Presentation of Q1 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 Highlights for Q1 2013 Tanker market Dry bulk market Finance • EBITDA of USD 36m (USD -7m in Q1 2012) • Profit before tax of USD -16m, which is a USD 53m improvement y-o-y Q1 Results • Positive operating cash flows of USD 11m incl. full interest payments • Effects materializing from the restructured time charter fleet and TORMs cost program • Seasonally strong first quarter in the product tanker segment • Tanker TORM well-positioned to take advantage of the market improvements • Q1 divisional EBIT of USD 15m • Bulk market in Q1 started at historically low levels, but improved slightly due to seasonal factors • Bulk Q1 divisional EBIT of USD -11m • No vessel sale or purchases in Q1 2013 • In April 2013, TORM entered into an agreement with Oaktree on five MR product tankers, who will Sale & Purchase place the five vessels under TORM’s commercial and technical management • Introduced EBITDA forecast. EBITDA for 2013 is forecasted at positive USD 80-110 million • Narrowed forecast on loss before tax to USD 100-130 million including USD 5 million write-down from Guidance the sale of five vessels for FY 2013 • TORM expects to remain in compliance with the financial covenants for 2013 3
Highlights Q1 2013 results Tanker market Dry bulk market Finance Financial highlights for Q1 2013 USD million Q1 2013 Q1 2012 2012 2011 2010 2009 P&L • Q1 2013 EBITDA of USD 36m Gross profit 50 27 (93) 81 180 243 (USD -7m in Q1 2012) • Q1 2013 Profit before tax óf USD Sale of vessels - (16) (26) (53) 2 33 -16m, which is a USD 52m EBITDA 36 (7) (195) (44) 97 203 improvement y-o-y • Positive operating cash flow of Profit before tax (16) (79) (579) (451) (136) (19) USD 11m incl. full interest Balance payments Equity 255 569 267 644 1.115 1.247 • Operational result driven by – Gradually improving freight NIBD 1.871 1.838 1.868 1.787 1.875 1.683 rates in product tanker Cash and cash equivalents 17 29 28 86 120 122 – Effects of TORMs cost Cash flow statement program and the restructured time charter fleet Operating cash flow 11 (57) (100) (75) (1) 116 Investment cash flow (9) 5 - 168 (187) (199) Financing cash flow (14) (5) 42 (128) 186 37 4
Highlights Product tanker freight were relatively strong in Q1 2013 Tanker market Dry bulk market Finance Freight rates in USDt/day LR1 and LR2 • Positive effects in Q1: ‒ Weak US and European domestic demand opened naphtha arbitrage from Europe to the Far East ‒ Increased export out of the Arabian Gulf and India after refinery maintenance ‒ Seasonally strong quarter • Negative effects in Q1: ‒ 13 LR2s cleaned up after trading in dirty increasing tonnage supply (equal approx. 10% of total clean fleet) MR • Positive effects in Q1: ‒ Open gasoline arbitrage from Europe to the US combined with a tight tonnage supply in the West ‒ Unusually cold weather in North Asia ‒ Increased Australian import demand after the refinery capacity adjustments ‒ Seasonally strong quarter • Negative effects in Q1: ‒ Refinery maintenance in the US Gulf curbing the export of diesel ‒ Shift to summer grade gasoline led to a draw on inventories ‒ Continued tonnage oversupply 5 Source: Clarksons, 2 Nov 2012. Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) and MRT: C2 (Rotterdam->NY)
Tanker Division spot rates versus benchmarks TORM spot vs. benchmark last 12 months (USD/day) TORM avg. Earning -19% -13% Benchmark (roundtrip) +31% 15,000 10,000 5,000 0 MR LR1 LR2 TORM spot vs. benchmark Q1 2013 (USD/day) TORM avg. Earning +1% Benchmark (roundtrip) +5% -3% 15,000 10,000 5,000 0 MR LR1 LR2 Note: Benchmarks are not one-to-one comparisons as they do not take into account broker commission, armed guards and low sulphur fuel cost Source: Clarksons, Spot earnings: LR2: TC1 (Ras Tanura-> Chiba), LR1: TC5 (Ras Tanura-> Chiba) MR: TC2 (Rotterdam -> NY)
Highlights Refinery expansions favors long-haul product trades and is Tanker market Dry bulk market expected to outweigh slow oil demand growth Finance Slow growth in world oil demand Mbbl/day Y-O-Y change Global oil demand Y-O-Y % 92 4 • 2013 will likely show modest 90 3 expansion in oil product consumption due to a continued 88 2 subdued global economic growth 86 1 84 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 Refinery expansions favoring tonne-mile 2,0 Net distillation capacity additions and expansions, mbbl/day • Longer-haul product movements 1,5 are favored by: 1,0 – India and Middle East Other increasing their export Middle East 0,5 oriented refining capacity Latin America – Expected closure of non- 0,0 India & other Asia competitive refining capacity in China the Atlantic and Pacific basin -0,5 Pacific Atlantic Basin -1,0 2012 2013 2014 2015 2016 2017 7 Source: IEA
Highlights Modest supply outlook for the product tanker fleet Tanker market Dry bulk market Finance Net fleet growth y-o-y in % of total fleet (no of vessels) LR2 LR1 MR Handysize 14 12 10 • Net fleet growth is expected to 8 gradually decline to manageable level 6 • Compound annual net growth 4 rate expected at 3% during 2013-14 2 • Scrapping will mostly impact 0 Handysize leading to a negative fleet growth -2 -4 2010 2011 2012 2013E 2014E Note: Increase calculated basis number of vessels. The number of vessels beginning of 2013 was: LR2 225, LR1 339, MR 1,285, Handy 683 Note: Net fleet growth: Gross order book adjusted for expected scrapping 8 Source: Maersk Broker
Highlights Product tanker vessel prices continues at low levels with Tanker market Dry bulk market limited S&P activity Finance Vessel price development • Newbuilding orders continues to USDm be mainly for MRs, but emerging MR - Newbuilding shift to LR2s 60 MR - 5 yr. Second-Hand 50 • Difficult for buyers to get 40 financing 30 • Ample second hand tonnage 20 marketed, but sales processes 10 are protracted 0 • Second hand prices holding Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul12 Jan 13 USDm USDt 60 25 MR - 5 yr. Second-Hand 50 20 MR 1 yr. T/C • T/C rates and second-hand 40 15 prices are well correlated 30 10 20 5 10 0 0 1/1/08 7/1/08 1/1/09 7/1/09 1/1/10 7/1/10 1/1/11 7/1/11 1/1/12 7/1/12 1/1/13 7/1/13 9 Source: Clarksons
Highlights Dry bulk market continued at a historical low level during Q1 2013 Tanker market Dry bulk market Finance Panamax freight rate development (USDt/day) • Historical low start of 2013, but 100 2008 - 2012 range 2012 2013 freight rates improved during 90 March 80 • Negative effects in Q1: 70 – Large influx of new tonnage 60 – Monsoon season in Pacific 50 • Positive effects in Q1: 40 – South American grain season 30 – Petcoke and mineral activity in 20 the US golf 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Chinese iron ore and coal import (mt/day) Chinese iron ore imports Chinese coal import • Chinese raw material import 80 remain strong 70 – Seasonally coal import peak in 60 December 50 – High iron ore price favours 40 domestic production 30 20 10 0 Jan06 Jan07 Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 10 Source: RS Platou, Clarksons
Earnings in bulk division in Q1 2013 affected by positioning voyages TORM spot vs. benchmark last 12 months (USD/day) 15,000 TORM avg. Earning Benchmark +1% +15% 10,000 5,000 0 Panamax Handymax TORM spot vs. benchmark Q1 2013 (USD/day) TORM avg. Earning 15,000 Benchmark 10,000 -7% -13% 5,000 0 Panamax Q1 2013 Handymax Q1 2013 Note: Benchmark against BPI and BSI market indices Source: Baltic Exchange, TORM
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