Q3 Presentation November 8 th 2017 Craig Jasienski, President & - - PowerPoint PPT Presentation

Q3 Presentation

November 8th 2017

Craig Jasienski, President & CEO Rebekka Glasser Herlofsen, CFO

Agenda

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

BUSINESS UPDATE

by Craig Jasienski

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Business update Q3 at a glance…

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Realization of synergies well on the way Still some overcapacity and pressure on ocean rates Good contract coverage next few years, especially H&H The positive development for Volume & Cargo mix continues The positive development for landbased continues

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

The positive development for Volume & Cargo mix ix contin inues

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Co Comments

• Volumes down 5% q-o-q, largely driven by
• seasonality. Decline in volumes across all

foundation trades with the exception of volumes from Asia to South America

• Positive development for cargo mix with a

H&H share of 26% in the third quarter, up from 25.8% in the second quarter (which included large spot shipments ex-China)

• Volumes up 10% y-o-y primarily driven by

higher volumes transported in foundation trades, in particular export from Asia to North America and export out of Europe to Asia Volume1) and cargo mix2) development

Million CBM and %

5 10 15 20 25 30 35 5 15 10 20

• 5%

Q3’17

26,0%

16,7 Q2’17 17,6

25,8%

Million CBM Q2’16 16,1 Q3’16 Q1’17 15,2 16,7 15,8

25,2%

Q4’16

24,0% 22,2% 20,4%

Q2’15

25,3%

Q4’15 Q3’15 15,5 Q1’16

24,9%

18,0

25,6%

18,2 % Q1’15 19,5 Q3’14

24,4%

Q4’14 19,4

25,3%

18,2 18,7

25,2%

+10%

22,6%

Business Update Financial Performance Market and Business Outlook Summary and Q&A Cargo mix Cargo mix (previous) Total prorated volumes 1) Prorated volume 2) Calculated based on unprorated volumes. Updated figures based on aligned cargo type definition and reporting across all Ocean units

WWL trade routes EUKOR trade routes ARC trade routes

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Seasonal reduction in in volu lumes, but posit itive development from same perio iod la last year for all ll foundation trades

Atlantic Shuttle

Q2 ’17 2.9

• 1%

2.8 Q3 ’17 Q3 ’16 2.9 +4%

EU/NA – Oceania1)

Q2 ’17 Q3 ’17

• 5%

2.0 Q3 ’16 +6% 1.9 1.8

EU - ASIA

3.2 2.7 Q3 ’16 Q2 ’17

• 6%

+11% Q3 ’17 3.0

Asia - EU

• 11%

+2% Q2 ’17 Q3 ’16 Q3 ’17 2.9 2.8 3.2

Asia - NA

3.2

• 8%

+23% Q3 ’17 Q3 ’16 Q2 ’17 3.4 2.6

Asia - SAWC

Q2 ’17 1.1 Q3 ’16 1.1 1.0 Q3 ’17 +8% +18%

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

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Positive development in in net freig ight/CBM due to trade/cargo mix ix

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

Co Comments Net freight / CBM development1)

Indexed to 100 per Q2 2014

• Net freight / CBM increased with 0.8% in the

third quarter compared with the last quarter

• The positive development was mainly driven

by improved cargo mix and increased H&H shipments, but trade mix also contributed positively

• No material rate changes in the third quarter
• There is still significant pressure on rates in

several tenders due to tough competition and customers’ procurement focus

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

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

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Good contract coverage for H&H for the next xt few years

25 50 75 100 2 018 2 019 2 020 WWL + EUKOR 2 017

Contract coverage for “top 10” H&H customers1

Percent of volumes

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

1) Based on 2017 budgeted volumes for WWL Ocean and EUKOR

Realization of synergies well on the way…

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• About two thirds of the targeted annualized

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

• More than USD 10 million already realized in Q3

(annualized effect of around USD 50 million)

• The remainder of confirmed synergies gradually

taking effect over the next 3-6 months

• Realization of remaining synergies on fleet
• ptimization, ship management and IT carry a

longer lead time and next wave of synergies will take some time

• USD 100 million synergy target within 2019 remains

Co Comments Confirmed and realized synergy development

USD million Q3 2018 Q2 2018 65 55 Q4 2017 Q3 2017 Q1 2018 Q2 2017 Q1 2019 Q4 2018 100

IT Ship Management GSA Savings Procurement Fleet Optimization Business Update Financial Performance Market and Business Outlook Summary and Q&A

• Continued strong volumes for technical services in North America, but less value-adding

services coupled with congestion at certain plant locations pulled results down slightly. In line with slowing US auto sales, the build-up of auto inventories in the US continued in Q3 2017.

• Terminals experienced a slight fall back in results in line with overall decline in ocean

volumes, especially for Zeebrugge and Port Hueneme, while other terminals showed stable performance

• On the business development side the network was expanded with one new yard

management contract in Europe

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

The positive development for landbased continues…

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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 – thir ird quarter 2017

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

Q3 2017 Q2 2017 Q3 2016 (proforma)1)

Total income 962 912 869 Operating expenses (774) (806) (726) EBITDA 188 106 143 EBITDA adjusted 193 188 143 Depreciation (84) (83) (82) EBIT 104 23 61 Financial income/(expense) (21) (41) n/a Profit/(loss) before tax 83 (17) n/a Tax income/(expense) (28) (3) n/a Profit/(loss) for the period 55 (20) 40 EPS 0.12 (0.06) n/a

• Adjusted EBITDA was USD 193 million

in the third quarter, up 2% q-o-q

• Extraordinary items include
• USD 4.5 million gain on fixed assets sale
• USD 1.5 million in loss on previously held

equity interests in joint ventures (ref merger)

• USD 8 million loss related to sale a lease

back transaction

• Net financial expenses in the third

quarter was positively impacted by unrealized gains from interest hedges and positive movements in currency Co Comments

Ocean segment – thir ird quarter 2017

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Total income and EBITDA ocean segment1, 2

USD million

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

Total income EBITDA

775 798 719 744 707

• 3%

+10% Q4’16 Q2 ’17 Q3’16 Q1’17 Q3 ’17 1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time 17 31 162 145 135 123 125 166 162 Q1’17 +5% Q2’17 Q4’16 170 +36% Q3’16 8 Q3 ’17 Extraordinary items

Co Comments

• Ocean income was USD 775 million, down 3%

compared with previous quarter

• EBITDA adjusted for extraordinary items improved

5% q-o-q and 36% y-o-y

• Improved results q-o-q driven by cargo and

trade mix, project cargo shipments in the Atlantic occupying empty space coupled with increased realization of synergies which more than offset seasonally lower volumes

• Improved results y-o-y driven by volume

growth of 10%, cargo and trade mix, project cargo shipments in Atlantic and synergy realization

Landbased segment – thir ird quarter 2017

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Total income and EBITDA landbased segment1,2)

USD million

Business Update Financial Performance Market and Business Outlook Summary and Q&A 203 192 186 184 177 Q2 ’17 +3% Q1’17 Q4’16 Q3’16 +12% Q3 ’17

• 5

199 29

• 5

26 22 21 20 Q2 ’17 27 Q1’17

• 9%

Q4’16 1 Q3’16 Q3 ’17 24 +19% 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

Co Comments

• Adjusted income was USD 199, up 4% q-o-q
• Adjusted EBITDA was USD 24 million, down 9%

q-o-q, but up 19% y-o-y

• For Technical services, the reduction in EBITDA was

driven by less value-adding services content coupled with congestion at certain plant locations

• Terminals experienced a slight fall back in results in

line with overall decline in ocean volumes, especially for Zeebrugge and Port Hueneme, while

• ther terminals performed in line with the

performance in the previous quarter

ASSETS EQUITY & LIABILITIES

Bala lance sheet revie iew – thir ird quarter 2017

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Unaudited Balance Sheet 30.09.2017

USD billion

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

Non current assets 1.4 7.7 Current assets 6.2 1.4 Equity Non current liabilities 3.5 Current liabilities 2.7 7.7

Co Comments

• Total assets of USD 7.65 billion with an equity

ratio of 35.5% (up from 34.7% in the second quarter)

• Net interest bearing debt of USD 3.0 billion, a

reduction of USD 200 million since last quarter

• Strong cash and liquidity position with USD

820 million in cash and USD 230 million in undrawn facilities

• Increased cash position mainly driven by

increased drawdown on revolving credit facility of USD 45 million, but also underlying positive cash flow in the quarter

Cash flo low and liq liquid idit ity development – thir ird quarter 2017

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

820 96 188 755 EBITDA Liquidity Q2 2017

• 11
• 114
• 18

Sale of tangible assets CAPEX Liquidity Q3 2017 Other1

• 45

Taxes paid

• 30

Interest and financial derivatives Net financing

Cash flow and liquidity development

USD million

1) Mainly relates to changes in working capital

Proje ject in init itia iated to streamline le legal l and fin inancial l structure

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Target legal and funding structure

• Establish legal and funding structure

consistent with business unit structure

• Refinance 2018 and 2019 Wallenius and

Wilhelmsen ship loan maturities

• Amendments to move Wallenius and

Wilhelmsen ship loans into “WWL Ocean”

• Harmonize covenants as part of the process
• Target to finalize process by end of Q1 2018

Comments

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

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Market and Business Outlook

by Craig Jasienski

Lig ight vehic icle le exp xport in in the thir ird quarter up 0.4 .4% 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 Comments

• Global light vehicle (LV) exports in the third quarter declined -

0.6% y-o-y and increased 0.4% q-o-q

• North America -incl. Mexico- (NA) exports continues to develop

positively with an increase 6.1% y-o-y and 2.1% q-o-q

• European exports developed positively (+2.8% y-o-y and +0.6% q-
• -q) mainly driven by strong sales in the US and new models
• Exports out of Japan developed with a seasonal lift of 2.0% q-o-q

and slightly down (-1.0%) y-o-y.

• Exports out of South Korea down -11.0% y-o-y mainly driven by

was less volume to US as production capacity in Mexico is ramped

• up. Exports q-o-q were down -2.9% due to seasonality
• Soft development for light vehicle sales in the third quarter with -

1.7% q-o-q (normally the slowest during the year) and 0.8% y-o-y

• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

• 1%
• 6%

1% 6% 5% 4% 3% 2% 27% 8% 7%

• 2%
• 3%
• 4%
• 5%

0%

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

CAGR ’16-21 Q3’17 vs Q2’17

Europe South Korea

ME AF EUR AM APAC Source: IHS Markit 1) Size of circle indicates auto production Q3 2017, 2) Greater China – China & Taiwan 3) All export figures are sales based

Construction segment strengthening, g, while ile Agric iculture remains mix ixed

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Business Update Financial Performance Market and Business Outlook Summary and Q&A 1) Source: IHS GTA | Global construction and rolling mining equipment deliveries (>20k USD )(Avg. L12M (units) and L3M growth (y/y %)). Data cut-off: 06.2017 2) Sources: TMA, KBA, Axema, ANFAVEA, AEA, Seaport | Registrations: UK (+50Hp), Germany (Major brands only), France (+100Hp). Sales: Australia (+100Hp) – L3M (June-Aug), Brazil (All tractors), US (+100Hp) (Growth y/y %)

Construction machinery trade strengthening

Global construction and rolling mining equipment imports1, 12-17

Agriculture machinery markets remain mixed

Tractor sales and registrations2, 16-17

• Commodity prices continued the upward trend this quarter, but grain prices are still low
• The US equipment market remained very challenged in the third quarter, and the
• utlook is also on the negative side in the short term
• European tractor registrations in the third quarter declined strongly on emissions-

related deadlines in the prior year, but the EU sales are still on track to levelling out this year, and dealer sentiments are at a 5-year high

• Australian tractor sales remained strong in the period
• 30%
• 20%
• 10%

0% 10% 20% 30% Growth (y/y %) France US Germany Australia Brazil UK 3Q (y/y) YTD (y/y) 50k 0% 10%

• 10%
• 20%

30% 20% 60k 40k 30k Growth (L3M y/y %) Quantity (Avg. L12M) 01/17 07/16 07/15 01/15 07/14 01/14 01/16 07/13 01/13 07/12 01/12 Growth Quantity

• All continents (excl. Africa) are still experiencing uninterrupted growth in equipment

imports this year, and this year’s Chinese equipment demand boom continues

• US sales are on track to grow again this year and forecasted to continue to improve
• The EU market is expected to continue moving sideways in the near term on a subdued

UK economy and a saturated German equipment market

• The fundamentals in the Australian market remains supportive of equipment growth

Min inin ing equip ipment deliv liveries contin inue to move up from the bottom

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

Continued gains for commodity prices and machinery

Global mining equipment deliveries1 and iron ore price2, 09-18

1) Source: Parker Bay | Surface Mining Equipment Index (Indexed value of surface mining equipment shipments in real terms ($2010), 2007 = 100) 2) Source: MarketIndex, IMF | Average quarterly iron ore price (USD/t)

25 50 75 100 125 150 175 200 20 40 60 80 100 120 140 160 180 200 Value (Indexed) Price (USD/t) 1Q14 1Q13 1Q16 1Q17 1Q09 1Q12 1Q15 1Q11 1Q18 1Q10

• Global deliveries of large mining equipment continued the trend and

posted another quarter of growth, but volumes are still low in a historical context

• Australia has seen values stabilise in the last few quarters, and finally

saw solid growth this period, albeit from very low levels.

• OEMs again reported very solid demand growth in their mining

divisions, but aftermarket sales remain the driver in the end-user demand

• Book-to-bill ratios developed favourably, with OEM order growth in

many cases accelerating sequentially

• Despite a September slide, commodity prices extended the good run

in the third quarter, pointing to a continued equipment uptick in the remainder of the year

Iron ore price (+3Q) Equipment value Iron ore price

Comments and highlights

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Business Update Financial Performance Market and Business Outlook Summary and Q&A Sources: The Parker Bay Company, Deutsche Bank, Factset 1) Not considering parked/idled machinery, i.e. assuming yearly utilization of 6,0 khrs/yr

Theoretical replacement age1

80 – 90 khrs (13 – 15 yrs) 24 – 26 khrs (4 – 5 yrs) 5,5 – 6,5 khrs/yr Truck replacement Engine rebuilds Yearly utlisation

1000 2000 3000 4000 5000 6000 3 9 2 15 17 1 5 7 Age 11 12 <1 40+ 30+ 6 14 8 16 10 18 Operating mining trucks 19 13 4 20+ Average

The number of trucks approaching replacement age is growing

Mining truck operational characteristics and operating fleet age distribution

• Mining majors are finally expected to increase

investments again next year

• Sustaining capex is the key growth driver
• The number of trucks approaching theoretical

replacement age is growing in the coming years

• Idled machinery is clouding the outlook:
• Machines were parked and not used at full

capacity during the downturn

• Inactive machines can still be redeployed in place
• f new equipment deliveries

Comments

Repla lacement numbers in increasing more rapid idly in in the mediu ium term

Gradually im improving supply demand bala lance exp xpected

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Shrinking net fleet growth is contributing to…

Average net fleet growth %, 2005-2019F

Business Update Financial Performance Market and Business Outlook Summary and Q&A Source: Clarksons Platou

…tightening supply-demand balance

Fleet utilization rate, 2015-19F

• 500
• 400
• 300
• 200
• 100

100 200 300 400 500

• 12%
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 2017F 2016 2018F 2014 2013 2009 2010 2007 2015 2019F 2006 2012 2011 2008 2005 Recycled Average Net Fleet Growth Delivered 1000 CEU Fleet Utilization Rate % 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 4,0 0,5 1,5 3,5 3,0 1,0 4,5 2,0 2,5 0,0 2017F 2015 2009 2016 2011 2014 2013 2008 2018F 2007 2006 2012 2005 2010 2019F Demand Utilization rate Supply Average Net Fleet Growth % Million CEU

The annual fleet growth is estimated at around 1% as deliveries will slow down significantly, thereby leading to a continued low fleet growth in 2018 and 2019 Idle fleet capacity reduced in the third quarter and tonnage balance is expected to gradually improve post 2018 as a result of an expected recovery in tonnage demand and low fleet growth

Quarterly “fun fact”: WWL supports growing electrical auto sales

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

The challenge

• Sensitive, heavy industrial press from manufacturing site in

Germany to new electric car plant in California

• 49 breakbulk pieces
• 2765 freight tonnes
• Time of the essence for production start

WWL solution

• Liner service with regular sailings and short transit time
• MV Tulane ramp capacity geared for handling the heaviest

208-tonne pieces

• RoRo solution with advanced self-propelled modular

transporter and WWL`s special heavylift Samson trailer

Summary and outlook

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

SUMMARY

Volume, cargo and trade mix showed positive development in the third quarter Realization of synergies well under way; USD 100 million target is maintained Adjusted EBITDA for the third quarter ended at USD 193 million – up 2% q-o-q Continued strong results for landbased

OUTLOOK

Some early signs of improving supply and demand balance The Ocean business is still faced with some

• vercapacity and pressure on rates

Modest recovery in the high & heavy segment

• verall, but no significant improvement for

large mining shipments expected short term Good visibility on H&H volumes medium term with many contracts secured

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Q&A

by Craig Jasienski and Rebekka Glasser Herlofsen

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Thank you!