Odfjell SE - Investor presentation June 2020
Today’s agenda Timer Topic Representative 09:00 – 09:30 Strategy update Kristian Mørch, CEO Odfjell SE 09:30 – 09:50 Finance strategy Terje Iversen, CFO Odfjell SE 09:50 – 10:10 Market update Bjørn Kristian Røed, Research Odfjell SE 10:10 – 10:15 Final remarks Kristian Mørch, CEO Odfjell SE 10:15 – 10:30 Q&A 2 2
Introduction Strategy update ESG Tank Terminals Capital Allocation Key highlights and operational update Results Good start to the year. Based on the development so far, we expect 2Q20 results to be better than the 1Q20 results The market Spot market slightly softer, but activity remains good. CPP has helped us in 1Q/2Q COA COA rates continue to be renewed at higher rates, and our COA coverage remains at about 50%. Overall structure of our COA portfolio has strengthened coverage Our We continue to operate safely, with high utilisation of our ships and terminals and we have not yet detected slips in quality of service due to Covid-19 performance Our Recent cost cutting and efficiency gains mean we have a very competitive platform which can now focus on OPERATIONS without distractions focus Finance We have taken precautionary measures to build liquidity reserves due to the uncertain outlook driven by Covid-19 Our platform Our performance during these unprecedented times has shown the resilience and the competitive advantage of our operational platform 3
Introduction Strategy update ESG Tank Terminals Capital Allocation Covid-19 has been a disruptive factor testing the strength of our platform – We have so far been largely unaffected by challenges created by covid-19 1 2 Global platform Ship Management 3 COA coverage 4 Adaptable TC fleet 5 Cargo flexibility TC-in vessels Pool vessels 58% 60% 56% 60 30 53% 51% 50% 25 50 20 40 15 30 10 20 5 10 0 4Q- 1Q- 2Q- 3Q- 4Q- 1Q- 2Q- 3Q- 4Q- 1Q- mai- 0 2015 2016 2017 2018 2019 2020 17 18 18 18 18 19 19 19 19 20 20 Global operations with vessels In-house ship management for High enough to give protection TC vessels switched by pools Carries 600 different products in all main ports at all times part of our fleet from weaker markets… and further TCs can be redelivered per year… Local knowledge from 15 Deep knowledge of our vessels …Low enough to target Pool vessels gives Odfjell zero Can swing into various products offices worldwide that can be monitored remotely cargoes with best returns downside and exposure to upside if economics are stronger Odfjell relative performance: Odfjell earnings, ODFIX 160 Chemical tanker spot earnings index (midcycle = 100) 140 120 100 80 60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Odfjell, Clarksons Platou Securities 4
Introduction Strategy update ESG Tank Terminals Capital Allocation The economic downturn in 2008-09 showed resilient demand for chemical tankers, Fundamentals looks likely to support our markets in the event of a new downturn Chemical tanker demand during 2008-2009 economic recession Chemical tanker demand development post Covid-19 pandemic Organics Inorganics Vegoils Others Pandemic struck Asia that accounts for 49% of seaborne imports of chemicals first Outbreak Recovery well underway in Asia supporting seaborne trade of chemicals +3% 191 timing Regional differences are in general seen as supportive to seaborne trade 180 179 12 176 12 18 14 56 55 51 53 2008/09 economic crisis was structural, 2020 crisis due to “self-imposed” lockdowns GDP 2008/09 recovery was quicker in Asia than in the western hemisphere recovery 27 IMF forecast 2021 GDP growth of 5.8% driven by eased lockdowns and stimulus 25 25 27 96 The weak chemical tanker market post 2008/09 was supply driven, not demand driven 88 Supply 86 81 Fleet growth in 2008 and 2009 was 15.4% and 14.9%, respectively growth Fleet growth in 2020 and 2021 is estimated to 1.4% and 0.4%, respectively 2007 2008 2009 2010 5 Source: ICIS, Odfjell
Introduction Strategy update ESG Tank Terminals Capital Allocation Despite uncertain times, our long term strategy remains intact but we are adapting our short term priorities Key focus areas driven by Covid-19 uncertainties Keep everyone safe and healthy QHSE Keep scheduled maintenance to minimum Keep entire fleet and terminals operational Keep delivering to our customers OPERATIONS Fill the ships and collect our freight Accelerate refinancing DE-RISK Increase liquidity to eliminate bond refinancing risk Reduce capex and spending Keep distractions to a minimum FOCUS Keep engagement levels high 6
Introduction Strategy update ESG Tank Terminals Capital Allocation ESG has always been a focus in Odfjell and we have consistently delivered improvements. ESG will continue to be a vital part of our strategy Strategy Environmental Social Governance Sustainability is included as an integral Odfjell have a clear policy on anti- Energy efficency of our fleet has improved Odfjell do not compromise on safety part of the Odfjell Strategy, with a clear more than 30% since 2009 corruption and integrity framework based on statement of «Our Impact» together with Our last LTI was in August 2019 the UK Bribery act Vision, Mission and Commitment EEOI reduced by more than 20% since 2008 Mandatory training and signing of Code of All vendors have signed our corporate Our first sustainability report was Conduct and anti-corruption policies for all Ranked number 1 among chemical tankers conduct principles where we have clear released in 2018 and we have since then operators on fleet average EVDI rating since demands on issues like safety, ethics, human our employees increased reporting on key ESG related vs 2008 baseline rights, discrimination and others topics based on high demand and growing Odfjell is a member of the Maritime Anti- attention Corruption Network and the ‘’Say-no’’ Ranked number 2 among chemical and Odfjell has a gender diversity programme campaign is implemented on all our vessels product tankers operators on owners with a ESG has always been a core focus area share of fleet with EEDI improvement Odfjell is a signatory to the UN Global for Odfjell. The higher attention on these Compact and supports all the ten principles, Odfjell supports and follow the factors from the finance community is recommendation on ship recycling Fuel-cell project to be piloted on an Odfjell where number 3 to 6 concerns labor rights welcomed ship in 2021. This is the first of its kind 7
Introduction Strategy update ESG Tank Terminals Capital Allocation Odfjell Terminals US has secured a refinancing of its debt facility that enables the terminal to execute on its growth potential Odfjell Terminals Houston Phase 1: Bay 17 Phase 2: Bay 13 Phase 3: The Point (partly financed) Current capacity: 380k cbm, 119 tanks Capex plan: Bring three tanks back Capex plan: New speciality chemical Plan: New speciality chemical tanks into service tanks servicing truck, rail, ship and barge servicing truck, rail, ship, barge and Built: 1983 modalities pipeline modalities Construction period: 2019-2020 Capacity growth potential: 180k – 200k cbm Planned new capacity: 30k – 35k cbm Planned capacity: 150k – 165k cbm Capex projection range (Odfjell SE 2019 EBITDA (Odfjell SE share): USD 19 mill share): USD 1.8 – USD 2.5 mill FID to be concluded shortly Two deep water docks Estimated EBITDA (Odfjell SE Construction period: 2021-2022 FID to be taken when anchor customer share): USD 0.4 – USD 0.5 mill signed and attractive returns secured Capex projection range (Odfjell SE share): USD 23 – USD 25 mill Construction period: 2022 – 2026 Estimated EBITDA range (Odfjell SE Capex projection (Odfjell SE share): 8 share): USD 2.8 – USD 4.3 mill USD 88 – USD 113 mill
Introduction Strategy update ESG Tank Terminals Capital Allocation Capital Allocation priorities Odfjell Newbuildings fully funded and zero capex or investments plans beyond 2020. Any growth needs to be capital light and have limited effect on our balance sheet Tankers Odfjell To remain self-funded after successful refinancing. Growth is focused on our Houston terminal and any further accretive growth plans to be considered on Terminals a case by case basis De- Reduce our debt levels and ensure we reach our target of low break-even levels (Market dependent) leveraging Dividends Establish a fixed and sustainable dividend policy and return cash flow to shareholders (Market dependent) 9
Agenda Strategy update Finance strategy Market update Final remarks
Finance strategy Efficient capital structure... ...And meet relevant financial targets... ...That enables us to: Reduce debt Improved Equity ratio Have attractive capital resources Manage risk Lower daily break-even Optimise debt structure Accommodate operational strategy Have a competitive cost of capital Secure growth and flexibility Optimise debt structure according to collateral Flexible debt structure Lower cost of capital Secure attractive returns to shareholders Returns through improved ROIC Lower cost of equity Improved free cash flow to equity Having an efficient capital structure is key to ensure we succeed on our finance strategy 11
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