ARDMORE SHIPPING CORPORATION Second Quarter 2019 Earnings Presentation
Disclaimer This presentation contains certain statements that may be deemed to be “forward -looking statements” within the meaning of applicable U.S. federal securities laws. All statements, other than statements of historical facts, that address activities, events or developments that Ardmore Shipping Corporation (“Ardmore” or the “Company”) expects, projects, believes or anticipates will, or may occur in the future, are among these forward-looking statements including, without limitation, statements about: future operating or financial results; global and regional economic conditions and trends; the Company’s business strategy and expected operating expenses and operating leverage, including expected increases in EPS for given tanker rate increases; competition in the tanker industry; shipping market trends and market fundamentals, including expected tanker demand and scrapping levels; changes in governmental rules and regulations or actions taken by regulatory authorities; the effect on tanker demand of the IMO 2020 regulations, and the timing of such effect; future tanker rates; the Company’s financial condition, liquidity and debt amortization; drydocking and expected capital expenditure including ballast water management systems; instances of offhire and expected 2019 revenue days. Although the Company believes that its expectations stated in this presentation are based on reasonable assumptions, actual results may differ materially from those projected in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the risk factors described in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the Company’s Annual Report on Form 20-F for the year ended December 31, 2018. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. 2
Earnings Release: Second Quarter 2019 3 Agenda ▪ Highlights ▪ Key Market Developments ▪ Quarterly Performance ▪ Tanker Market Activity and Fundamentals ▪ Financial Review ▪ Summary 3
Highlights 4 ▪ Reporting net loss from continuing operations of $3.4 million, or $0.10 per share for 2Q19, compared to net loss of $2.6 million, or $0.08 per share for 1Q19 ▪ MR charter market in line with expectations in 2Q19; our MR product tankers earned $14,892 / day in the second quarter, compared to $15,856 / day in 1Q19 and $11,510 / day in 2Q18 ▪ MR voyages for 3Q19 to-date are $14,000 / day (40% of revenue days) reflecting the final phase of first-half refinery turnaround; expect activity to ramp up over the next month with freight rates following in September ▪ Completed six of seven 2019 drydockings; fleet well positioned to take maximum advantage of the anticipated IMO 2020 rates strengthening ▪ Maintaining strong liquidity position and balance sheet; cash of $55 million at quarter-end and corporate leverage (net debt basis) of 52% ▪ Completed the sale of the Ardmore Seafarer (2004-built) for $9.1 million, thus completing older ship phase-out and improving fleet average age to 5.9 years ▪ Maintaining dividend policy paying out 60% of earnings from continuing operations. Consistent with policy, the Company is declaring no dividend for 2Q19 ▪ Ardmore well positioned to benefit from the anticipated charter market upturn with 25 modern, fuel-efficient ships 100% employed in the spot market; each $1,000 / day increase in rates translating into $0.27 in EPS 4
Key Market Developments 5 ▪ MR rates subsided in 2Q19 as a consequence of seasonally lower demand and heightened global refinery maintenance ahead of IMO 2020 fuel switch ▪ IMO 2020 preparations unfolding as expected: o Refinery upgrades and preparations should be nearing completion o Marine fuel providers commencing clean-up of logistics infrastructure and preparing to stockpile compliant fuels in large quantities ahead of switchover Pricing of HSFO (1) has risen in some regions and availability constrained as a o consequence of reduced storage and barging capacity, as some is already being taken out of service for VLSFO (1) o Industry participants stockpiling low sulfur blending components, albeit in relatively small quantities thus far o Refinery throughput should be set to increase over next few months with meaningful compliant fuel stockpiling in advance of switchover o We expect product tanker freight rates to benefit beginning in September ▪ Geopolitical events in the Middle East Gulf resulting in some disruption of tanker activity but no noticeable impact on rates ▪ Product tanker supply-demand fundamentals are strong, which should support a sustained upturn: o Oil consumption growth still relatively strong at 1.2 mbd for 2019 (2) ; refinery capacity growth continuing in export-oriented locations o Product tanker supply growth (MR / LR1 / LR2) remains very modest; net fleet growth averaging around 2.2% for the foreseeable future (3) 1. HSFO = High Sulfur Fuel Oil; VLSFO = Very Low Sulfur Fuel Oil 2. IEA, Oil Market Report, July 2019 Clarksons Shipping Intelligence Network and Management’s estimates 3. 5
Performance and Tanker Market 6 6
Quarterly Performance 7 ▪ Reported adjusted EBITDA of $12.3 million for the second quarter ▪ Loss from continuing operations of $3.4 million, or $0.10 per share for the second quarter ▪ GAAP net loss for the quarter of $9.9 million or $0.30 EPS: o GAAP includes $6.6 million related to loss on sale of the Ardmore Seafarer ▪ Earnings impacted by reduced revenue days as a result of scheduled drydockings o Six of seven 2019 drydockings completed as of July 31, 2019 ▪ Ardmore fleet TCE averaged $14,375 / day in 2Q19 and $14,663 / day in 1H19 o MR spot rates averaged $14,892 / day ($15,856 / day in 1Q19) o Chemical tankers averaged $12,830 / day ($12,142 / day in 1Q19) ▪ Fleet continues to perform very well operationally ▪ Drydockings coming in below budget for the year 7
Recent Tanker Market Activity and Outlook 8 ▪ Global Refinery Throughput (1) Recent market activity: 85.0 84.0 o Reduced cargo volumes; global refining throughput in 2Q19 dropped 0.7 83.5 84.0 83.3 mbd y-o-y, the largest annual decline in 10 years (1) Refinery Throughput (mbd) 83.0 82.4 81.8 81.6 82.0 o Markets East of Suez were firm; steady volumes of distillates from Middle 80.9 81.0 East and Asia to Europe 80.0 o Charter rates in the Atlantic basin were more subdued due to lower cargo 79.0 volumes resulting from refinery maintenance and lower trading activity 78.0 77.0 o Strong underlying consumption demand leading to continued decline in 76.0 OECD refined product inventories (2) 75.0 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19E 4Q19E ▪ Market outlook and trends: OECD Refined Product Inventories (2) o Global refinery throughput set to increase by 4.2 mbd from May to August; 1,200 expect record throughput of 84.6 mbd in August resulting in increased volumes of refined products (2) 1,150 o Overall low refined product inventories and regional imbalances will Million Barrels 1,100 support trading activity 1,050 o Geopolitical events in the Middle East Gulf resulting in some disruption of tanker activity and an uptick in oil price volatility (3) 1,000 o IMO 2020 expected to drive increased trading activity; transformation of global bunker supply chains to intensify over coming months 950 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18 Feb-19 May-19 1. IEA, Oil Market Report, July 2019 2. IEA, Oil Market Report, July 2019; OECD Refined Product Inventories totalled over Gasoline, Middle Distillate and Residual Fuel Oil inventories 3. Bloomberg, as at July 25, 2019 8
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