Presentation of Q3 2012 results 7 November 2012
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 and filings with The US Securities and Exchange Commission. 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
Highlights Highlights for Q3 2012 Tanker market Dry bulk market Finance • Q3 loss before tax of USD 63m before special items of USD -15m • Both main segments remained challenging in Q3 2012 Results • Results negatively impacted by TORM’s financial situation • LR2 and LR1 benefitted in Q3 2012 from distillate arbitrage and e.g. jet fuel cargoes from the Middle East to Brazil Tanker • MR freight rates in the West were negatively affected by refinery maintenance and limited arbitrage, whereas imbalances in Asia Pacific positively impacted freight rates in the East • EBIT of USD -42m in Q3 2012, despite beating commercial spot benchmarks again • Bulk market suffered in Q3 2012 due to the US grain season affected by drought • EBIT of USD -4m in Q3 2012 – Beating commercial benchmarks Bulk • Restructuring with banks and time charter partners completed 5 November 2012 – New working capital (USD 100m) for two years Restructuring – Amendment of debt maturities until 31 December 2016 – Significant savings from time charter contracts being realigned to market level or terminated • The bank group and time charter partner have become majority shareholders • Maintain forecasted loss before tax of USD 350-380m for the financial year 2012 excluding accounting effects of the execution of the restructuring, further vessel sales and potential impairment charges Guidance 3
Highlights TORM has completed the restructuring with banks and time Tanker market Dry bulk market charter partners Finance Banks New capital Maturities for all debt amended to 31 USD 100m in working capital over two December 2016 years *** Majority owners of the Company T/C-in partners Newbuilding program Compre- T/C-rates adjusted to market Elimination of newbuilding program hensive level or contracts terminated completed finance *** solution for TORM Co-owners of the Company TORM Cost and cash initiatives with a cumulative effect of at least USD100m over three years *** Cost program office in place and identified initiatives under implementation 4
Highlights Third quarter of 2012 proved to be challenging Tanker market Dry bulk market Finance Financial highlights for Q3 2012 USD million Q3 2012 Q3 2011 2011 2010 2009 P&L • Q3 2012 loss before tax of USD Gross profit 3 2 81 180 243 -79m (USD -70m in Q3 2011) • Q3 2012 result driven by Sale of vessels - - -53 2 33 – Challenging freight rate EBITDA -11 -17 -44 97 203 environment and seasonality – Adverse effects from TORM’s Profit before tax -79 -70 -451 -136 -19 financial situation Balance – Extraordinary advisory costs of USD 15m Equity 358 958 644 1,115 1,247 • Financing cash flow of USD -2m, NIBD 1,858 1,836 1,787 1,875 1,683 which was positively affected by de facto standstill with the bank Cash and cash equivalents 13 96 86 120 122 group Cash flow statement Operating cash flow 6 -21 -75 -1 116 Investment cash flow -8 10 168 -187 -199 Financing cash flow -2 -41 -128 186 37 5
Product tanker freight rates have been under pressure and especially the MR Highlights Tanker market Dry bulk market segment was weak due to continued subdued demand in Western hemisphere Finance Freight rates in USDt/day 80 LR2 (TC1) 70 60 LR2 and LR1 50 • Positive effects: 40 – Middle distillate arbitrage from the Middle East 30 to Europe open 20 – Naptha arbitrage from the West to the Far East 10 open 0 – East Africa imports have re-started 70 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec LR1 (TC5) – Increased long-haul volumes to Brazil and the 60 2007-2011 range 2012 2011 US from the AG and India 50 • Negative effects: – Reduced imports to the AG from Europe 40 resulting in increased ballast 30 20 10 0 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec MR (TC2) MR • Positive effects: 2007-2011 range 2012 2011 40 – Continued Brazilian imports – Increased African imports substituting LR1 30 – Intra-Asia activity has increased especially to 20 Australia due to closing of refineries • Negative effects: 10 – Refinery maintenance in Europe – High refinery utilization in the US 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec – US exports limited due to supply constraints 2007 - 2011 range 2012 2011 6 Source: Clarksons, 2 Nov 2012. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MRT: C2 (Rotterdam->NY)
Highlights TORM spot rates consistently exceed benchmarks Tanker market Dry bulk market Finance TORM spot vs. benchmark Q3 2012 (USD/day) • TORM’s financial position continued TORM spot rate Benchmark to pose a challenge in Q3 2012 +2% +6% 15,000 • Nevertheless, TORM still outper- +93% formed on all segments due to – East Africa business (LR2) 10,000 – Optimization through DPP employment (LR1) – Relative large presence in the 5,000 Arabian Gulf and Far East (MR) – Utilization of triangulation 0 LR2 LR1 MR TORM spot vs. benchmark last 4 quarters (USD/day) 15,000 +32% +51% +49% • Consistent spot rates that exceed benchmarks due to 10,000 – Large and high quality fleet – Demonstrating organizational strengths (end-to-end 5,000 processes) 0 LR2 LR1 MR 7 Source: Clarksons, 31 Oct 2012. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MRT: C2 (Rotterdam -> NY)
Highlights Refinery expansions favors long-haul product trades and is Tanker market Dry bulk market expected to outweigh slow oil demand growth Finance Slow growth in world oil demand Mbbl/day Y-O-Y change Global oil demand Y-O-Y % 92 4 • 2013 will likely show modest 90 3 expansion in oil product consumption due to a continued 88 2 subdued global economic growth 86 1 84 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 Refinery expansions favoring tonne-mile 2,5 Gross distillation capacity additions, mbbl/day Other Middle East • Longer-haul product movements 2,0 India & other Asia are favored by: China – India and Middle East 1,5 Atlantic Basin increasing their export oriented refining capacity 1,0 – Expected closure of non- competitive refining capacity in 0,5 Europe and the Atlantic Basin 0,0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 8 Source: IEA Oil Market Report 12 Oct 2012. Poten & Partners 12 Oct 2012
Highlights Modest supply outlook for the product tanker fleet Tanker market Dry bulk market Finance Net fleet growth y-o-y in % of total fleet (DWT) 16% LR2 LR1 MR Handysize 9% • Net fleet growth is expected to gradually decline to manageable 7% levels in 2012-2014 6% 6% 6% 6% 6% • Scrapping will mostly impact 4% Handysize leading to a negative 2% 2% fleet growth 1% -1% -1% -2% -4% 2010 2011 2012E 2013E Note: Calculated basis dwt. Number of vessels beginning of 2012: LR2 203, LR1 339, MR 958, Handy 552 Note: Net fleet growth: Gross order book adjusted for expected scrapping 9 Source: SSY, 19 October 2012
Highlights Product tanker vessel prices continues at low levels with Tanker market Dry bulk market limited S&P activity Finance Vessel price development • Newbuilding orders continues to USDm be mainly for MRs (2014 MR - Newbuilding delivery) 60 MR - 5 yr. Second-Hand 50 • Difficult for buyers to get 40 financing 30 • Ample second hand tonnage 20 marketed, but sales processes 10 are protracted 0 • Price pressure especially on Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul12 Jan 13 older units USDm USDt 60 25 MR - 5 yr. Second-Hand 50 20 MR 1 yr. T/C 40 • T/C rates and second-hand 15 prices are well correlated 30 10 20 5 10 0 0 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 10 Source: Clarksons, 31 Oct 2012
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