Fourth Quarter / Preliminary Full Year 2014 Results Oslo 12 - - PowerPoint PPT Presentation

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Fourth Quarter / Preliminary Full Year 2014 Results

Oslo – 12 February 2015

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Agenda

• Highlights
• Financials
• Operational review
• Project Felix
• Market update and prospects

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Highlights

• Chemical Tankers EBITDA of USD 30 million, compared with USD 26 million in third

quarter

• Odfjell chemical freight index (ODFIX) up more than 10% compared with last

quarter

• Time-charter result down 6% due to bunker hedging

Highlights

50 100 150 200 08 09 10 11 12 13 14 15

Index 1990=100

ODFIX

¹ Proportional consolidation method according to actual historical ownership share

• 50

50 100 150 200 250 300 350 05 06 07 08 09 10 11 12 13 14

USD mill

EBITDA¹

Chemical tankers Tank terminals LPG/Ethylene

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Highlights

• Odfjell Terminals EBITDA of USD 2 million compared with USD 4 million in third

quarter

• Initiated cost-cutting and efficiency programme estimated to improve the net result

by in excess of USD 100 million on a yearly basis when fully implemented within the end of 2016

Highlights Delivery of Bow Triumph in January, the last of four coated chemical tankers from the Hyundai Mipo yard in South Korea

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hallo Income statement¹ - Fourth quarter 2014

USD mill

4Q14 3Q14 Gross revenue 245 267 Voyage expenses (116) (123) TC expenses (41) (47) Operating expenses (40) (44) Share of net result from associates and JV (5) (8) General and administrative expenses (18) (24) Operating result before depr. (EBITDA) 25 19 Depreciation (20) (24) Impairment (4)

• Capital gain/loss on fixed assets

(0) 7 Operating result (EBIT) 1 Net finance (22) (9) Taxes 3 (1) Net result (18) (9)

Financials

¹ Equity method

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hallo Income statement¹ - Preliminary full year 2014

USD mill

2014 2013 Gross revenue 1 053 1 027 Voyage expenses (496) (489) TC expenses (191) (164) Operating expenses (175) (189) Share of net result from associates and JV (32) (52) General and administrative expenses (93) (93) Operating result before depr. (EBITDA) 66 41 Depreciation (90) (89) Impairment (4)

• Capital gain/loss on fixed assets

7 (9) Operating result (EBIT) (22) (57) Net finance (53) (46) Taxes (5) Net result (75) (108)

Financials

¹ Equity method

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Quarterly figures¹

USD mill

50 100 150 200 250 300 350 2012 2013 2014

USD mill

Gross Revenue

5 10 15 20 25 30 35 40 45 2012 2013 2014

USD mill

EBITDA

• Stable gross revenue
• EBITDA improvement continues, USD 34 million in 4Q14 compared to

USD 31 million in 3Q14

• Stable gross revenue
• EBITDA improvement continues, USD 34 million in 4Q14 compared to

USD 31 million in 3Q14

Financials

¹ Proportional consolidation method

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Quarterly figures

USD mill

11 ‐6 ‐15 ‐5 8 ‐15 ‐25 23 5 ‐23 ‐99 5

• 120
• 100
• 80
• 60
• 40
• 20

20 40 2012 2013 2014

USD mill

Operating Result (EBIT)¹

• Other financial items negative USD 10 million

related to unrealized loss on derivatives not treated as hedge accounting

• Net interest includes prior periods adjustments of

USD 1 million

• Other financial items negative USD 10 million

related to unrealized loss on derivatives not treated as hedge accounting

• Net interest includes prior periods adjustments of

USD 1 million

‐8 ‐9 ‐9 ‐9 ‐9 ‐7 ‐7 ‐9 ‐9 ‐9 ‐9 ‐11 ‐9 ‐3 ‐7 7 ‐1 ‐15 ‐6 1 ‐5 ‐10

• 25
• 20
• 15
• 10
• 5

5 10

USD mill

Net Finance²

Net interest Other financial/currency

2012 2013 2014

Financials

¹ Proportional consolidation method ² Equity method

haallooo

• ‐4

‐13 ‐22 ‐28 ‐2 ‐26 ‐39 9 ‐9 ‐40 ‐102 ‐18

• 120
• 100
• 80
• 60
• 40
• 20

20 2012 2013 2014

USD mill

Net Result

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Results per segment¹

4Q14 3Q14

USD mill Chemical tankers Tank terminals LPG/ Ethylene Chemical tankers Tank terminals LPG/ Ethylene

Gross revenue 247 24 4 263 23 7 EBITDA 30 2 1 26 4 1 EBIT 5 (1) 1 3 (5) 7

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Gross revenue EBITDA Assets

4Q14

Chemical tankers Tank terminals LPG/Ethylene

Financials

¹ Proportional consolidation method

• 50

50 100 150 200 250 300 350 05 06 07 08 09 10 11 12 13 14

USD mill

EBITDA¹

Chemical tankers Tank terminals LPG/Ethylene

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Income statement¹ – 4Q14 chemical tankers

USD mill

4Q14 3Q14 Gross revenue 247 263 Voyage expenses (117) (122) TC expenses (41) (45) Operating expenses (40) (44) General and administrative expenses 2 (18) (25) Operating result before depr. (EBITDA) 30 26 Depreciation (21) (24) Impairment (4)

• Operating result (EBIT)

5 3

Financials

¹ Proportional consolidation method

2 Including corporate functions

• Impairment of USD 4 million related to Bow Pilot sold in January 2015
• Change of pension schemes resulting in an income of USD 10.9 million
• Provisions for severance payments of USD 5.1 million
• Realized bunkers hedging derivatives impacted the results negatively by USD 16.6 million
• Impairment of USD 4 million related to Bow Pilot sold in January 2015
• Change of pension schemes resulting in an income of USD 10.9 million
• Provisions for severance payments of USD 5.1 million
• Realized bunkers hedging derivatives impacted the results negatively by USD 16.6 million

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Vessel operating expenses - chemical tankers

2,000 4,000 6,000 8,000 10,000 12,000 05 06 07 08 09 10 11 12 13 14 USD

USD / day, total USD/day, crew Financials

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Bunker development

71.1 72.3 65.9 66.4 52.3 (4.7) (4.2) (3.9) (3.2) 2.7 (1.1) (0.4) (0.7) (0.2) 16.6 65.3 67.7 61.3 63.0 71.6

(30) (20) (10)

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20 30 40 50 60 70 80 4Q13 1Q14 2Q14 3Q14 4Q14

USD mill

Net Bunker Cost

Bunker purchase Bunker clauses Bunker hedging Net bunker cost

100 200 300 400 500 600 700 800 10 11 12 13 14 15

USD/mt

Platts 3.5% FOB Rotterdam

hallooooo

• Net bunker cost in 4Q14 was USD 565 per tonne

before hedging

• About 50% of the 2015 exposure is hedged at

an average of USD 525 per tonne

• Bunker clauses in CoAs cover about 50% of the

exposure

• Net bunker cost in 4Q14 was USD 565 per tonne

before hedging

• About 50% of the 2015 exposure is hedged at

an average of USD 525 per tonne

• Bunker clauses in CoAs cover about 50% of the

exposure

Financials

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Income statement¹ – 4Q14 tank terminals

USD mill

4Q14 3Q14 Gross revenue 24 23 Operating expenses (17) (14) General and administrative expenses (5) (5) Operating result before depr. (EBITDA) 2 4 Depreciation (9) (8) Impairment (reversal) 5

• Capital gain/(loss)

(1) Operating result (EBIT) (1) (5)

Financials

¹ Proportional consolidation method

Partial reversal of impairment of USD 5 million related to Odfjell Terminal (Rotterdam) Partial reversal of impairment of USD 5 million related to Odfjell Terminal (Rotterdam)

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Tank terminals EBITDA – by geographical segment

‐41 14 14 9

• 50
• 40
• 30
• 20
• 10

10 20 Europe North America Asia Middle East

USD mill

EBITDA 2014

EBITDA Tank Terminals by geographical segment 4Q14 3Q14 Europe (7) (6) North America 3 3 Asia 3 4 Middle East 2 2 Total EBITDA 2 4

• The tank terminal group delivered an EBITDA of USD

2 million in 4Q14

• The results were in line with previous quarter
• The tank terminal group delivered an EBITDA of USD

2 million in 4Q14

• The results were in line with previous quarter

Financials

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Balance sheet¹ – 31.12.2014

USD mill - Assets Ships and newbuilding contracts 1 284 Other non-current assets/receivables 84 Investment in associates and JV’s 393 Total non-current assets 1 761 Available-for-sale investments and cash 105 Other current assets 159. Total current assets 265 Assets held for sale 7 Total assets 2 032 Equity and liabilities Total equity 638 Non-current liabilities and derivatives 40 Non-current interest bearing debt 839 Total non-current liabilities 880 Current portion of interest bearing debt 326 Other current liabilities and derivatives 188 Total current liabilities 514 Liabilities held for sale

• Total equity and liabilities

2 032

• Cash balance of USD 105 million - excluding JV’s cash
• Net investment in tank terminals JV’s USD 331 million
• Unrealized loss on hedging derivatives with negative equity effect of USD 62.5 million
• Entered into a total return swap in December 2014 with expiry 19 March 2015
• Equity ratio 31.4%
• Cash balance of USD 105 million - excluding JV’s cash
• Net investment in tank terminals JV’s USD 331 million
• Unrealized loss on hedging derivatives with negative equity effect of USD 62.5 million
• Entered into a total return swap in December 2014 with expiry 19 March 2015
• Equity ratio 31.4%

Financials

¹ Equity method

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Debt development – 31.12.2014

• Debt repayments due in 2015 will be refinanced and will contribute poitively to
• ur cash holdings
• A significant portion of the balloon repayment maturing late 2015 will be

refinanced during first half of 2015

• NOK 600 million bond matures in December 2015

200 400 600 800 1,000 1,200 1,400 2014 2015 2016 2017 2018 2019

USD mill

Debt Portfolio

Ending balance Repayment

Financials

50 100 150 200 250 300 350 2015 2016 2017 2018 2019

USD mill

Debt Repayments

Secured loans Balloon Leasing NOK bond 12/15 NOK bond 12/17 NOK Bond 12/18

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Capital expenditure programme

In USD mill – per 31.12.2014

2015 2016 2017 2018 2019 Chemical Tankers, Odfjell share Hyundai Mipo, 2 x 46,000 dwt1) 28 Docking 20 18 17 17 17 Odfjell Gas, 100 % share2) Sinopacific, 4 x 17,000 cbm 90 63 Sinopacific, 4 x 22,000 cbm 25 84 70 Tank Terminals, 100% share Planned capex 73 54 32 7 5

Financials

1) Bow Triumph was delivered in January 2015 2) Odfjell (50%) is committed to inject up to USD 50 million in equity in 2015 - 2017

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Terminal projects and expansions

Operational review

hallooo

• Odfjell Terminals (Charleston) will be at full occupancy in 1Q15, including a ship/store

solution for one major customer

• The new tank pit in Houston (Bay 10) is under construction with expected completion in

4Q 2015, adding 17,170 cbm of tank capacity, increasing total capacity to 362,134 cbm

• The construction of the new Tianjin Terminal in China is progressing with mechanical

completion scheduled in 1Q15, with jetties already receiving all operating permit from the authorities

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Tank terminal capacity

200 400 600 800 1,000 1,200 1,400 1,600 1,800 Cubic Metres`000

Mineral oil storage Chemical storage Ongoing expansions

Current capacity 5,419,722 Ongoing expansions 479,570 Current capacity 5,419,722 Ongoing expansions 479,570 Total capacity in CBM (incl. related parties): Operational review

* Odfjell’s ownership share in the respective tank terminals is shown in percentage

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Odfjell Terminals (Rotterdam) – current status

Operational review

• EBITDA negative USD 7 million in 4Q14, Odfjell share
• Re-organisation and subsequent staff reduction have improved the cost base
• Commercial occupancy is 90% at the beginning of 2015
• Storage tanks supporting the PID distillation units re-commissioned as extended

ECA requirements in effect from 2015 will provide new contract opportunities

• Renewed product storage opportunities on contango pricing
• Gradually increase in commercial availble capacity from 550,000 cbm to 900,000

cbm during 2015

• The terminal received ISO certification in January; an important milestone on the

road to recovery

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Odfjell Gas Carriers

 Stronger results from underlying operation in 4Q  Positive contribution from continued long-haul activity  Satisfactory utilisation

Operational review USD mill

4Q14 3Q14 Gross revenue 4 7 EBITDA 1 1 EBIT 1 7

• Ownership share in 4Q14 is 50% compared to100% in 3Q14
• EBIT in 3Q14 includes a capital gain in excess of USD 6 million related the JV transaction
• Ownership share in 4Q14 is 50% compared to100% in 3Q14
• EBIT in 3Q14 includes a capital gain in excess of USD 6 million related the JV transaction

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hhhh hhhh Fleet development - last 12 months

Operational review

Fleet additions DWT Built Tanks Transaction January 2015 Bow Triumph 49 600 2015 Coated Owned October 2014 Bow Trident 46 600 2014 Coated Owned August 2014 Kristin Knutsen 19 152 1998 Stainless Short-term TC June 2014 Bow Tribute 46 000 2014 Coated Bareboat May 2014 UACC Mansouria 45 352 2013 Coated Short-term TC April 2014 Bow Trajectory 46 000 2014 Coated Bareboat April 2014 Bow Harmony 33 619 2008 Stainless Purchase March 2014 SG Friendship 19 773 2003 Stainless Medium-term TC

Short-term: Up to one year Medium-term: 1-3 years

Fleet disposals, owned DWT Built Tanks Transaction January 2015 Bow Pilot 6 008 1989 Stainless Sale Odfjell has no further chemical tankers on order, but has medium term time-charter contract s for future newbuildings on order by third parties Odfjell has no further chemical tankers on order, but has medium term time-charter contract s for future newbuildings on order by third parties

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Reducing cost and improving efficiency

• Announced 8 May 2014 a review of the business model in order to improve the

financial result through a more competitive cost structure

• In November 2014 we announced that immediate initiatives expected to effect

the bottom line by USD 50 million when fully implemented

• In January 9 the Board approved a complete restructuring plan
• When fully implemented end of 2016 it is estimated to improve the net results by

USD 100 million on a yearly basis

• Majority of the initiatives will be implemented throughout 2015

Project Felix

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Reducing cost and improving efficiency

• The cost savings initiatives are related to operating expenses, general and

administrative expenses, trade optimisation and bunker consumption

• Operating expenses and general and administrative expenses are expected to

account for in excess of 50% of the improved result

• Reduction of 86 positions at the office in Bergen – there will also be
• rganisational changes at offices abroad
• Severance payments are currently estimated to a total of USD 12 million of

which provisions of USD 5.1 million have been made in fourth quarter

• Change in pension schemes, USD 10.9 million recognized in 4Q14 results

Project Felix

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• 50

+50 G&A Net result 2014F OT profitability O Opex Bunker cost Potential net result after improvements Implications:

• Bunker cost

improvement

A B C D

Sustainable profitability in today's market implies a required profit improvement in excess of 100 MUSD

Sufficient for fleet renewal and dividend capacity

• Significant cost

reduction (25-30%)

• Cost reductions

within both general OPEX and crew

• Exit from

unprofitable trades

• Optimization of core

trades

Project Felix

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hhh h Project Felix implementation timeline

Aiming at realizing 88% of targeted improvements by end 2015

10 20 30 40 50 60 70 80 90 100 Oct. Feb. Jan. 34 % Jun. 79 % 54 % Nov. 75 % 81 % 81 % Sep. Dec. 100 % 80 % % of total

• Dec. 2016

Jul. May Aug. 69 % 61 % 88 % 60 % 43 % Mar. Apr.

Targeted improvements “run rate” (% of total)

2015

Project Felix

Through these changes we will initiate a route back to reach our goal of also being a profitable global provider of transportation of liquid chemicals Through these changes we will initiate a route back to reach our goal of also being a profitable global provider of transportation of liquid chemicals

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Market update – chemical tankers

• Activity and nominations under CoAs were stable in most areas
• ODFIX index up by more than 10%
• Time-charter result down 6% due to bunker hedging
• Spot trading in general was slow
• A strong clean market has removed some swing tonnage from the chemical space, it

also facilitates good back-hauls for our vessels

• Product flow related to industrial production (system cargos) remain strong, both

CoA and spot

Market update and prospects

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hhhhhh hhhhhh h Core Chemical Deep-sea Fleet 2004-2018

Orderbook and estimated demolition per 31 January, 2015

* Outphasing 30 years (Europe built) and 25 years (Asian built) Source: Odfjell FLEETBASE

Market update and prospects

• 8
• 4

4 8 1 , 2 1 , 6 2 ,

07 08 09 10 11 12 13 14 15 16 17 18

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• 6

. %

• 3

. % . % 3 . % 6 . % 9 . % 1 2 . % 1 5 . %

D e l i v e r i e s O r d e r b

• k

A c t u a l l y d e m

• l

i s h e d E s t i m . v e s s e l

• u

t p h a s i n g N e t f l e e t g r

• w

t h %

• f

y e a r

• s

t a r t f l e e t

Average annual net growth: 2004-2014: 7.1% 2015-2018: 4.8%

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Prospects

• Modest growth in world GDP expected in 2015, one of the main factors affecting
• verall chemical tanker demand
• The demand for chemical tanker services is firming going forward, with contracts of

affreightment being renewed at somewhat improved terms

• Although ordering of new chemical tankers has reduced drastically last quarter, the
• rderbook for stainless steel vessels is still close to 30% of current fleet. As a

consequence thereof, we expect the supply/demand imbalance to persist, at least through 2015

• Odfjell will have limited benefits by lower bunker prices in 2015
• First quarter in 2015 is expected to improve from the last quarter in 2014 for the

chemical tankers

• We expect improved results at Odfjell Terminals (Rotterdam) and continued stable

results from the other terminals for the next quarter

Market update and prospects

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Company representatives

Terje Iversen – CFO, Odfjell SE Email: Terje.Iversen@odfjell.com Phone: +47 932 40 359 IR – contact: Tom A. Haugen – VP Finance, Odfjell SE Email: Tom.Haugen@odfjell.com Phone: +47 905 96 944 Tore Jakobsen – CEO, Odfjell SE Email: Tore.Jakobsen@odfjell.com Phone: +47 908 49 190

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Thank you

For more information please visit our webpage at www.odfjell.com