Q2 Presentation August 9 th 2017 Craig Jasienski, President & - - PowerPoint PPT Presentation

Q2 Presentation

August 9th 2017

Craig Jasienski, President & CEO Rebekka Glasser Herlofsen, CFO

Agenda

2

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

BUSINESS UPDATE

by Craig Jasienski

3

Business update Q2 at a glance…

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

Still pressure on ocean rates Positive development for landbased continues Realization of synergies well on the way Volume, cargo and trade mix show positive development Organizational restructuring completed

Organizational restructuring completed

5

• Organizational restructuring completed with a ~20%

reduction in office staff

• USD 20 million in personnel related restructuring costs

accounted for in the second quarter, well below savings achieved

• Landbased separation in place, tasks from owners absorbed

and organizations from WW ASA and WWL AS merged

• Foundation for increased cooperation between WWL

Ocean and EUKOR established

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

Realization of synergies well on the way…

6

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

• Approximately half of the targeted annualized synergies have

been confirmed, through actions related to the organizational restructuring and procurement

• USD 5 million already realized in Q2 (annualized effect of

USD 20 million)

• The remainder of confirmed synergies gradually taking effect
• ver the next 3-9 months
• Realization of remaining synergies on fleet optimization, ship

management and IT carry a longer lead time

• USD 100 million synergy target within 2019 remains

Volume and cargo mix ix show posit itive development

7

Comments

• Ocean transported volumes up 12% q-o-q,

largely driven by seasonality:

• Increased exports out of Asia, mainly to Europe and

North America

• Increased exports from Europe to Asia
• Increased exports from Europe to Oceania
• Improved cargo mix with a high & heavy share
• f 24.8%, up from 23.2% q-o-q
• Ocean transported volumes up 6% y-o-y

primarily driven by higher volumes transported in foundation trades, in particular export from Asia to Europe Volume and cargo mix development

Million CBM and %

Business Update Financial Performance Market and Business Outlook Summary and Q&A 5 10 15 20 25 30 35 6 22 20 16 8 12 10 2 4 18 14 Q1’17 15.9 23% +6% Million CBM 17.8 19.4 18.0 18.2 Q2’15 18.3 24% 24% Q4’14 23% 20% Q2’14 25% Q1’15 Q3’15 Q3’14 18.7 25% 22% 20.5 Q4’15 19.6 15.2 % 24% Q1’16 21% 24% 16.8 16.1 Q2’16 24% Q3’16 +12% Q4’16 25% Q2’17 15.5 HH share of volumes Volume

WWL trade routes EUKOR trade routes ARC trade routes

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

Good seasonal l development in in all ll foundation trades

Atlantic Shuttle

3.0 Q2 ’16 2.9 Q1 ’17 3.3 +5%

• 10%

Q2 ’17

EU/NA – Oceania1)

+18% Q2 ’17 Q2 ’16 1.8 2.0 +12% Q1 ’17 1.7

EU - ASIA

+14% 3.2 Q1 ’17 Q2 ’17 2.8 Q2 ’16 3.1 +1%

Asia - EU

+22% +22% 2.7 Q1 ’17 2.7 Q2 ’16 Q2 ’17 3.3

Asia - NA

Q2 ’16 3.4 +5% Q2 ’17 3.4 Q1 ’17 3.3 +2%

Asia - SAWC

1.0 1.1 Q2 ’17 Q1 ’17 +16% Q2 ’16 0.9 +9%

Note: Prorated volumes on operational trade basis in CBM 1) Including Cape sailings (South Africa)

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

But there is is still ill sig ignif ificant pressure on rates

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

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

• Net freight / CBM development not only

impacted by rates, but also trade, customer and cargo mix

• There is still significant pressure on rates in

several tenders due to tough competition and customer procurement focus

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

Total fle leet is is 127 vessels ls, wit ith one deliv livery in in the second quarter

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Fl Flee eet de develo lopment

CEU in 1000, # of vessels

Co Comments

• WWL ASA operates approximately 20% of the global

car carrier fleet

• In Q2, two chartered-in vessels were redelivered to

external owners and a Post-Panamax newbuilding, “Morning Prosperity”, was delivered in June for EUKOR

• Regular chartering in and out of short term positions

continued throughout the quarter to balance capacity

• Four Post-Panamax vessels under construction and

expected to enter service between 2017 and 2019, with remaining installments of USD 170 million

• The group has the flexibility to redeliver three

vessels by end of 2017 and has 18 vessels on short term charters

125 127 128 127 130 134 133 137 139 140 143 147 146 20 40 60 80 100 120 140 160 180 1,000 800 600 400 200 Q3’15 917 897 Q2’15 900 Q4’14 886 924 Q2’14 Q3’14 CEU ‘000 934 # of vessels Q3’ 16 865 929 Q2’17 869 873 Q4’16 Q2’ 16 889 Q1’ 16 865 Q1’15 Q1’17 873 Q4’15

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

• Continued strong performance for technical services supported by stable volumes and high content

value adding services for VSA

• Build-up of auto inventories in the US continued in Q2 2017
• Terminals experienced improved performance in line with overall increase in ocean volumes with the

terminals in Baltimore, Port Hueneme, Pyeongtaek and Zeebrugge as the main positive contributors

• On the business development side several smaller positive developments took place
• Network expanded with three new yard management contracts (two in Mexico for VSA and one in Europe)
• Expansion of Oxnard VPC to facilitate growth with new and existing customers
• 25% of Vehicle Services South Africa (VSS) sold to local new partner to ensure compliance and improve

competitive position

• Interesting pipeline of investment and M&A opportunities for landbased

The positive development for landbased continues…

11

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

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Financial Performance

by Rebekka Glasser Herlofsen

Consolid idated result lts – second quarter

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• Extraordinary items in the second quarter include
• Merger accounting loss of USD 62 million
• Org. restructuring cost of USD 20 million
• Total income adjusted for the merger accounting loss

was USD 974 million, up 9% q-o-q and 6% y-o-y

• EBITDA adjusted for the extraordinary items was

USD 188 million, up 32% q-o-q

• ROCE in the second quarter was 6.0%3
• Underlying improvement in financial performance is

driven by higher transported volumes, reduced SG&A costs and the US flag operations, as well as improved results from the landbased business.

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

Co Comments

1) Adjusted for extraordinary items 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time 3) ROCE calculated as annualized EBIT adjusted for extraordinary items minus restructuring costs divided by average CE in the quarter

Co Cons nsol

• lid

idated resu esult lts - Tot

• tal

al inc ncome and and EBIT EBITDA1, 2

USD million

Total income EBITDA

912 62 890 913 869 919 Q2 ’17 974 +9% +6% Q1’17 Q3’16 Q4’16 Q2’16 82 31 143 143 162 Q1’17 188 Q2’17 179 Q3’16 Q2’16 Q4’16 +16% +32% Extraordinary items

Ocean segment – second quarter

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Tot

• tal inc

ncome and and EBIT EBITDA oce

• cean segm

egment1, 2

USD million

Co Comments

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

• Ocean income was USD 798 million, up 11%

since previous quarter

• EBITDA adjusted for extraordinary items

improved 32% q-o-q

• Increase in transported volumes, reduced

SG&A cost, lower net bunker costs and revenues from the US flag operations all contributed to the improved result

• Continued pressure on rates

Total income EBITDA

798 719 744 707 759 +11% Q2’16 +5% Q2 ’17 Q1’17 Q3’16 Q4’16 1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time 17 31 123 125 142 162 166 Q4’16 Q3’16 +14% Q2’16 Q2’17 Q1’17 +32% Extraordinary items

Landbased segment – second quarter

15

Tot

• tal inc

ncome and and EBIT EBITDA lan andbased seg egment1, 2

USD million

Co Comments

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

• Landbased income was USD 192 million, up 3%

since previous quarter

• EBITDA adjusted for organizational restructuring

cost was USD 27 million, up 21% since previous quarter

• Continued strong performance for technical

services supported by stable volumes and an increase in value-adding services for VSA

• Terminals show improved performance in line with
• cean volumes, with the terminals in Baltimore,

Port Hueneme, Pyeoengtaek and Zeebrugge as the main positive contributors

192 186 184 177 176 Q2’16 Q4’16 +3% Q3’16 +9% Q2 ’17 Q1’17 26 22 21 20 23 Q1’17 Q4’16 Q2 ’17 27 1 +18% Q3’16 +21% Q2’16 Extraordinary items

Total income EBITDA

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

Consolid idated result lts – Fir irst Half lf Year 2017

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• Extraordinary items in the first half include
• Merger accounting loss of USD 62 million
• Org. restructuring cost of USD 20 million
• Total income adjusted for the merger accounting loss

was USD 1 864 million, up 4% from the same period last year

• EBITDA adjusted for the extraordinary items was

USD 331 million, an underlying improvement of 10% compared with same period previous year

• Underlying improvement in financial performance is

driven by higher transported volumes, reduced SG&A costs, the US flag operations, as well as improved results from the landbased business

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

Co Comments Co Cons nsol

• lid

idated resu esult lts - Tot

• tal

al inc ncome and and EBIT EBITDA1, 2

USD million

Total income EBITDA

1 802 1 794 1H 2016 1H 2017 62 +4% 1 864 249 82 301 331 1H 2016 +10% 1H 2017 Extraordinary items 1) Adjusted for extraordinary items; 2) Comparable numbers for H1 2016 and Q1 2017 are pro forma numbers as if the transaction had taken place back in time

ASSETS EQUITY & LIABILITIES

Bala lance sheet revie iew

17

Una naudit ited Bala Balance Sh Shee eet 30.06.2017

USD billion

Co Comments

• Net interest bearing debt of USD ~3.2 billion,
• f which cash and cash equivalents of USD 755

million

• Equity ratio at 34.7%
• USD ~310 million in provisions remain to cover

extraordinary costs in jurisdictions with

• ngoing anti-trust investigations
• Fair value of assets and liabilities at merger

date (except 100% owned WW ASA entities)

• USD 288 million goodwill element after

allocation of merger consideration to fixed and intangible assets

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

Non current assets 1.3 7.7 Current assets 6.4 1.3 Equity Non current liabilities 3.8 Current liabilities 2.7 7.7

Cash flo low and liq liquid idit ity development

18

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

755 150 18 62 106 607

• 90
• 48

Liqudity Q2 2017

• 49

Interest and financial derivatives Other CAPEX Net financing1 Proceeds from sale of financial investments Merger loss EBITDA Liquidity Q1 2017

Cash Cash fl flow w and and liqu quid idit ity de develo lopment

USD million

1) Includes: Proceeds from issue of debt of USD 131 million, Repayment of debt USD 206 million and loan to related party USD 15 million 2) Loss on previously held equity interests in JVs joint ventures as a consequence of the merger transaction

19

Market and Business Outlook

by Craig Jasienski

Auto sale les dropped 1.7 .7% q-o-q driv iven by y drop in in Chin ina

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

Global auto sales per main sales region1

CAGR 2016-2021, Change Q2’17 vs Q1’17

Comments to global auto sales

Source: IHS Markit 1) Size of circle indicates auto sales Q2 2017

• 2%
• 1%

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

• 20%
• 15%
• 10%
• 5%

0% 5% 10% 15% 20% 25% 30% 35%

CAGR ’16-21 Q2’17 vs Q1’17

West Europe Greater China Central Europe East Europe incl. Russia ASEAN Oceania Japan/Korea NAFTA South America India & Pakistan Middle East & Africa

APAC AM EUR ME AF

• Increased sales of 11.1% q-o-q in the US driven by seasonality,

with y-o-y sales down 1.4%. Despite softer sales, the absolute sales figures are still strong, with inventory building up.

• Flat development for Western Europe both q-o-q and y-o-y. Sales

have rebounded after historic low figures and sales rate is now almost on par with sales before financial crisis.

• The Chinese market is down 8.4% q-o-q driven by the

implementation of less favorable (tax) incentives. Small improvement of 0.6% y-o-y

• The Russian market shows signs of a fragile recovery continuing

during the second quarter

• In Brazil the market looks to have turned a corner in the second

quarter as sales have started to pick up Long term forecast shows ~2% annual growth rate for sales

Auto exp xports in increased wit ith 1.6 .6% q-o-q

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

Global auto export per main production region1,2

CAGR 2016-2021, Change Q2’17 vs Q1’17

Comments to global light vehicle export

• NAFTA exports (driven by Mexico) continue to increase, with

4.2% y-o-y and 0.6% q-o-q

• European exports still strong, mostly driven by strong demand

in the US and new models. Exports to China also still solid.

• Exports out of Japan developed with a seasonal lift 3.6% q-o-q

while flat y-o-y. NAFTA is still the largest receiving region for light vehicles produced in Japan.

• Exports out of South Korea continue to decline and were down

7.1% y-o-y, but increased 6.9% q-o-q driven by seasonality. The main driver of the decline is less volume to US as production capacity in Mexico is ramped up. Long term forecast shows ~2% annual growth rate for exports

• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11%

• 14%
• 12%
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12%

South Korea Japan

CAGR ’16-21 Q2’17 vs Q1’17

North America South Asia Middle East/Africa Greater China South America Europe

AM APAC ME AF EUR Source: IHS Markit 1) Size of circle indicates auto production Q2 2017 2) Chinese figures are adjusted

Moderately im improvin ing outlo look for Construction and Agricult lture

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Business Update Financial Performance Market and Business Outlook Summary and Q&A 1) Source: IHS Construction and IMF (International Monetary Fund) | World Construction Spending (% growth y/y in real terms ($2010)) 2) Source: CEMA (European Agriculture Machinery)) | Business Barometer (Index = sum of 1) evaluation of the current business situation & 2) turnover expectation, 100/-100)

Construction growth picking up

World construction spending (% y/y), 12-20E1

Mixed outlook for Agriculture equipment

European business climate (Index 100/-100), 10-172

• World construction growth is picking up, and infrastructure projects look

increasingly important in mid-term spending prospects

• Equipment sales in the China-driven Asian market is the current growth

engine

• Low crop and dairy prices put pressure on the agricultural equipment segment,

but sentiment is improving in some key regions

• Mixed outlook for equipment market, with South America outperforming the
• ther regions in the short term
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7% ’19E ’14 ’17E ’15 ’18E ’20E ’13 ’16 ’12 % y/y Total Emerging and developing economies Advanced economies

• 100
• 80
• 60
• 40
• 20

20 40 60 80 100 Business climate 1Q17 1Q16 1Q15 1Q14 1Q13 1Q12 1Q10 1Q11

Index Present Future

The recovery ry for the min inin ing segment is is still ill slo low

23

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

Continued uptick in global equipment deliveries

Global surface mining equipment shipments (Index ‘07 = 100), 07-171

1) Source: Parker Bay | Surface Mining Equipment Index (Indexed value of surface mining equipment shipments in real terms ($2010), 2007 = 100) 2) Source: IHS Global Trade Atlas | Non-rolling mining equipment deliveries in regions as reported by customs for individual cargo values > USD 20.000. (12 month rolling average (L12M) units) (Data edge: 04.2017)

25 50 75 100 125 150 175 200 1Q14 1Q15 1Q16 1Q17 1Q10 1Q12 1Q13 1Q11 1Q09 1Q07 1Q08

• Average mining equipment age is at a level not observed since the 1990’s, and the older fleet is driving higher demand for parts and eventually replacements
• OEMs are reporting significantly growing sales with Asia looking the strongest, but much of the growth is related to aftermarket or smaller machines for coal mining activity
• The increase in mining shipments are mainly driven by intraregional shipments of smaller machines in Europe (Russia) and South Asia
• Larger equipment for more traditional regions (Australia, Canada, Peru) also expected to slowly recover, but no significant improvement expected before 2019/2020

Several regions have seen imports bottom out

Customs trade flows of non-rolling mining machines (L12M avg units), 12-172

100 200 300 400 500 600

• Avg. monthly units

1Q15 1Q16 1Q13 1Q14 1Q12 1Q17 Oceania North America Latin America Europe Asia

Source: SeaWeb, Lloyds List Intelligence Unit

Moderate net fle leet growth forecasted going forw rward

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

3% of fleet are recycling candidates…

Fleet by year of build, 1000 CEU

..contributing to moderate net fleet growth

Forecasted net fleet growth, % p.a.

• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Net fleet growth, %

400 350 300 100 200 50 150 250 61 333 2000 142 72 215 146 321 319 84 176 134 124 268 2005 2020 45 61 130 279 227 15 185 388 155 2015 2010 1 52 1 118 44 30 26 1990 1985 18 161 6 5 38 1995 61 11 25 22 12

~40 FIRM VESSELS 7-8% OF FLEET CEU 36 VESSELS >25 YRS OLD 3% OF FLEET CEU

• Five vessels were delivered and seven vessels were sold for recycling during the quarter
• The current global order book counts ~40 vessels representing 7-8% of global fleet capacity
• No new orders or negotiations to postpone deliveries were reported, but four newbuildings were

converted to tankers during the second quarter

Summary and outlook

25

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

SUMMARY

Volume, cargo and trade mix showed positive development in the second quarter Organizational restructuring completed and realization of synergies well under way; USD 100 million target is maintained Adjusted EBITDA for the second quarter ended at USD 188 million – up 32% q-o-q Strong results for landbased combined with interesting M&A/ investment pipeline

OUTLOOK

Recovery in the high & heavy segment remains slow and no significant improvement for large mining shipments is expected before 2019 The Ocean business is still faced with tough competition and pressure on rates

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Q&A

by Craig Jasienski and Rebekka Glasser Herlofsen

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Thank you!