Q1 2018 Quarterly presentation Highlights first quarter 2018 - - PowerPoint PPT Presentation

Q1 2018

Quarterly presentation

May 7th 2018

2

Highlights first quarter 2018

Underlying positive volume development, especially for high & heavy Seasonally weak results with EBITDA adjusted of USD 128 million New Corporate Visual Identity and name; Wallenius Wilhelmsen ASA About USD 85 million in synergies confirmed Ocean results impacted by rate reductions, reduced HMG volumes, increased bunker cost and currency movements Landbased results down due to increased SG&A cost allocations

Agenda

Market and business outlook Summary and Q&A Business update Financial performance

Business update

by Craig Jasienski

5

Underlying positive volume development offset by reduced contracted Hyundai Motor Group (HMG) volumes

5 10 15 20 25 30 35 10 5 20 15 %

20,4%

Q3’15

25,3%

Q2’15

27,9%

Q3’17 Q2’17

26,1%

Q1’17

26,1%

Q4’17

26,0% 25,2%

18,4 17,7 16,7 16,2 18,2 16,2 16,8

25,4% 22,6%

Q2’16

25,7%

Q4’16 Q3’16

24,2% 24,9%

Q4’15 Q1’16

• 12%

+2% Q1’18 Million CBM

25,1%

Q1’15

24,0%

Q4’14

22,6%

Q3’14 18,7 19,4 19,5 15,5 18,2 15,2 15,9 18,0 Total prorated volumes Cargo mix 1) Prorated volume 2) Calculated based on unprorated volumes. Updated figures based on aligned cargo type definition and reporting across all Ocean units

• Underlying positive volume development offset by

reduced contracted HMG volumes (up 2% y-o-y)

• Increased volumes in all foundation trades excluding

AS-NA (especially USWC) where EUKOR had the largest reduction in contracted HMG volumes

• Adjusted for reduced contracted HMG volumes (0.5

million CBM) volumes were up about 5% y-o-y

• Volumes down 12% q-o-q, driven by seasonality and

contracted reduction in HMG volumes

• Continued positive development for cargo mix with a

high & heavy share of 27.9% in the first quarter, up from 26.1% in the previous quarter and 24.2% in same period last year

Business Update Financial Performance Market and Business Outlook Summary and Q&A

Volume and cargo mix development1 Million CBM and % Comments

6

Seasonal reduction in volumes across most foundation trades

WWL trade routes EUKOR trade routes ARC trade routes

Atlantic Shuttle

Q1 ’18 +18%

• 1%

3.4 2.9 Q4 ’17 Q1 ’17 3.4

EU/NA – Oceania1)

1.7 +3% 2.0

• 10%

Q1 ’18 Q1 ’17 Q4 ’17 1.8

EU - ASIA

+6% Q1 ’18 Q4 ’17

• 14%

3.4 2.9 2.8 Q1 ’17

Asia - EU

3.3 Q1 ’17

• 13%

2.9 Q4 ’17 2.7 Q1 ’18 +7%

Asia - NA

3.3 Q4 ’17 Q1 ’18

• 26%

2.4 Q1 ’17 3.3

• 26%

Asia - SAWC

Q1 ’17 Q4 ’17 1.2 1.2 Q1 ’18 +1% +22% 1.0

Note: Prorated volumes on operational trade basis in CBM 1) Including Cape sailings (South Africa) Business Update Financial Performance Market and Business Outlook Summary and Q&A

7

Positive development in net freight/CBM despite rate reductions due to changes in trade and cargo mix

80 85 90 95 100 105 Q2’14 Q3’17 Q2’17 Q1’16 Q1’15 Q3’16 Q4’15 Q2’15 Q4’14 Q3’14 Q4’17 Q2’16 Q1’17 Q3’15 Q1’18 Q4’16

• 4%

+1%

Note: Unprorated volumes excluding US flag operations 1) Net freight = Revenues adjusted for surcharge elements such as BAF, SRC, THC etc

• Net freight / CBM increased by about 1% in the first

quarter compared with the previous quarter due to changes in trade and cargo mix

• The largest volume reduction in the quarter was seen

in EU-AS and AS-USWC which are trades with relatively low net freight / CBM

• Furthermore, the increased high & heavy share also

had a positive impact on net freight / CBM

• On the other side, rate reductions from

contract renewals in 2017 impacted the net freight index negatively with about USD 5 million compared to last quarter and about USD 15 million compared to the same period last year

Business Update Financial Performance Market and Business Outlook Summary and Q&A

Net freight / CBM development1) Indexed to 100 per Q2 2014 Comments

8

133 vessels operated at the end of the first quarter

128 127 126 126 124 132 134 130 127

• 6

9 6 6 128 5 125 Q1’17 Q3’17

• 5

132

• 2

Q3’16 125 Q2’16 128 Q2’17 Q4’16 132 Q1’16 128

• 4

Q4’17 132 Q1’18 133 Short Term T/C In/Out Group Fleet

• Wallenius Wilhelmsen operated a core fleet of 124

vessels (851K CEU), representing around 20% of the global fleet in the first quarter

• In addition, the group continued to leverage the short-

term market and controlled a fleet of 133 vessels at the end of the first quarter, but with less capacity deployed during the seasonally slow January & February months

• The group retains flexibility to redeliver two vessels and

up to 19 vessels by 2022 (excl. short term time charters)

• Four Post-Panamax vessels are expected to enter

service in 2018 and 2019, with remaining installments

• f about USD 160 million

Business Update Financial Performance Market and Business Outlook Summary and Q&A

Fleet development # of vessels Comments

9

USD 86 million of the USD 120 million synergy target confirmed

86 Q4 2017 Q1 2018 120 Q3 2018 Q4 2018 Q2 2018 76 Q3 2017 55 Q2 2017 65

Ship Management Fleet Optimization SG&A savings Procurement Realized savings (annualized)

• At the end of the first quarter USD 86 million of the

USD 120 million synergy target was confirmed

• During the quarter about USD 10 million was added

to confirmed synergies, through a combination of fleet optimization, procurement and SG&A savings

• The annualized run rate for synergies were about

USD 80 million, up from about USD 65 million in the previous quarter

• The remaining part of the confirmed synergies will

gradually come into effect over the next 3-6 months

Business Update Financial Performance Market and Business Outlook Summary and Q&A

Confirmed and realized synergy development USD million Comments

10

Several key developments for landbased in the first quarter

• VSA results negatively impacted by high auto inventories

causing congestion and reduced operational efficiencies

• Melbourne terminal fully operational from January 2018
• Keen Transport being integrated into WW Solutions
• WW Solutions credit facility to be increased with USD 150

million to allow for further non-organic growth

• Investment and M&A pipeline remains interesting

Business Update Financial Performance Market and Business Outlook Summary and Q&A

Key highlights for landbased

11

New Corporate Visual Identity and name; Wallenius Wilhelmsen ASA

Business Update Financial Performance Market and Business Outlook Summary and Q&A

raig Jasienski

Financial performance

by Rebekka Herlofsen

13

Consolidated results – first quarter 2018

Q1 2018 Q4 2017 Proforma Q1 20171) Total income 968 1 036 890 Operating expenses (843) (859) (747) EBITDA 125 177 143 EBITDA adjusted 128 182 143 Depreciation (84) (84) (74) EBIT 41 93 60 Net financial items (5) (32) n/a Profit before tax 35 61 n/a Tax income/(expense) (25) 27 n/a Profit for the period 10 86 n/a EPS 0.02 0.20 n/a

• Seasonally weak results with EBITDA adjusted of

USD 128 million, down 10% y-o-y and 30% q-o-q primarily driven by the ocean segment

• Extraordinary costs of USD 3 million related to the

restructuring and realization of synergies

• Net financial items in the first quarter were

positively impacted by USD 30 million in unrealized interest rate derivatives and USD 3 million related to movements in currency

• Tax expense of USD 25 million in the first quarter,

primarily related to changes in deferred tax of USD 12 million and provision for withholding tax on dividends from EUKOR of USD 7 million

Financial Performance Market and Business Outlook Summary and Q&A Business update 1) Comparable numbers are pro forma numbers as if the transaction had taken place back in time

Comments

14

Increased bunker prices and unfavourable currency movements continue to impact the results negatively

409 372 329 320 335 240 260 280 300 320 340 360 380 400 420 Q3’17 Q2’17 Q4’17 Q1 ’18 Q1’17

• BAF in customer contracts are the main mechanism to manage risk
• The business is exposed to changes in the bunker price since BAF is

calculated based on the average price over a historical period, and then fixed during an application period, creating a “3 month” lag effect (negative if prices move up and positive if prices move down)

• Bunker prices continue to move upwards, and results in the first quarter

were negatively impacted with more than USD 10 million 91 94 94 98 100 80 85 90 95 100 Q1 2018 Q3’17 Q4’17 Q1’17 Q2’17

• Main currency for both revenues and costs in the operating entities are

USD with the majority of revenues in USD while 20% of the operating costs in non-USD currencies (mainly EUR, KRW, JPY, SEK and CNY)

• The USD has weakened lately causing a negative currency effect of about

USD 15 million y-o-y and about USD 5 million q-o-q

• As a main principle, financial instruments are not used to hedge currency

risk in the operating entities (assessment done when USD is historically strong vs. other currencies)

Bunker price development USD / ton HFO Currency development1 Basket of currencies Indexed to 100 per Q1 2017

1) Value weighted basket of currencies consisting of USD/EUR, USD/KRW, USD/JPY, USD/CNY and USD/SEK

USD / Basket of currencies

Financial Performance Market and Business Outlook Summary and Q&A Business update

15

750 832 775 798 719 748 Q1 ’18 Q4 ’17 Q3 ’17 +4%

• 10%

Q2 ’17 Q4’16 Q1’17 1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time 145 162 157 17 109 123 135 Q4’16 170 Q1’17 Q2’17 3 8 162 Q3 ’17 111

• 10%

Q4 ’17 160

• 31%

Q1 ’18 2 Extraordinary items

Total income

• Total income was USD 750 million, up 4% y-o-y due to

increased volumes and fuel compensation

• EBITDA adjusted of USD 111 million, down 10% y-o-y driven by
• Reduced contracted HMG volumes
• Strike at HMG production facilities
• Unfavourable currency movements (USD 15 million)
• Net bunker price increase (USD 10 million)
• Rate reductions (USD 15 million)
• Armacup stink bug challenges (USD 3 million)
• The negative impact from above factors was partly offset by

underlying strong volume development, increased high & heavy share and realization of synergies

• EBITDA in the first quarter was down 31% compared to the previous

quarter driven by the same factors as described above as well as seasonally lower volumes

Financial Performance Market and Business Outlook Summary and Q&A Business update

Total income and EBITDA ocean segment1, 2 USD million Comments EBITDA

Ocean segment – first quarter 2018

16

• Total income was USD 232, up 25% y-o-y primarily

driven by Keen Transport and the Melbourne terminal

• EBITDA was USD 20 million, down 10% y-o-y
• Increased SG&A allocations of USD 3 million
• Congestions and reduced operational efficiencies

at certain locations in North America (VSA) due to high inventories

• The negative impact of above factors was partly offset

by improved contribution from the terminals (Melbourne terminal fully operational from Jan 2018) and Keen transport (acquired 7 December 2017)

Landbased segment – first quarter 2018

Financial Performance Market and Business Outlook Summary and Q&A Business update 221 232 203 192 186 184 Q3 ’17

• 5

Q1’17 Q4’16 199 +6% +25% Q2 ’17 219

• 2

Q4 ’17 Q1 ’18 26 29 23

• 5

20 22 21 1 27 Q2 ’17 Q3 ’17 24 1 Q4’16

• 16%

Q4 ’17 24

• 10%

Q1’17 Q1 ’18 Extraordinary items 1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time

Total income Total income and EBITDA landbased segment1, 2 USD million Comments EBITDA

17

Cash flow and liquidity development – first quarter 2018

649 5 125 796 Liquidity Q4 2017 Other Liquidity Q1 2018 Net financing Taxes paid Interest and financial derivatives EBITDA CAPEX Dividend to non controlling interests Proceeds from sale

• f assets
• 17
• 42
• 6
• 148
• 50
• 14
• CAPEX of USD 50 million includes
• Purchase option for leased vessel (USD 26 million)
• Instalments for new buildings (USD 8 million)
• Dry docking costs (USD 9 million)
• Net financing of USD 148 million includes
• Regular instalments of USD ~100 million
• Early down payment of ship loans USD ~90 million

(refinanced in early April 2018)

• Drawdown on credit facilities (USD 37 million)
• EUKOR distributed USD 70 million in dividend in the

first quarter with USD 14 million to non controlling interest

Financial Performance Market and Business Outlook Summary and Q&A Business update

Comments Cash flow and liquidity development USD million

18

Balance sheet review – first quarter 2018

Non current assets 1.4 7.7 Current assets 6.3 1.6 Equity Non current liabilities 3.3 Current liabilities 2.8 7.7

• Total assets of USD 7.7 billion with equity ratio of

36.3%, up from 35.8% last quarter

• Net interest bearing debt of USD 2.98 billion,

stable compared with last quarter

• Continued high cash and liquidity position with

USD 649 million in cash and about USD 250 million in undrawn credit facilities

• Early repayment of vessel loans of about USD 90

million during the quarter (refinanced in early April)

Financial Performance Market and Business Outlook Summary and Q&A Business update

Assets Unaudited Balance Sheet 31.03.2018 USD billion Comments Equity & Liabilities

19

The legal and financial restructuring project finalized on time

New legal and funding structure

• Legal and funding structure consistent with

business unit structure in place

• New USD 445 million term loan and credit facility

to refinance vessel loans maturing in 2018 and 2019 and a revolving credit facility in WW Ocean

• Other loan agreements in WW Ocean have been

harmonized with the new facility agreement

• Main covenants for WW Ocean following the

refinancing process is minimum cash, positive working capital and loan to value clauses

Comments

Financial Performance Market and Business Outlook Summary and Q&A Business update

20

Debt maturity profile following financial and legal restructuring project

Financial Performance Market and Business Outlook Summary and Q&A Business update

Debt maturity profile after refinancing (per 4 April 2018) USD million

2021-> 2.035 2020 657 2019 644 2018 383

Credit facilities (drawn) Bonds Installments (bank loans and financial leases) Balloons (bank loans and financial leases)

21

Market and business outlook

by Craig Jasienski

22

Auto sales in the first quarter were up 2.6% y-o-y

Global light vehicle (LV) sales per quarter Global LV sales per main sales region1)

Source: IHS Markit 1) Size of circle indicates auto sales in Q1 2018

• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17%

South America Oceania West Europe

CAGR ’17-22 Q1’18 vs Q1’17

Middle East/Africa Indian Subcontinent Central Europe Japan/Korea Greater China East Europe North America ASEAN

EUR AM ME AF APAC

Q1 2016 22.8 22.3 Q2 2016 Q4 2017 23.6 Q2 2018 Q1 2018 23.9 Q3 2017 23.0 22.9 24.8 23.3 22.4 Q1 2017 Q3 2016 25.0 Q2 2017 Q4 2016 22.7

• 4.0%

Q4 2018 +2.6% 25.6 Q3 2018

• Sales in North America developed sideways y-o-y, but down 8.1% q-o-q (seasonality)
• Sales in Western Europe down 0.8% y-o-y, but was up about 16.8% q-o-q (seasonality)
• The Chinese market started the year with sales up 4.6% y-o-y (down 16% q-o-q) which

was considered positive given that the temporarily tax cut ended in December 2017

• Continued positive development for the Russian and Brazilian markets

Financial Performance Market and Business Outlook Summary and Q&A Business update

23

Auto exports in the first quarter were up 4.6% y-o-y

Global LV export per quarter Global LV export per main sales region1)

Source: IHS Markit 1) Size of circle indicates auto export in Q1 2018

• 18% -16% -14% -12% -10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 3% 25%

• 2%

26% 6% 5% 4% 1%

• 1%

2% 7% 0%

Middle East/Africa South America Greater China Europe

CAGR ’17-22

North America South Asia Japan

Q1’18 vs Q1’17

South Korea

AM EUR APAC ME AF

Q3 2018 3.9 Q2 2018 3.8 4.0 Q1 2018 3.7 Q1 2017 3.6 Q3 2017 3.7 Q4 2016 3.8 Q4 2017 3.8 Q2 2017 +4.6% Q4 2018

• 0.2%

3.7 Q2 2016 Q3 2016 Q1 2016 3.7 3.5 3.7

• Exports from NA increased 6.8% y-o-y and 4.2% q-o-q driven by Mexico
• European exports were up 6.7% y-o-y and 0.6% q-o-q.
• Japanese exports in the first quarter were up 6.5% y-o-y and down 2.4% q-o-q.
• Exports out of South Korea were up 0.9% y-o-y and 1.9% q-o-q.
• Chinese exports were up 34.6% y-o-y due to new export facilities, but flat q-o-q.

Financial Performance Market and Business Outlook Summary and Q&A Business update

24

Construction machinery markets remain very solid globally

Global construction and rolling mining equipment exports1

• 20%
• 15%
• 10%
• 5%

0% 5% 10% 15% 20% 25% 30% 35% 60k 30k 50k 40k 01/18 07/14 07/13 07/15 07/12 01/13 01/14 01/15 01/12 07/16 07/17 Machinery exports (Quantity avg. L12M) 01/16 01/17 Machinery exports (Growth L3M y-o-y %) Machinery export growth (L3M) Machinery exports (L12M)

Source: 1 IHS Markit | Global construction and rolling mining equipment exports (equipment valued >20 kUSD ) (Avg. units L12M (last 12 months) and L3M (last 3 months) y-o-y %). Data cut-off: 01.2018 2 Caterpillar Inc., Volvo AB, Komatsu Ltd., US Bureau of the Census, AIA, Dodge Data & Analytics, Eurostat, IHS Markit, CECE, AiGroup, NAB

Comments

• Global construction trade continues to strengthen, with imports

to North America and Oceania accelerating in the first quarter

• OEM majors continued to report broad-based geographical

demand in the first quarter, with strong order development across regions

• US construction spending edged up from the previous quarter,

leading non-residential indicators continued to signal expansion, and housing starts and permits increased again

• EU construction output declined in the period, but the Eurozone

construction PMI expanded and construction confidence strengthened in the quarter

• Australian construction activity continued expanding at multi-

year highs, with robust growth in the commercial and engineering sectors

Financial Performance Market and Business Outlook Summary and Q&A Business update

25

Global non-rolling mining machinery exports1 Mining machinery sales2

• Key commodity prices softened in the first quarter, but have since strengthened
• OEMs concluded another quarter of strong y-o-y sales growth in their mining divisions

with broad-based geographical demand, and order development remains positive.

+2% 3 633 3 392 4 291 Q317 4 208 Q118 Q116 2 957 +26% Q217 Q416 Q316 Q417 2 655 2 722 Q117 Q216 3 688 3 180 400 800 1 200 1 600

• 60%
• 40%
• 20%

0% 20% 40% 60% 80% 100% 01/14 07/16 07/13 07/15 01/17 07/14 01/13 07/12 01/12 01/18 01/16 Machinery exports (Quantity avg. L12M) 07/17 01/15 Machinery exports (Growth L3M y-o-y %) Machinery export growth (L3M) Machinery exports (L12M) Atlas Copco AB Caterpillar Inc. Sandvik AB

Mining equipment demand continues to recover on replacement needs

Source: 1 IHS Markit | Global non-rolling mining equipment exports (equipment valued >20 kUSD ) (Avg. units L12M (last 12 months) and L3M (last 3 months) y-o-y %). Data cut-off: 01.2018 2 Caterpillar Inc., Sandvik AB, Atlas Copco AB | Revenue, mining equipment divisions (MUSD (fixed rate) and growth y-o-y/q-o-q %) Financial Performance Market and Business Outlook Summary and Q&A Business update

26

Signs of a tightening supply-demand balance. However market rates remain distressed reflecting poorer earnings

Car Carrier Fleet Orderbook1 # vessels equal or above 4000 CEU Open Vessels and Time Charter Rates2 # of vessels and USD/day

Sources: 1Clarksons Platou, Sea-web, 2Clarksons Platou, 3Vessels equal or above 4000 CEU

10 12 2 1 29 4 14 Orderbook 2021 2018 2019 2020 Deliveries Confirmed Orders

• The current orderbook stands at 25 vessels3 with the delivery of five car carriers
• Current market rates do not justify new ordering activity
• Time charter rates continue to rise and no open 6000+ CEU vessels reported
• Still some overcapacity in the market, although somewhat improved

5 10 15 20 25 30 35 40 45 50 5 000 10 000 15 000 20 000 25 000 Number of vessels 6/17 2/17 10/16 9/16 12/16 5/16 8/16 4/16 4/17 3/16 5/17 3/17 8/17 6/16 10/17 11/17 1/17 12/17 7/16 9/17 11/16 7/17 1/18 7/15 3/15 8/15 1/16 12/15 6/15 2/16 11/15 10/15 9/15 5/15 4/15 3/18 TC Rate, $/day 2/18 5000 CEU 6500 CEU 2000-5999 CEU 6000+ CEU

Financial Performance Market and Business Outlook Summary and Q&A Business update

Summary and

• utlook

by Craig Jasienski

28

Outlook

Tonnage supply/demand balance continues to improve Positive volume development, especially for high & heavy Lower HMG volumes will continue to impact results However, market rates remain at a depressed level

Financial Performance Market and Business Outlook Summary and Q&A Business update

Increased realization of synergies will positively impact results

Thank you!