Presentation of Q3 2013 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 Q32013 Highlights Tanker market Dry bulk market Finance • EBITDA of USD 11m (USD -11m in Q32012) and USD 71m for YTD (USD -41m) • Profit before tax of USD -40m, which is a USD 38m improvement y-o-y Q3 Results • Positive operating cash flows of USD 9m after full interest payments and USD 47m YTD • Effects materializing from the restructured time charter fleet and TORM’s cost program • Freight rates were at seasonally low levels although the product tanker segments benefitted from stronger market fundamentals Tanker • TORM well positioned for the market improvements • Q3 divisional EBITDA of USD 22m (USD -8m) and EBIT of USD -9m (USD -42m) • Freight rates for Panamax and Supramax stayed at depressed levels until the end of Q32013, where the seasonal restocking of especially iron ore in China commenced Bulk • Q3 divisional EBITDA of USD -11m (USD -3m) and EBIT of USD -12m (USD -4m) • Scaling down of bulk activities is continuing • Prices for modern tonnage is trending upwards Sale & Purchase • EBITDA forecast for 2013 is narrowed to positive USD 90-100m Guidance • Forecast on loss before tax is also narrowed to USD 110-120m for FY 2013 • TORM expects to remain in compliance with the financial covenants for 2013 3
Q32013 results Highlights Tanker market Dry bulk market Finance Financial highlights USDm Q3 2013 Q3 2012 2012 2011 2010 P&L • Q32013 EBITDA of USD 11m Gross profit 25 3 (93) 81 180 (USD -11m in Q32012), whereas EBITDA for Q1-Q32013 is USD Sale of vessels - - (26) (53) 2 71m or 112m better than same EBITDA 11 (11) (195) (44) 97 period of 2012 • Q32013 Profit before tax of USD Profit before tax (40) (78) (579) (451) (136) -40m, which is a USD 38m Balance improvement y-o-y • Operational result driven by Equity 190 358 267 644 1,115 – Gradually improving freight rates in product tanker NIBD 1,725 1,858 1,868 1,787 1,875 – Effects of TORM’s cost Cash and cash equivalents 31 13 28 86 120 program and the restructured time charter fleet Cash flow statement • Positive operating cash flow of Operating cash flow 9 6 (100) (75) (1) USD 9m after interest payments Investment cash flow 121 8 0 168 (187) Financing cash flow 124 2 42 (128) 186 4
Product tanker freight rates for large segments gained strength Highlights Tanker market Dry bulk market towards the end of Q32013 while MR rates on TC2 lost ground Finance Freight rates in ‘000 USD/day LR1 and LR2 • Positive effects in Q3: � Increased Middle East and North East Asia activity in second half of Q3 � Arbitrage opportunities into Europe due to refinery maintenance and low refinery-margins in Europe • Negative effects in Q3: � Initially weak naphtha export to Far East Asia � Owners continued to clean up LR2s after trading in dirty products (incl. crude) and thereby increasing tonnage supply MR • Positive effects in Q3: � US refineries replacing European refineries on exports to West Africa yielding longer ton-mile � Mexican Gulf export to Europe making the traditional TC2 route a backhaul • Negative effects in Q3: � Weak activity level in Asia � Tonnage supply 5 Source: Clarksons 22 Oct 2013. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MR: TC2 (Rotterdam->NY)
Highlights Tanker Division spot rates versus benchmarks Tanker market Dry bulk market Finance TORM spot vs. benchmark Q3 2013 (USD/day) TORM avg. Earning Benchmark (roundtrip) -19% +84% +39% 15,000 10,000 5,000 0 MR LR1 LR2 TORM spot vs. benchmark last 12 months (USD/day) TORM avg. Earning Benchmark (roundtrip) -14% +31% -3% 15,000 10,000 5,000 0 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 6 Source: Clarksons, Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) MR: TC2 (Rotterdam -> NY)
Refinery expansions favors long-haul product trades and is Highlights Tanker market Dry bulk market expected to outweigh slow oil demand growth Finance • US distillate exports surged 28% US distillate exports all-time high while gasoline imports declining y-o-y in Q3, supported by high refinery utilization and relatively ‘000 bbl/day Distillate exports Gasoline imports low domestic demand as well as 1,500 strong demand from Latin America 1,250 • Increased US winter heating fuel 1,000 demand may imply slightly slower export growth for ULSD 750 in Q4 • US gasoline imports continued to 500 declining, however, improved Q1 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q2 Q3 Q4 demand in Asia will allow 13 11 11 11 12 12 12 12 13 13 11 displaced imports to move to Asia Refinery expansions favoring tonne-mile Net distillation capacity additions and expansions, mbbl/day 2.5 • The opening of Saudi Arabia’s export-oriented Jubail refinery 2.0 with a capacity of 400,000 b/d will give a further boost to 1.5 product trade in 2014 Other 1.0 Middle East • Longer-haul product movements 0.5 Latin America are favored by expected closure India & other Asia of non-competitive refining 0.0 China capacity in the Atlantic and -0.5 Pacific basin Pacific Atlantic Basin -1.0 2013 2014 2015 2016 2017 2018 7 Sources: EIA, IEA, Torm Research
Modest 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) • Compound annual net growth LR2 LR1 MR Handysize 14 rate expected at 4.7% during 2013-14. This is higher than in 12 2012 but still relatively moderate in historical terms 10 • Net fleet growth is expected to pick up in 2014 reflecting a 8 recent surge in MR and LR2 6 ordering activity • Scrapping will mostly impact 4 Handysize leading to a near- zero fleet growth 2 0 -2 -4 2010 2011 2012 2013E 2014E Note: Increase calculated basis number of vessels. The number of vessels beginning of 2013 was: LR2 219, LR1 341, MR 1,293, Handy 685 Note: Net fleet growth: Gross order book adjusted for expected scrapping 8 Source: Torm Research
Product tanker vessel prices increasing with S&P activity Highlights Tanker market Dry bulk market Finance Vessel price development • In terms of capacity, product USDm tanker ordering activity increased MR - Newbuilding by almost 7% in Q3 compared to MR - 5 yr. Second-Hand Q2 • MRs continue to account for the bulk of newbuilding orders, but emerging shift to LR2s • Increased demand at especially top-tier shipyards has pushed MR newbuilding prices up 3% during 2013 YTD USDm USDt • Equity backed interest for MRs remained relatively strong in Q3 MR - 5 yr. Second-Hand • Secondhand prices have MR 1Yr T/C increased approximately 8% during the first three quarters of 2013, amid improvements in time charter rates 9 Source: Clarksons
Dry bulk market started at low levels in Q3 2013 Highlights Tanker market Dry bulk market Finance Panamax freight rate development (USDt/day) • Spot rates moving between USD/day 5-9,000 in July and August • Seasonal restocking of especially iron ore to China drove higher Cape size freight rates, which positively affected the Panamax segment • Positive effects from grain season in the Mexican Gulf TORM spot vs. benchmark Q32013 (USD/day) TORM avg. Earning Benchmark +22% -9% 10 Source: Clarksons
Highlights High influx of dry bulk tonnage affecting vessel prices Tanker market Dry bulk market Finance Net fleet growth y-o-y as percent of exiting fleet primo 2013* 30 20 10 0 2012 2013 order 2014 order Cape P-PMX PMX SMX Handy Panamax newbuilding and second-hand prices (USDm) * Calculated basis dwt. Number of vessels primo 2013: Cape 1,393; P-PMX 467; PMX 1,685, SMX 2,892; Handy 3,357. 11 Source: TORM Research, Clarksons
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