SALT Company Presentation
November 2018
SALT Company Presentation November 2018 Disclaimer and - - PowerPoint PPT Presentation
SALT Company Presentation November 2018 Disclaimer and Forward-looking Statements This presentation includes forward - looking statements within the meaning of the safe harbor provisions of the United States Pr ivate Securities Litigation
November 2018
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This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Scorpio Tanker Inc.’s (“Scorpio’s”) current views with respect to future events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect” and similar expressions identify forward-looking statements. 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, management’s examination of historical operating trends, data contained in Scorpio’s records and other data available from third parties. Although Scorpio believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond Scorpio’s control, Scorpio cannot assure you that it will achieve or accomplish these expectations, beliefs, projections or future financial performance. Risks and uncertainties include, but are not limited to, the failure of counterparties to fully perform their contracts with Scorpio, the strength of world economies and currencies, general market conditions, including fluctuations in charter hire rates and vessel values, changes in demand in the tanker vessel markets, changes in Scorpio’s operating expenses, including bunker prices, drydocking and insurance costs, the fuel efficiency of our vessels, the market for Scorpio's vessels, availability of financing and refinancing, charter counterparty performance, ability to
regulations or actions taken by regulatory authorities including those that may limit the commercial useful lives of tankers, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports Scorpio files with, or furnishes to, the Securities and Exchange Commission, or the Commission, and the New York Stock Exchange, or NYSE. Scorpio undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are not guarantees of Scorpio's future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements. Scorpio has filed a registration statement (including a base prospectus) and has or expects to file a preliminary prospectus supplement with the Commission for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement, the preliminary prospectus supplement and other documents Scorpio files with, or furnishes to, the SEC for more complete information about Scorpio and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov.
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This presentation describes time charter equivalent revenue, or TCE revenue, which is not a measure prepared in accordance with IFRS (i.e. a "Non-IFRS" measure). TCE revenue is presented here because we believe that it provide investors with a means of evaluating and understanding how the Company's management evaluates the Company's operating performance. This Non-IFRS measure should not be considered in isolation from, as substitute for, or superior to financial measures prepared in accordance with IFRS. The Company believes that the presentation of TCE revenue is useful to investors because it facilitates the comparability and the evaluation of companies in the Company’s industry. In addition, the Company believes that TCE revenue is useful in evaluating its operating performance compared to that of other companies in the Company’s industry. The Company’s definition of TCE revenue may not be the same as reported by other companies in the shipping industry or other industries. For a reconciliation of TCE revenue to revenue, please see the Appendix of this presentation. Unless otherwise indicated, information contained in this presentation concerning Scorpio’s industry and the market in which it operates, including its general expectations about its industry, market position, market opportunity and market size, is based on data from various sources including internal data and estimates as well as third party sources widely available to the public such as independent industry publications, government publications, reports by market research firms or other published independent sources. Internal data and estimates are based upon this information as well as information obtained from trade and business organizations and other contacts in the markets in which Scorpio operates and management’s understanding of industry conditions. This information, data and estimates involve a number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed above. You are cautioned not to give undue weight to such information, data and estimates. While Scorpio believes the market and industry information included in this presentation to be generally reliable, it has not independently verified any third-party information or verified that more recent information is not available.
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Scorpio Bulkers Inc. (“Scorpio” or the “Company”) owns
an average age of 2.8 years and time charters in one vessel The Company is headquartered in Monaco, and incorporated in the Marshall Islands, making it exempt from U.S. income tax. It has NYSE-compliant governance and transparency for foreign private issuers and is listed under the ticker “SALT”
✓ Capture rising freight rates by employing vessels in the spot market through the Scorpio Ultramax and Scorpio Kamsarmax pools ✓ Operate vessels efficiently and minimize costs ✓ Maintain a strong balance sheet through conservative leverage ✓ Take advantage of market dislocation to
Key Facts Fleet Profile Low Average Age vs. Worldwide Fleet
37 19
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5 10 15 20 25 30 35 40 Ultramax Kamsarmax Owned TC/BB Chartered-In 3.0 2.5 8.7 9.2 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Handymax/Ultramax Panamax/Kamsarmax Scorpio Bulkers Active Fleet
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Q3-2018 Financial Results
financing costs)
TCE
Time Charter Coverage
2019
Liquidity
Investment in Scorpio Tankers Inc.
shares, or 10.9% of Scorpio Tankers’ issued and outstanding shares
Stock Buyback Program
the Company under its share buyback program at a cost of $6.80 per share or $11.9 million in aggregate
$50.0m of our common stock, replacing the existing authorization
Dividend
2018
Fleet Development
between Q2 2019 and Q3 2020 for a cost of between $1.5m - $2.2m per vessel
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Youngest ECO dry bulk fleet
average age of 2.8 years, youngest fleet among publicly listed peers Attractive Mid Size Segment
commodities and is strongly correlated to global GDP growth Positive & Increasing EBITDA
positive EBITDA Significant trading liquidity and inside ownership
trading liquidity per day and insider ownership of 23% Well prepared for BWT system & IMO 2020 regulation
upside potential through fuel savings
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Source: Clarksons Research Services, November 2018
6.1 10.3 10.6 8.2 11.9 8.9 8.6 2.8 29 32 32 39 49 47 72 56 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0
Golden Ocean Genco Diana Safe Bulkers Navios MH Eagle Bulk Star Bulk Scorpio Bulkers
# of Owned Handymax/Panamax Vessels Average Age
8 $3,462 $5,335 $7,083 $7,238 $8,230 $8,360 $8,949 $10,886 $9,757 $11,569 $11,342 $13,388 $3,331 $5,263 $6,349 $7,401 $9,164 $9,273 $9,211 $12,605 $12,881 $12,823 $13,649 $14,382
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18* Ultramax Kamsarmax
in the face of record newbuild deliveries, shows the underlying strength of the market and supports the continuation of the market recovery
February 10, 2016 BDI hits 40 year low
* Projections based on 47% and 49% of the days for the Ultramax fleet and Kamsarmax fleet, respectively as of October 17, 2018.
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$6.0 $2.9 $10.6 $9.4
$0 $5 $10 $15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18
$2.5 $5.3 $13.5 $11.1 $21.1 $18.6
$5 $15 $25 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 $17.0 $5.8 $1.3 $0.9 $7.3 $10.8 $12.4 $22.9 $20.4 $28.1 $28.8
$0 $10 $20 $30 $40 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 $10.2 $17.4 $23.9 $26.8 $34.7 $37.7 $38.6 $51.1 $54.3 $60.6 $62.5 $0 $10 $20 $30 $40 $50 $60 $70 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18
Operating Cash Flow EBIT Revenue EBITDA
Figures in $USD millions.
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IMO 2020 Ballast Water Treatment Systems
require shipowners to reduce sulfur emissions from 3.5% currently to 0.5% in January 2020. How will Scorpio comply?
all of its owned and finance leased Kamsarmax and Ultramax vessels between the second quarter of 2019 and the third quarter of 2020.
with scheduled dry docks, reducing the amount of off hire
$1.5 - $2.2 million per vessel, and the Company anticipates that between 60-70% of these costs will be financed.
install ballast water treatment system (BWTS) after September 8, 2019 at their next special survey.
least $450,000 per vessel based on $350,000 for equipment and $100,000 for installation
and expensive as they were designed without the space in the engine room to fit BWTS (see how large these BWTS are) How will Scorpio comply?
All 56 of SALT’s vessels are fitted with BWT systems No $25.2 million in future capex (56 vessels x $450,000) Scrubbers manage the downside risk of rising fuel prices and provide upside potential through fuel savings
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Vessel Type DWT Cargoes Vessels Owned
Handysize/Handymax
< 50,000 Grain, minor bulks
50,000-64,000 Iron ore, coal, grain, minor bulks 37
Panamax/Kamsarmax
65,000-100,000 Iron ore, coal, grain, bauxite, steel 19
Capesize
>100,000 Iron ore, coal
Minor Bulks: Bauxite, steel, scrap, cement, salt, forest products, potash/fertilizer, coke, nickel ore, sugar.
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Kamsarmax Ultramax Coal Products, 33% Grain Products, 15% Minerals, 15% Steel products, 11% Ore, 7% Fertiliser, 5% Others, 14% Coal Products, 59% Grain Products, 18% Ore, 14% Minerals, 7% Others, 1%
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✓ Ton mile demand driven by solid global GDP growth and industrial production ✓ Baltic supramax and panamax average earnings indices near their 10 year average ✓ Strong spot rates and future expectations push assets values for young vessels above newbuilds ✓ Growing dry bulk demand in major and minor bulks ✓ Limited fleet growth in mid size segments due to lowest newbuilding orders since 2007 (excluding 2016) ✓ Potential for accelerated scrapping given age profile and upcoming environmental regulations
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Source: Clarksons Research Services, November 2018
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Aug-13 Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18 Atlantic Region Industrial Production Growth Pacific Region Industrial Production Growth
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Source: Clarksons Research Services, November 2018 Baltic Supramax Avg of 6 T/C Routes Baltic Panamax Avg of 4 T/C Routes
$0 $4,000 $8,000 $12,000 $16,000 $20,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$/Day
Baltic Supramax Avg Earnings
FY-16 FY-17 FY-18 10 Yr Avg $0 $4,000 $8,000 $12,000 $16,000 $20,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
$/day
Baltic Panamax Average Earnings
FY-16 FY-17 FY-18 10 Yr Avg
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Figures in million US$, Source: Clarksons Research Services, November 2018 Resale defined as to be delivered before year end of less than one year old.
$1 million increase in asset values equates to $0.74 in NAV per share
Current rates and future expectations push values for young vessels above newbuilds
$15 $20 $25 $30 $35 $40 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 Nov-18 Ultramax NB Kamsarmax NB Ultramax Resale Kamsarmax Resale
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Source: Clarksons Research Services, November 2018
2009-2018 Iron Ore Coal Grains Minor Bulks Total Dry Bulk CAGR 5.9% 5.2% 5.8% 4.4% 5.1%
Million Tonnes 3,401 3,821 4,068 4,302 4,558 4,816 4,812 4,892 5,095 5,215 5,338
2,000 3,000 4,000 5,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) Iron Ore Coal Grain Minor Bulk
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7.3% 2.0% 4.9% 1.5% 1.6% 0.0% 3.1% 2.9% 3.2%
9.4% 5.2% 12.2% 5.3% 4.9% 6.1% 1.3% 2.5% 7.8% 11.3% 6.4% 2.9%
0.2% 5.3% 4.0% 2.0%
0.0% 5.0% 10.0% 15.0% 2011 2012 2013 2014 2015 2016 2017 2018e 2019e Minor Bulks Grains Coal
Source: Clarksons Research Services, November 2018
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Source: Clarksons Research Services, November 2018 Ultramax scrapping assumptions: 2018 (0.8m dwt), 2019 (1.6m dwt), 2020 (3.5m dwt) Kamsarmax scrapping assumption: 2018 (0.5m dwt), 2019 (1 m dwt), 2020 (5.7m dwt)
2.8% 2.8% 1.2%
0.0% 10.0% 20.0% 30.0%
10 20 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e
(million DWT)
Demolition Delivery Net Fleet Growth
Forecast Actual
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302 512 1,064 778 921 157 267 369 677 706 432 221 569 881 1,741 1,484 1,353 378 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2001-2003 2004-2006 2007-2009 2010-2012 2013-2015 2016-2018 YTD
# of Vessels
Newbuilding Orders in Three Year Periods
Newbuilding orders for ultramax and kamsarmax vessels, aside from 2016, are at their lowest level since 2001
Source: Clarksons Research Services, November 2018
46 101 155 112 120 280 567 361 136 455 214 109 504 278 139
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85 53
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91 148 99 101 169 358 238 81 473 152 81 202 150 80 5 141 75 74 192 303 211 221 449 925 599 217 928 366 190 706 428 219 24 226 128 200 400 600 800 1,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD
# of Vessels
Newbuilding Orders Per Year: 2001-2018 YTD
Handymax/Ultramax Panamax/Kamsarmax
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Scrapping 2018 YTD is at its lowest levels since 2007
Source: Clarksons Research Services, November 2018
2 11 29 9 47 104 80 72 71 96 67 14 2 17 32 9 76 127 74 69 96 117 49 2 4 28 61 18 123 231 154 141 167 213 116 16 50 100 150 200 250 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
# of Vessels
Handymax Scrapping Panamax Scrapping
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Newbuild Deliveries (2018-2020) vs. Vessels over 20 Years Old in 2020
and cap ex for BWT systems
There will be more potential scrapping candidates (20+ years) than newbuildings delivered between 2018-2020
Source: Clarksons Research Services, November 2018
253 300
100 200 300 400 Ultramax Kamsarmax
# of Vessels
NB Deliveries (2018-2020) 20 Years & Older in 2020
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Vessel Type Earliest Redelivery Date Rate/day
SBI Jaguar Ultramax April 2019 $16,000 SBI Ursa Ultramax June 2019 $15,000 SBI Tango Ultramax March 2019 $14,500 SBI Cougar Ultramax March 2019 $16,500 SBI Echo Ultramax February 2019 $15,000 SBI Thalia Ultramax April 2019 $16,500 SBI Lyra Ultramax April 2019 $16,500 SBI Bolero Kamsarmax May 2019 $14,500 SBI Macarena Kamsarmax February 2019 $16,000 SBI Samba Kamsarmax April 2019 $15,500 SBI Mazurka Kamsarmax May 2019 $16,000
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Owned & Finance Leased Vessels # Name Year Yard Type # Name Year Yard Type 1 SBI Athena 2015 Chengxi Ultramax 29 SBI Aries 2015 Chengxi Ultramax 2 SBI Bravo 2015 Nacks Ultramax 30 SBI Gemini 2015 Chengxi Ultramax 3 SBI Antares 2015 Nacks Ultramax 31 SBI Taurus 2015 Chengxi Ultramax 4 SBI Leo 2015 Dacks Ultramax 32 SBI Pisces 2016 Chengxi Ultramax 5 SBI Echo 2015 Imabari Ultramax 33 SBI Virgo 2017 Chengxi Ultramax 6 SBI Lyra 2015 Dacks Ultramax 34 SBI Libra 2017 Chengxi Ultramax 7 SBI Subaru 2015 Dacks Ultramax 35 SBI Puma 2014 Chengxi Ultramax 8 SBI Tango 2015 Imabari Ultramax 36 SBI Jaguar 2014 Chengxi Ultramax 9 SBI Maia 2015 Nacks Ultramax 37 SBI Cougar 2015 Chengxi Ultramax 10 SBI Hydra 2015 Nacks Ultramax 38 SBI Samba 2015 Imabari Kamsarmax 11 SBI Pegasus 2015 Chengxi Ultramax 39 SBI Rumba 2015 Imabari Kamsarmax 12 SBI Ursa 2015 Dacks Ultramax 40 SBI Capoeira 2015 Hudong Kamsarmax 13 SBI Thalia 2015 Chengxi Ultramax 41 SBI Electra 2015 Yangzijiang Kamsarmax 14 SBI Cronos 2015 Imabari Ultramax 42 SBI Carioca 2015 Hudong Kamsarmax 15 SBI Orion 2015 Chengxi Ultramax 43 SBI Conga 2015 Hudong Kamsarmax 16 SBI Achilles 2016 Imabari Ultramax 44 SBI Flamenco 2015 Hudong Kamsarmax 17 SBI Hercules 2016 Chengxi Ultramax 45 SBI Bolero 2015 Hudong Kamsarmax 18 SBI Perseus 2016 Chengxi Ultramax 46 SBI Sousta 2016 Yangzijiang Kamsarmax 19 SBI Hermes 2016 Imabari Ultramax 47 SBI Rock 2016 Yangzijiang Kamsarmax 20 SBI Zeus 2016 Mitsui Ultramax 48 SBI Lambada 2016 Hudong Kamsarmax 21 SBI Hera 2016 Mitsui Ultramax 49 SBI Reggae 2016 Hudong Kamsarmax 22 SBI Hyperion 2016 Nacks Ultramax 50 SBI Zumba 2016 Hudong Kamsarmax 23 SBI Tethys 2016 Nacks Ultramax 51 SBI Macarena 2016 Hudong Kamsarmax 24 SBI Phoebe 2016 Chengxi Ultramax 52 SBI Parapara 2017 Hudong Kamsarmax 25 SBI Poseidon 2016 Mitsui Ultramax 53 SBI Mazurka 2017 Hudong Kamsarmax 26 SBI Apollo 2016 Mitsui Ultramax 54 SBI Swing 2017 Hudong Kamsarmax 27 SBI Samson 2017 Chengxi Ultramax 55 SBI Jive 2017 Hudong Kamsarmax 28 SBI Phoenix 2017 Chengxi Ultramax 56 SBI Lynx 2018 Yangzijiang Kamsarmax