INVESTOR PRESENTATION JANUARY 2018
Safe Harbor Statement Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and statements other than statements of historical facts. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect,” “pending” and similar expressions generally identify forward-looking statements. The forward-looking statements in this release 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 our records and other data available from third parties. Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, the Company cannot guarantee that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward- looking statements include the strength of the world economy and currencies, changes in charter hire rates and vessel values, changes in demand for “ton miles” of oil carried by oil tankers, the effect of changes in OPEC’s petroleum production levels and worldwide oil consumption and storage, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled dry- docking, changes in TORM’s operating expenses, including bunker prices, dry-docking and insurance costs, changes in the regulation of shipping operations, including requirements for double hull tankers or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents, political events or acts by terrorists. In light of these risks and uncertainties, you should not place undue reliance on forward- looking statements contained in this release because they are statements about events that are not certain to occur as described or at all. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of 2 unanticipated events.
Orion purchase price considerations AGENDA 1 Attractive Product Tanker Fundamentals 2 Company Overview 3 Q3 2017 Financials 3
SUPPLY- DEMAND FACTORS MOVING IN OWNERS’ FAVOR + Sustained, increasing demand for gasoline and other petroleum products + Product inventories have decreased (approaching 5-year average) + Relocation of refineries expanding ton-mile demand + Low order book, particularly for smaller product tankers + Significant reduction of shipyard capacity Freight rates started to move up in Q4 2017, with further gains anticipated in 2018 Source 4
RELOCATION OF REFINERIES WILL BENEFIT PRODUCT TANKERS AND EXPAND TON-MILES Middle Eastern refinery capacity set to grow Saudi Arabia diesel exports increasing* 12 0.7 1.9m b/d of capacity to be added through 2022 Historical rate of 1.5m 0.6 10 b/d of capacity to 3.4 times 0.5 8 0.4 M b/d M b/d 6 0.3 4 0.2 2 0.1 0 0.0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17e Q4 17f * Decline in Saudi Arabia’s diesel exports in 4Q 2016 reflects heavy refinery maintenance Source Naphtha Gasoline Jet Diesel 5 Source: WoodMackenzie
KEY DEMAND DRIVERS HAVE BEEN NORMALISING Global CPP inventories Short-term factors Billion bbl Product stock draws accelerated in Q3 driven by stronger-than- 1.70 1.70 Decreasing inventory levels, approaching 5-year average expected oil demand, preliminary data for the US and Europe 1.60 1.60 shows that destocking continued in Q4. During the first eight months of 2017, global CPP stocks 1.50 1.50 decreased by a volume equivalent to a loss of potential trade of 5% each month. 1.40 1.40 A high number of crude newbuilding deliveries in 2018 continue 1.30 1.30 to pressurize the product tanker market through cannibalization Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec of the gasoil trade from East to West. 5-yr High/Low 2015 2016 2017 5-yr Average US gasoline forward cover (days) Long-term factors Days The fundamental long-term outlook remains positive with oil 32 32.0 demand increasing and the ton-mile being positively impacted 30 30.0 by increasing imbalances between the demand for and supply 28 28.0 of clean petroleum products. 26 26.0 Middle East refinery capacity additions are expected to 24 24.0 accelerate from 1.5 mb/d during 2011-2016 to 1.9 mb/d during 22 22.0 2017-2022, placing a renewed pressure on less competitive 20 20.0 W 1 W 6 W 11 W 16 W 21 W 26 W 31 W 36 W 41 W 46 W 51 refineries in other areas. 5 Year High/Low 2017 5 Year Average 6 Source: EIA, JODI, WoodMackenzie, TORM Research
REDUCED ORDER BOOK FOR THE PRODUCT TANKER FLEET Net fleet growth y-o-y (no. of vessels)* % 2005-2015 average fleet growth for • In Q3, product tanker newbuilding activity slowed down LR2, LR1, MR and Handysize from Q2, as owners’ appetite for more expensive Tier 3 tonnage remained weak and newbuilding activity was focused on dry bulk and container ships • The product tanker order book to fleet ratio currently stands at 11%, relatively low compared in historical terms • Product tanker deliveries totaled 2.7m dwt during Q3, which combined with limited scrapping activity resulted in a 1.4% net fleet growth in Q3 (Q-over-Q basis) MR order book as percentage of the fleet (DWT) • For FY 2017, a fleet growth of around 5.4% is forecasted, m dwt followed by a slowdown to around 4% p.a. during 2018- 2019 * The number of vessels at the beginning of 2017 was: LR2 315, LR1 339, MR 1,570, Handy 704 (includes chemical vessels). Net fleet growth: gross order book adjusted for expected scrapping, delivery slippage and TORM assumptions on additional ordering. Currently confirmed orders account on average for 100% and 71% of forecasted deliveries respectively in 2018 and 2019. 7 Source: TORM Research
SIGNIFICANTLY REDUCED SHIPYARD CAPACITY FOR PRODUCT TANKERS Reduction in Korean shipyard capacity* Reduction in shipyard capacity • Yard restructurings and consolidations in Korea and China 70 have caused a reduction in available capacity for product 60 tankers 50 • Overall yard capacity for product tankers is full in 2017 and -45% 2018, and only limited capacity is available for deliveries in 40 the second half of 2019 Mill. dwt 30 • Restrictions on traditional bank financing 20 • Prices for newbuildings generally firm 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total deliveries Total orderbook Capacity prior restructuring Capacity after restructuring Source 8 * Source: TORM, data as per September 2017
STABLE PRODUCT TANKER VESSEL PRICES Vessel price development • Second-hand market in Q3 remained slow in a low freight USDm LR2 - Newbuilding LR1 - Newbuilding MR - Newbuilding market. Activity focused on older tonnage with prices overall unchanged • In Q4 so far, second-hand activity is picking up with more buyers interested in acquiring both modern and older tonnage • In Q4 so far, newbuilding prices have remained firm with some product tanker contracts for both Tier 2 and 3 versions − Yards well-employed with other shipping segments: crude, LPG, dry bulk and containers continue to be active MR - 5 yr. Second-Hand USDm MR 1Yr T/C 9 Source: Clarksons
Orion purchase price considerations AGENDA 1 Attractive Product Tanker Fundamentals 2 Company Overview 3 Q3 2017 Financials 10
TORM – KEY SUCCESS FACTORS TORM’s superior integrated TORM is a large scale, pure-play operating platform includes product tanker owner , active in all in-house technical and commercial key product tanker segments in management (preferred by customers) order to meet customer needs Enhanced responsiveness to TORM’s customers, Our ~80 product tankers resulting in higher TCEs are primarily deployed in the spot market Scale and focus driving cost-efficient results TORM has a solid TORM pursues selective capital structure growth based on rigorous with financial strength to financial hurdles pursue growth Well-positioned to grow at market Competitive advantage when lows and to be a consolidator pursuing vessel acquisitions from yards In-house S&P team with relationships with brokers, yards, banks and shipowners Semi-annual distribution policy of 25-50% of net income 11
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