DNB Oil, Offshore & Shipping C onference March 2018
Agenda • Odfjell at a glance • Our recent history • Positioning for the future • Market outlook 2
Odfjell has more than 100 years experience in the chemical tanker industry, and is today one of the leading companies in our industry • Established in 1914 with headquarters in Bergen, Norway • Listed on Oslo stock exchange • We are a leading operator of chemical tankers operating 80 vessels, which are among the most sophisticated tankers in the world • About 50-60% contract coverage • We own (j/v) and operate 8 tank terminals worldwide • After a period of crisis, the company is emerging from a turn-around with a stronger balance sheet and a significantly more competitive platform 3
Our vessels are sophisticated and built for serving very complex and demanding trades, with multiple parcels of highly specialized chemicals Basic chemical tanker Sophisticated super-segregator 13WP 8WP 7WS 6WP 6W 5W 4W 3W 2W 1W 6P 5P 4P 3P 2P 1P 8WS 13WS 7WS 6WS Standardized and cost efficient Tailor-made and responsive Scale effect on basic equipment across similar ships Complex and flexible equipment Experienced crew with cost focus, comprehensive technical competencies Experienced crew with cost focus and training 4
Agenda • Odfjell at a glance • Our recent history • Positioning for the future • Market outlook 5
Odfjell is emerging from a turn around, and is today stronger and leaner, with a robust balance sheet Opex per day, USD per day • In 2013/2014 Odfjell was in a «perfect storm» with erosion of 2007-2014 average 12 000 -25% market shares, financial losses, a weakening balance sheet and 10 000 2015-2017 average a significant cost problem 8 000 6 000 • In 2011 our largest terminal faced a shut down, which for a 4 000 period has required a significant part of Odfjell´s capital and 2 000 attention 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 • The core of the business continued to work, but it was clear to Non-crew OPEX Crew cost all stakeholders that we had to change course to regain Odfjell Terminals (Rotterdam), 100%, EBITDA, EUR millions strength 60 • Since 2015 the company has been undergoing a significant 41 35 35 40 transition 27 26 20 10 10 Material cost cuts of +USD 100m (OPEX, fuel cost and G&A) – 0 Rotterdam terminal under control – -8 -20 We solved our tonnage renewal and growth ambitions at the -40 – bottom of the cycle, in a very capital efficient way -46 -60 -49 -60 Introduction of top to bottom business intelligence system -80 – 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 6 Source: Odfjell
..and we are seeing real and measurable effects from our operational excellence initiatives Project Moneyball status, End Q4 2017 Port efficiency is 7% better than historic benchmark and 1% better 23% improvement in ETA performance (days) than target Average delays Odfjell port efficiency index -23% 100% 5.7 -7% 94% 93% 4.4 Historic benchmark Target 2016-2017 Actual 2016-2017 Q1-2017 Q4-2017 (Baseline) 7 Source: Odfjell
Our EBITDA performance improved, despite the challenging markets, which means we are today significantly more competitive LPG/Ethylene EBITDA per division, USD million Tank terminals Chemical tankers 316 286 74 +73% 238 95 47 191 182 169 166 157 40 38 117 109 242 110 96 96 22 93 191 188 27 147 125 98 97 73 66 61 59 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Odfjell 8
2017 marks a year where we continued to make good progress as a company and Odfjell is now well positioned for the future Growth • The “100 vessel” target reached • Tonnage renewal / fleet growth • CTG and Sinochem concluded • Take part in consolidation High quality service • Successful efficiency programmes • Safety, predictability and reliability and improved safety performance Operational excellence • Reduced by USD 8 mill in 2017 • Tankers: OPEX + SG&A • Being implemented • Terminals: implementing operational excellence project Financial strength • Equity Ratio and cash improved • Further improve balance sheet to be able to act quickly as opportunities may arise • Ongoing process • Cost of capital Terminals – back to profitability • Ongoing process • Implementation of the «value creation program» 9
Agenda • Odfjell at a glance • Our recent history • Positioning for the future • Market outlook 10
Our balance sheet is robust and we have a strong liquidity position, which we believe will translate into a lower cost of capital and ultimately to appreciation by the equity markets Net interest bearing debt / EBITDA Odfjell SE cash position Comments 25.4x 207 • Key ratios has improved since 2015 165 162 • Equity instalments on newbuilding programme limited to USD 24 mill 16.1x 126 105 • We got liquidity and a balance sheet to act if 7.6x attractive opportunities arises 4.0x 3.6x • Dividends have been reinstated from 2016 • Lowering our cost of capital is an ongoing 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 process. Equity ratio Return on capital employed Share price development (NOK per share) * 41.0% 41 8% 8% 38.0% 37.0% 33.0% 31.0% 31 31 29 28 28 2% -1% -3% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Today 2013 2014 2015 2016 2017 * 11 * Year-end closing prices
The main reason for the strengthened balance sheet is the sale of two non- operated terminals in Oman (2016) and Singapore (2017) at attractive valuations Oman transaction Singapore transaction 40.0 153.0 136.0 22.0 14.0 12.0 23.0 18.0 4.1 15.6 EV/EBITDA Equity gain Cash gain Equity IRR (%) Equity gain per EV/EBITDA Equity gain Cash gain Equity IRR (%) Equity gain per multiple (x) (USD mill) (USD mill) share (NOK) multiple (x) (USD mill) (USD mill) share (NOK) • Odfjell announced a strategy of divesting terminals where we did not have operational control • In late 2016 we divested our minority stake in the Oman terminal. Generated an equity IRR of 22% • In late 2017 we divested our minority stake in the Singapore terminal. Generated an equity IRR of 23% • Assets were sold at attractive multiples and contributed with material cash to Odfjell SE • Our focus is now turned to terminals were we have operational control in key hubs like Houston, Rotterdam and growth initiatives in China 12 Source: Odfjell
Our long-term ambition level and targets Safety Zero incidents performance Customer Delivering safely, on time, on spec and being competitively priced service Revenue / Average revenue growth of 10% per year (over time) Top-line Industry leading EBITDA margin Profitability Target an operated fleet of about 100 vessels, to benefit from scale advantages Tankers scale 13
Our investments and growth initiatives on tankers have been concluded at a very low point on the cycle – even at historic earnings, the investments are attractive 15.0% • Based on 2008 asset prices and 10 year median 10.0% ROIC TCE rates as quoted by brokers based on 5.0% 2.7% 2.5% 2.1% • Super segregator asset 2008 asset 0.8% 0.0% 0.0% values based on quotes values and -0.1% -0.2% -0.2% -0.4% from shipyards in 2008 2008-2017 EBIT -5.0% and TCE based on internal Super VLGC Suezmax Handysize VLCC LNG Capesize Panamax MR calculations segregators Tanker Carrier Bulker 15.0% • Based on 2018 asset ROIC 11.2% prices and last 10 year based on 10.0% median TCE rates as 2018 asset 5.2% quoted by brokers 3.5% 5.0% values and 2.4% 2.2% 1.9% 1.9% • Super segregator asset 2018-2027 EBIT 0.3% values based on Odfjell’s 0.0% assumed in line -0.1% growth/renewal initiatives with 2008-2017 -5.0% • Super segregators will be Super Suezmax VLGC Capesize VLCC Panamax Handysize MR LNG more than 65% of our book segregators Bulker Tanker carrier values by 2020 Source: Clarksons Platou, Odfjell 14
Agenda • Odfjell at a glance • Our recent history • Positioning for the future • Market outlook 15
We believe that demand growth in chemical tankers will outpace supply growth towards 2020 and that tonne-mile growth will add further upside to demand. We expect volumes to grow by 4% p.a. primarily …while supply growth is reduced to 2% p.a. driven by organic chemicals… following a period of rapid growth The market has gone through a period with high fleet growth, but we expect more rational growth towards 2020 Deep-sea fleet development , DWT mill. 94 92 Core fleet 89 88 Swing/other fleet 81 17 16 16 75 15 72 13 68 66 64 13 61 12 57 12 12 11 10 50 10 9 77 76 72 74 68 62 59 56 53 54 51 47 41 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E Y +14% +7% +5% +2% +4% +5% +5% +8% +8% +2% +3% +1% owth +6% +2% p.a. p.a. +4% +2% ce: Odfjell 12 + tonne-mile effect Core fleet +3.6% p.a p.a. p.a. Degree of Chinese self-sufficiency could Potential downside from CPP markets impact this picture in both directions (swing tonnage) Source: Odfjell 16
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