • TORM’s dry bulk segment reported a gross result of USD -1m for Q3 • The new Restructuring Agreement was implemented on 13 July 2013 giving TORM strategic and financial flexibility Corporate • New ownership structure and Board in place events • TORM has secured undrawn financing of USD 67m for the first three MR newbuildings and undrawn financing of USD 26m for two of the second-hand MR vessels mentioned above • Full year 2015 guidance is an EBITDA of USD 200 - 220m and a PBT of USD 115 - 135m Guidance • Pro forma guidance, reflecting the combined fleets’ full year performance, is an EBITDA of USD 310 – 330m and a PBT of USD 185 - 205m 4
Q3 2015 reported a positive EBITDA of USD 96m and a positive PBT of USD 65m Reported Pro forma Pro forma Pro forma Pro forma Pro forma USDm Q3 2015 Q3 2015* Q3 2014* Q1-Q3 2015* Q1-Q3 2014* 2014* P&L 150 165 101 453 293 416 TCE Earnings 104 114 41 287 113 172 Gross profit 0 0 0 0 0 0 Sale of vessels 96 105 26 256 69 118 EBITDA 65 81 -4 169 -12 12 Profit before tax Balance sheet 947 947 764 947 764 770 Equity 534 534 643 534 643 668 NIBD 170 170 77 170 77 56 Cash and cash equivalents Key drivers 75 75 80 75 80 79 Number of vessels (#) 25,969 - 14,772 23,714 14,195 15,171 Tanker TCE/day (USD) 6,733 - 7,649 7,132 7,603 7,656 Tanker OPEX/day (USD) * Pro forma figures prepared as though the Restructuring occurred at 1 January 2014 and include the combined TORM and Njord fleet Comments: • Q3 EBITDA of USD 96m and Profit before tax of USD 65m • Q3 pro forma EBITDA of USD 105m and pro forma Profit before tax of USD 81m • Q3 Equity of USD 947m and Cash and cash equivalents of USD 170m • Q3 average Tanker TCE/day of USD 25,969 and average Tanker OPEX/day of USD 6,733 5
Agenda TORM Q3 Highlights Product Tanker Market Overview and Outlook TORM Q3 Financial and Operating Performance 6
Product tanker freight rates continued at strong levels Freight rates in ‘000 USD/day East (Q3 2015) • The LR market benefitted from the ramp-up of refinery capacity in Saudi Arabia and the UAE • The Far East exported large volumes of gasoil to West Africa and north-western Europe • Declining freight rates for dirty trading led LR2s to switch back into the clean market West (Q3 2015) • Freight rates driven by high European refinery margins yielding export volumes to West Africa • Considerable European export of gasoline to the US East Coast due to US demand and capacity restrictions • The refineries in the Mexican Gulf area had high exports to South and Latin America • High naphtha flows from West to East in July/Aug Source: Clarksons. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MR: average basket of Rotterdam->NY, Bombay->Chiba, Mina 7 Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sidney.
Demand outlook for the product tanker market is mixed Asia naphtha imports by source* • West to East naphtha arbitrage m tons flows are set to pick up from lows in Sep-Oct • After a strong summer driving demand in Q3, US gasoline demand is expected to undergo a seasonal decline in Q4, yet remain higher y-o-y • Imports to Latin America are expected to decline amid weak demand and restart of a number of refineries in the region • A steep contango and tight Refinery expansions favoring tonne-mile Refinery net expansions 2014-2020 storage availability in the NW Net distillation capacity additions and expansions, m b/d Europe jet market leading to postponed arrivals • Strengthening of the crude market has a potential to encourage some LRs to switch to dirty trade • Refinery rationalization will continue in Europe and Pacific, while more capacity will be added in Asia and the Middle East, supporting long haul trade Sources: IEA, Reuters, TORM Research. 8 * Data by time of arrival in Asia
Supply outlook for the product tanker fleet varies by segment Net fleet growth y-o-y in % of total fleet (no. of vessels) • Product tanker deliveries totaled 8.2m dwt during Q1-Q3 2005-2014 average fleet growth for • This corresponds to a fleet LR2, LR1, MR and Handysize growth of 4.7% (in terms of no. of vessels) • For FY 2015, the fleet is forecast to expand by 6.5% (in terms of no. of vessels) • The LR2 and MR segments are set to lead the growth • The fleet is forecast to grow by 5.0% in 2016 Note: Increase calculated basis number of vessels. The number of vessels by the beginning of 2015 was: LR2 258, LR1 327, MR 1,396, Handy 649. Note: Net fleet growth: Gross order book adjusted for expected scrapping and delivery slippage. 9 Source: TORM Research.
Product tanker vessel prices Vessel price development • Product tanker ordering totaled USDm 8.8m dwt during Q1-Q3, up 10% LR1 - Newbuilding MR - Newbuilding LR2 - Newbuilding from FY2014 • Ordering continued to be focused towards the LR1 and LR2 segments • Ordering in the MR segment has gained momentum while interest for the Handysize segment has been limited • Activity in the second-hand USDm USDk/day market has picked up in Q3, especially within modern MR MR - 5 yr. Second-Hand tonnage MR 1Yr T/C • Second-hand activity remains limited in the LR segment due to limited available modern tonnage 10 Source: Clarksons.
Agenda TORM Q3 Highlights Product Tanker Market Overview and Outlook TORM Q3 Financial and Operating Performance 11
PER 30.9.2015 Fleet update # vessels (includes Njord and TORM vessels pre restructuring completion date, 13 July 2015) Q2 2015 Changes Q3 2015 Changes Q4 2015 Changes 2016 Owned vessels LR2 8.0 8.0 LR1 7.0 7.0 MR 42.0 42.0 8.0 50.0 1.0 51.0 Handysize 11.0 11.0 Tanker Division 68.0 - 68.0 8.0 76.0 1.0 77.0 Bulk activities 2.0 2.0 -2.0 - - Total 70.0 - 70.0 6.0 76.0 1.0 77.0 Charter-in vessels LR2 2.0 2.0 2.0 2.0 LR1 - - - - MR 2.0 2.0 2.0 2.0 Handysize - - - - Tanker Division 4.0 - 4.0 - 4.0 4.0 Bulk activities 1.0 1.0 -1.0 - - Total 5.0 - 5.0 -1.0 4.0 4.0 Total fleet 75.0 - 75.0 5.0 80.0 1.0 81.0 12
TORM has significant operating leverage in an structurally improving product tanker market Fleet Spot Days # of days LR2 LR1 MR Handy 28,922 28,943 3,260 3,650 2,545 2,555 19,161 18,723 5,631 578 536 3,692 3,956 4,015 826 2015 Q4 2016 2017 Spot, % 84% 99% 100% Illustrative change in cash flow generation potential for the TORM Fleet USDm ∆ Average TCE/day 2015 Q4 2016 2017 USD 2,000 11.3 57.8 57.9 USD 1,000 5.6 28.9 28.9 USD (1,000) (5.6) (28.9) (28.9) USD (2,000) (11.3) (57.8) (57.9) 13
Peer comparison shows that TORM has continued to perform commercially despite financial difficulties and an older fleet USD/day MR - Total reported TCE 30.000 25.000 20.000 15.000 10.000 5.000 0 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Peer Hi-Lo TORM PF spot Peer avg Notes: • Peer gorup is based on Ardmore (split by ECO and ECO-modified); d’Amico , Frontline 2012, Norden, BW, Teeday Tankers and Scorpio • Q3 2015 figures are missing Frontline 2012, BW and d’Amico as they have not published yet. 14
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