Presentation of Q1 2014 results
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 for Q1 2014 Highlights Tanker market Dry bulk market Finance • EBITDA of USD 21m (USD 36m) Q1 2014 • Impairment as consequence of vessel sales of USD 195m (USD 0m) Results • Loss before tax of USD -222m (USD -16m) • Positive operating cash flow of USD 10m (USD 11m) after full interest payments of USD 13m (USD 14m) • Freight rates in the seasonally strong Q1 were partly offset by limited arbitrage trades and continued low European demand Tanker • Divisional Q1 2014 EBITDA of USD 20m (USD 46m) • Freight rates were volatile but with a downward trend throughout Q1 Bulk • Divisional Q1 2014 EBITDA of USD 0m (USD -11m) • Agreement to sell 3 LR2 and 10 MR product tankers to entities controlled by Oaktree Sale & • Prices for modern tonnage trended upwards in Q1 2014, but with few transactions Purchase • EBITDA forecast for 2014 is narrowed to positive by USD 70-100m Guidance • Forecast on loss before tax is USD 260-290m for FY2014 • Results include impairment of USD 195m 3
Q1 2014 results Highlights Tanker market Dry bulk market Finance • Q1 EBITDA of USD 21m USDm Q1 2014 Q1 2013 2013 2012 2011 (USD 36m) P&L 33 50 150 (93) 81 Gross profit • Q1 Profit before tax of USD -222m (USD -16m) including 0 0 0 (26) (53) Sale of vessels impairments of USD 195m 21 36 96 (195) (44) EBITDA (USD 0m) (222) (16) (166) (579) (451) Profit before tax •Positive operating cash flow Balance of USD 10m after full interest (103) 255 118 267 644 Equity payments (USD 11m) 1,662 2,056 1,718 1,868 1,787 NIBD 18 17 29 28 86 Cash and cash equivalents Cash flow statement 10 11 68 (100) (75) Operating cash flow 49 (9) 93 0 168 Investment cash flow (70) (14) (161) 42 (128) Financing cash flow 4
Product tanker freight rates Highlights Tanker market Dry bulk market Finance Freight rates in ‘000 USD/day LR1 and LR2 • Continued oversupply from vessels having cleaned up during the year • Middle distillate arbitrages from East to West were limited • In Q1 2014, TORM beat available spot benchmarks for LR2 and LR1 with 20% and 43% respectively MR • Cold US winter increased domestic consumption thus hampering export volumes of clean product • Mild-European winter and low general demand led to softened freight rates • In Q1 2014, TORM beat available spot benchmarks for MR with 47% Source: Clarksons 1 March 2014. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MR: average basket of Rotterdam->NY, Bombay->Chiba, 5 Mina Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sidney
Highlights Tanker Division spot rates versus benchmarks Tanker market Dry bulk market Finance TORM spot vs. benchmark Q1 2014 (USD/day) TORM avg. Earning -2% +43% +47% Benchmark (roundtrip) +20% 15.000 10.000 5.000 0 Handysize LR2 MR LR1 TORM spot vs. benchmark last 12 months (USD/day) TORM avg. Earning Benchmark (roundtrip) +31% +20% +14% -1% 15.000 10.000 5.000 0 Handysize MR LR1 LR2 Note: Benchmarks are not one-to-one comparisons as they do not take broker commission, armed guards and low sulphur fuel cost into account Source: Clarksons, Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) MR: average basket of Rotterdam->NY, Bombay->Chiba, Mina Al Ahmadi->Rotterdam, Amsterdam->Lome, Houston->Rio de Janeiro, Singapore->Sidney 6
Demand outlook for the product tanker market Highlights Tanker market Dry bulk market Finance US exports of gasoline and distillates seasonally low in Q1 but up 14% y-o-y • Mild winter weather reduced European gasoil (incl. heating oil) ‘000 b/d demand in Q1 2014 • Extremely cold weather in USA cut transportation demand in Q1, resulting in lower USAC gasoline imports yet additional heating needs lifted imports of distillates • US distillate exports declined from elevated levels in 2H 2013 as more ULSD was shipped to the USEC • Asian naphtha imports increased in Q1 with especially flows from the Atlantic Basin surging Refinery expansions favoring tonne-mile • Longer-haul product movements Net distillation capacity additions and expansions, mbbl/day from increasing refinery capacity in the Middle East and India are favored by expected closure of non- competitive refining capacity and utilization cuts in Europe • Closure of refinery capacity in the Pacific basin is expected to support the intra-Asian trade Sources: EIA, IEA, TORM Research 7
Supply outlook for the product tanker fleet Highlights Tanker market Dry bulk market Finance Net fleet growth y-o-y in % of total fleet (no. of vessels) • The total product tanker fleet is forecasted to grow by 5.1% in 2014 and 4.7% in 2015 (in terms of no. of vessels), with the MR and LR2 segments leading the growth • Higher fleet growth in 2014 and 2015 reflects higher deliveries for all segments except for LR1 compared to 2013, although some delivery slippage is likely • Scrapping will mostly impact the Handysize segment Note: Increase calculated basis number of vessels. The number of vessels by the beginning of 2014 was: LR2 250, LR1 323, MR 1,324, Handy 650 Note: Net fleet growth: Gross order book adjusted for expected scrapping and delivery slippage 8 Source: TORM Research
Product tanker vessel prices Highlights Tanker market Dry bulk market Finance Vessel price development • Product tanker ordering activity USDm slowed down in Q1, posting a MR - Newbuilding 52% decline compared to Q4 MR - 5 yr. Second-Hand and a 26% decline compared to the same period a year ago (in terms of capacity) • Ordering activity for LR1s picked up while all other segments experienced a slowdown compared to the previous quarter • Prices for modern tonnage USDm USDt trended upwards in Q1 2014, but MR - 5 yr. Second-Hand with few transactions MR 1Yr T/C 9 Source: Clarksons
Dry bulk market Highlights Tanker market Dry bulk market Finance Panamax freight rates in ‘000 USD/day • During Q1/2014, the bulk market was volatile but trending downwards • The 1-year time charter rate remained steady at USD/day ~14,000 for a standard 75,000 dwt Panamax (although with limited number of fixtures) 10 Source: Clarksons
Highlights Dry bulk order book and vessel prices Tanker market Dry bulk market Finance Net fleet growth y-o-y as percent of existing fleet primo 2014* 30 20 10 0 2015F 2012 2013 2014F SMX Cape P-PMX PMX Handy Panamax newbuilding and second-hand prices (USDm) • Calculated basis dwt. Number of vessels primo 2013: Cape 1,468; P-PMX 523; PMX 1,964, SMX 3,047; Handy 2,920. Source: TORM Research, Clarksons 11
TORM has a fully integrated business model Highlights Tanker market Dry bulk market Finance TORM has maintained a fully … but TORM’s cost program has trimmed admin integrated business model… expenses significantly Admin. expenses (quarterly avg. in USDm) • TORM has a fully integrated 0 2 4 6 8 10 12 14 16 18 20 22 24 business model to obtain the highest possible � 2008 trading flexibility � earning power 2009 • TORM manages � ~100 vessels commercially 2010 � 65+ vessels technically 2011 • Global reach ensures proximity to customers 2012 • Outsourced technical and 2013 commercial management would affect other line items of -40% Q1 2014 the P&L 12
Highlights TORM’s financial position Tanker market Dry bulk market Finance • As at 31 March 2014, TORM’s available liquidity was USD 106m consisting of Liquidity � USD 18m in cash � USD 88m in undrawn working capital facility • TORM has no newbuildings on order Newbuilding CAPEX • TORM has a total debt of USD 1.68bn incl. drawn part of working capital facility Debt situation • 2014 debt repayment related to drawn part of working capital facility (USD 0.01bn) and repayment of debt related to vessels held-for-sale (USD 0.27bn) USD bn, as of Q1 2014 1.32 1.68 0.08 0.28 2014 2015 2016 Total • Positive effects from the restructured time charter fleet and the Company’s cost Costs program continue 13
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