Presentation of Q3 2013 results Safe Harbor Statement Matters - - PowerPoint PPT Presentation

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Presentation of Q3 2013 results

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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.

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Highlights for Q32013

Q3 Results Tanker Bulk Guidance for FY 2013

• 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
• 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

• TORM well positioned for the market improvements
• Q3 divisional EBITDA of USD 22m (USD -8m) and EBIT of USD -9m (USD -42m)
• EBITDA forecast for 2013 is narrowed to positive USD 90-100m
• Forecast on loss before tax is also narrowed to USD 110-120m
• TORM expects to remain in compliance with the financial covenants for 2013
• 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

• Q3 divisional EBITDA of USD -11m (USD -3m) and EBIT of USD -12m (USD -4m)
• Scaling down of bulk activities is continuing

Highlights Finance Tanker market Dry bulk market

Sale & Purchase

• Prices for modern tonnage is trending upwards

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Q32013 results

Financial highlights

• Q32013 EBITDA of USD 11m

(USD -11m in Q32012), whereas EBITDA for Q1-Q32013 is USD 71m or 112m better than same period of 2012

• Q32013 Profit before tax of USD
• 40m, which is a USD 38m

improvement y-o-y

• Operational result driven by

– Gradually improving freight rates in product tanker – Effects of TORM’s cost program and the restructured time charter fleet

• Positive operating cash flow of

USD 9m after interest payments

Finance Tanker market Dry bulk market Highlights

USDm Q3 2013 Q3 2012 2012 2011 2010 P&L Gross profit 25 3 (93) 81 180 Sale of vessels

• (26)

(53) 2 EBITDA 11 (11) (195) (44) 97 Profit before tax (40) (78) (579) (451) (136) Balance Equity 190 358 267 644 1,115 NIBD 1,725 1,858 1,868 1,787 1,875 Cash and cash equivalents 31 13 28 86 120 Cash flow statement Operating cash flow 9 6 (100) (75) (1) Investment cash flow 121 8 168 (187) Financing cash flow 124 2 42 (128) 186

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Product tanker freight rates for large segments gained strength towards the end of Q32013 while MR rates on TC2 lost ground

Source: Clarksons 22 Oct 2013. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MR: TC2 (Rotterdam->NY)

Highlights Finance Tanker market Dry bulk market

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

Freight rates in ‘000 USD/day

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Tanker Division spot rates versus benchmarks

Source: Clarksons, Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) MR: TC2 (Rotterdam -> NY)

5,000 10,000 15,000

• 14%
• 3%

+31% LR1 MR LR2

Benchmark (roundtrip) TORM avg. Earning

TORM spot vs. benchmark Q3 2013 (USD/day) TORM spot vs. benchmark last 12 months (USD/day) 5,000 10,000 15,000 +84%

• 19%

+39% LR1 LR2 MR

Benchmark (roundtrip) TORM avg. Earning

Note: Benchmarks are not one-to-one comparisons as they do not take broker commission, armed guards and low sulphur fuel cost into account

Highlights Finance Tanker market Dry bulk market

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Refinery expansions favors long-haul product trades and is expected to outweigh slow oil demand growth

Sources: EIA, IEA, Torm Research

• US distillate exports surged 28%

y-o-y in Q3, supported by high refinery utilization and relatively low domestic demand as well as strong demand from Latin America

• Increased US winter heating fuel

demand may imply slightly slower export growth for ULSD in Q4

• US gasoline imports continued to

declining, however, improved demand in Asia will allow displaced imports to move to Asia

• The opening of Saudi Arabia’s

export-oriented Jubail refinery with a capacity of 400,000 b/d will give a further boost to product trade in 2014

• Longer-haul product movements

are favored by expected closure

• f non-competitive refining

capacity in the Atlantic and Pacific basin

1,000 750 Q3 13 Q2 13 Q1 13 Q4 12 Q3 12 Q2 12 Q1 12 Q4 11 Q3 11 1,500 1,250 500 Q2 11 Q1 11

Gasoline imports Distillate exports Refinery expansions favoring tonne-mile US distillate exports all-time high while gasoline imports declining

‘000 bbl/day

Highlights Finance Tanker market Dry bulk market

Middle East Other 2017 2016 2013 2014 1.5 0.0 0.5

• 1.0
• 0.5

2.5 2015 Latin America Atlantic Basin Pacific China India & other Asia Net distillation capacity additions and expansions, mbbl/day 1.0 2018 2.0

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Modest supply outlook for the product tanker fleet

• 4
• 2

2 4 6 8 10 12 14 2014E 2013E 2012 2011 2010 Handysize MR LR1 LR2 Net fleet growth y-o-y in % of total fleet (no. of vessels)

Highlights Finance Tanker market Dry bulk market

• Compound annual net growth

rate expected at 4.7% during 2013-14. This is higher than in 2012 but still relatively moderate in historical terms

• Net fleet growth is expected to

pick up in 2014 reflecting a recent surge in MR and LR2

• rdering activity
• Scrapping will mostly impact

Handysize leading to a near- zero fleet growth

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 Source: Torm Research

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Product tanker vessel prices increasing with S&P activity

• In terms of capacity, product

tanker ordering activity increased by almost 7% in Q3 compared to 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

• Equity backed interest for MRs

remained relatively strong in Q3

• Secondhand prices have

increased approximately 8% during the first three quarters of 2013, amid improvements in time charter rates

Source: Clarksons

USDm MR - 5 yr. Second-Hand MR - Newbuilding USDm MR - 5 yr. Second-Hand USDt MR 1Yr T/C

Vessel price development

Highlights Finance Tanker market Dry bulk market

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Dry bulk market started at low levels in Q3 2013

Source: Clarksons

Panamax freight rate development (USDt/day)

Highlights Finance Tanker market Dry bulk market

TORM spot vs. benchmark Q32013 (USD/day) +22%

• 9%

Benchmark TORM avg. Earning

• 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

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High influx of dry bulk tonnage affecting vessel prices

* Calculated basis dwt. Number of vessels primo 2013: Cape 1,393; P-PMX 467; PMX 1,685, SMX 2,892; Handy 3,357. Source: TORM Research, Clarksons

Finance Tanker market Dry bulk market Highlights

Panamax newbuilding and second-hand prices (USDm) Net fleet growth y-o-y as percent of exiting fleet primo 2013*

10 20 30 2014 order 2013 order 2012

SMX PMX P-PMX Cape Handy

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TORM has a fully integrated business model

TORM has maintained a fully integrated business model… 2 4 6 8 10 12 14 16 18 20 22 24

• 36%

2012 2011 2010 2009 2008 2013 Q1-Q3

Finance Tanker market Dry bulk market Highlights

… but TORM’s cost program has trimmed admin expenses significantly

• Admin. expenses (quarterly avg. in USDm)
• TORM has a fully integrated

business model to obtain highest possible

• trading flexibility
• earning power
• TORM manages
• ~110 vessels commercially
• 65+ vessels technically
• Global reach ensures proximity

to customers

• Outsourced technical and

commercial management would affect other line items of the P&L

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TORM’s financial position by 30 September 2013

Finance Tanker market Dry bulk market Highlights

Newbuilding CAPEX

• TORM has no newbuildings on order

Debt situation

• TORM has net debt of USD 1.7bn incl. drawn part of working capital facility
• TORM has restructured its debt profile
• A minimum instalment schedule exists from Q32014 and onwards (cash sweep

mechanisms in place) USD bn, as of Mar. 2013 Liquidity

• As at 30 September 2013, TORM’s available liquidity was USD 99m consisting of

USD 31m in cash USD 68m in undrawn working capital facility 1.7 1.6 0.1 2013 0.0 2016 2015 0.1 2014* Total

* Minimum installments incl. repayment of drawn part of working capital facility

Costs

• Positive effects from the restructured time charter fleet and the Company’s cost

program continues

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TORM’s forecast for 2013

Finance Tanker market Dry bulk market Highlights

2013 forecast Earnings sensitivity for 2013 Coverage per 30 September 2013 0% 3% 20% 13% 12% 55% 2013 2014 2015

Tanker Division Bulk Division

Rates (USD/day) 14,003 11,558 15,708 18,140 14,496 18,287 USDm Change in freight rates (USD/day) Segment

• 2,000
• 1,000

1,000 2,000 Tankers

• 9
• 5

5 9 Bulk

• 1

1 Total

• 10
• 5

5 10 Forecasts for 2013 Total, USDm EBITDA 90 to 100 Profit before tax

• 110 to -120

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Appendix

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Seafarers: ~2,900

• 1,400 Indian seafarers
• 1,150 Filipino seafarers
• 250 Danish seafarers
• 100 Croatian seafarers

TORM Offices: ~300 A world leading product tanker company

• A leading product tanker owner
• Presence in dry bulk as
• perator
• 124 years of history

Listed on NASDAQ OMX Copenhagen Key facts Global footprint based on regional power and presence TORM employees:

TORM at a glance

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Product tankers have coated tanks and have specially designed cargo systems with flexibility to transport a wide range of different products

11

Oil product supply chain Exploration Transportation Refining Transportation Storage/distribution

Crude

• ils

~14% Fuel oils ~12% Diesels ~7% Gas oils / Gas-

• lines

~38% Karo- senes / Jet fuel ~9% Clean conden- sates ~3% Naph- thas ~15% MTBEs ~0%

• Veg. oils

~1% Biofuel ~0% Ethanol ~0% ”Dirty products” Less refined ”clean products” More refined ”clean products”

Percentages = TORM volumes for 12 months period in 2011-2012

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Management team with an international outlook and many years of shipping experience

Executive management Jacob Meldgaard

• CEO of TORM since April 2010
• Previously Executive Vice President of the Danish shipping company NORDEN where he was in

charge of the company’s dry cargo division

• Prior to that he held various positions with J. Lauritzen and A.P. Møller-Mærsk
• More than 20 years of shipping experience

Mads Peter Zacho

• CFO of TORM since September 2013
• Previously CFO of the Danish shipping company Svitzer, a member of the A.P. Moller-Maersk Group

and prior to that Deputy Head of Group Finance with A.P. Moller Maersk

• Prior being recruited to A.P. Moller Maersk he was with Nordea in Copenhagen
• In shipping since 2004

Tina Revsbech

• Head of Tanker Division

Claus U. Jensen

• Head of Technical Division

Christian Riber

• Head of Human Resources

Lars Christensen

• Head of Sale & Purchase

Division Executive Management Senior Management Christian Søgaard-Christensen

• Head of IR and Corp. Support

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TORM has completed the restructuring with banks and time charter partners on 5 November 2012

Banks Maturities for all debt amended to 31 December 2016 *** Majority owners of the Company New capital USD 100m in working capital over two years Newbuilding program Elimination of newbuilding program completed 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 T/C-in partners T/C-rates adjusted to market level or contracts terminated *** Co-owners of the Company Compre- hensive finance solution for TORM

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The TORM share

TORM’s shares are listed on NASDAQ OMX Copenhagen under the ticker TORM In July 2013, TORM delisted the ADR-program from NASDAQ Capital Markets, USA, (ticker “TRMD”) Shares

• One class of shares, each carrying one vote
• Share capital of 728m shares of DKK 0.01 each

For further company information, visit TORM at www.torm.com Share information Ownership structure (30 September 2013*) 5.5% 6.2% 11.3% 11.5% 13.7% 51.8% DBS Bank Deutsche Bank Nordea Bank Danske Bank HSH Nordbank Other

* Based on public filings

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Industry cooperation and transparency is key to TORM’s Corporate Social Responsibility

Set climate targets:

• 20% reduction of CO2 emissions pr. vessel by 2020

(2008 = index 100)

• 25% reduction of CO2 emissions from offices per

employee by 2020 (2008 = index 100)

• TORM has published Environmental / CSR reports since
• 2008. As of 2011, our reporting is purely online

See: http://csr.torm.com/ Next reporting is end March 2014 Transparency is key…

• Danish Shipowners’ Association -

As part of DSA,TORM is pushing for international regulation and standards on e.g. emissions through the International Maritime Organization

• Maritime Anti Corruption Network –

TORM is founding member of a global business network working towards a maritime industry free of corruption that enables fair trade

• UN Global Compact –

TORM became signatory to the UNGC in 2009 as the first Danish shipping company

• For optimal comparability

and transparency, TORM reports on emissions as part

• f the Carbon Disclosure

Project TORM is actively participating in…

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Detailed key figures overview

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USDm Q1-Q32013 2012 2011 2010 2009 2008 Revenue 799 1,121 1,305 856 862 1,184 EBITDA 71 (195) (44) 97 203 572 Profit/(loss) before tax (86) (579) (451) (136) (19) 360 Balance Total assets 2,103 2,355 2,779 3,286 3,227 3,317 Equity 190 267 644 1,115 1,247 1,279 NIBD 1,725 1,868 1,787 1,875 1,683 1,550 Cash and cash equivalents 31 28 86 120 122 168 Cash flow statement Operating cash flow 47 (100) (75) (1) 116 385 Investment cash flow 105 168 (187) (199) (262) Financing cash flow (150) 42 (128) 186 37 (59) Financial related key figures EBITDA margin 9%

• 17%
• 3%

11% 24% 48% Equity ratio 9% 11% 23% 34% 39% 39% Return on invested capital (ROIC)

• 3%
• 20%
• 14%
• 3%

2% 16%

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Large and modern fleet

PER 30.9.2013 # of vessels Current fleet Newbuildings and T/C-in deliveries with a period >= 12 months Q2 2013 Changes Q3 2013 2013 2014 2015 Owned vessels LR2 8.0

• 8.0

LR1 7.0

• 7.0

MR 39.0

• 5.0

34.0 Handysize 11.0

• 11.0

Tanker Division 65.0

• 5.0

60.0

• Panamax

2.0

• 2.0

Handymax

• Bulk Division

2.0

• 2.0
• Total

67.0

• 5.0

62.0

• T/C-in vessels with contract period >= 12 months

LR2 2.0

• 2.0

LR1

• MR

3.0

• 3.0

Handysize

• Tanker Division

5.0

• 5.0
• Panamax

7.0

• 1.0

6.0

• 1.0

Handymax 1.0

• 1.0

Bulk Division 8.0

• 1.0

7.0

• 1.0
• Total

13.0

• 1.0

12.0

• 1.0
• T/C-in vessels with contract period < 12 months

LR2 LR1 MR Handysize Tanker Division

• Panamax

14.0

• 9.0

5.0 Handymax 8.0

• 3.0

5.0 Bulk Division 22.0

• 12.0

10.0 Total 22.0

• 12.0

10.0 Pools/commecial management 19.0 6.0 25.0 Total fleet 121.0

• 12.0

109.0

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Earning days, T/C cost and coverage for 2013, 2014 and 2015

Owned days PER 30.9.2013 T/C-in days at fixed rate T/C-in days at floating rate Total physical days Coverage

2013 2014 2015 2013 2014 2015 Ow ned days LR2 651 2,904 2,880 LR1 590 2,497 2,495 MR 2,997 12,223 12,168 Handysize 962 3,920 3,883 Tanker Division 5,201 21,544 21,425 Panamax 168 682 726 Handymax

• Bulk Division

168 682 726 Total 5,369 22,226 22,151 T/C in days at fixed rate T/C in costs, USD/day LR2

• LR1
• MR

275 726 726 14,166 15,145 15,895 Handysize

• Tanker Division

275 726 726 14,166 15,145 15,895 Panamax 662 1,816 1,676 11,577 12,393 12,225 Handymax 147

• 9,594
• Bulk Division

809 1,816 1,676 11,216 12,393 12,225 Total 1,084 2,542 2,402 11,964 13,179 13,335 T/C in days at floating rate LR2 183 721 726 LR1

• MR
• Handysize
• Tanker Division

183 721 726 Panamax 16 48

• Handymax

91 363 363 Bulk Division 108 411 363 Total 291 1,132 1,089 Total physical days Covered days LR2 834 3,625 3,606 153 329 6 LR1 590 2,497 2,495 206 174

• MR

3,272 12,949 12,894 659 33

• Handysize

962 3,920 3,883 100 194

• Tanker Division

5,659 22,991 22,877 1,118 730 6 Panamax 846 2,546 2,402 426

• Handymax

239 363 363 175 363 363 Bulk Division 1,085 2,909 2,765 601 363 363 Total 6,744 25,899 25,642 1,719 1,093 369 Coverage rates, USD/day LR2 18% 9% 0% 15,911 15,111 14,496 LR1 35% 7% 0% 13,153 15,838

• MR

20% 0% 0% 13,859 13,360

• Handysize

10% 5% 0% 13,791 17,000

• Tanker Division

20% 3% 0% 14,003 15,708 14,496 Panamax 50% 0% 0% 10,494

• Handymax

73% 100% 100% 14,144 18,140 18,287 Bulk Division 55% 12% 13% 11,558 18,140 18,287 Total 25% 4% 1% 13,148 16,516 18,228 Covered, %

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