Presentation of Q f Q1 2009 results
Highlights First quarter results • Pre-tax profit of USD 39 million for f r first quarter Guidance for full year • Pre-tax profit for full year 2009 of US USD 100 – 140 million remains • Development in freight rates add co considerable uncertainty about the profit expectations • By the end of March 42% of the rem maining earning days in the Tanker Division were hedged to an average rate of USD 21,334 p per day and 13% of the remaining earning days in the Bulk Division to an average rate of USD 13,434 per day Tank division • Operating profit of USD 25.5 million n for the first quarter of 2009 • Rates began the year at a high leve vel but dropped to historical lows in mid-quarter. • Pressure on rates were primarily dri riven by delivery of a large number of new buildings (app. 70) together with a large decline in o n oil demand • Less than usual delays in The Bosp spurus further pressured LR2 rates • A larger number of long-haul voyage • A larger number of long-haul voyage ges and the use of vessels as storage due to the contango ges and the use of vessels as storage due to the contango curves had some positive impact Dry bulk division • Operating profit of USD 23.7 million n, including compensation in the amount of USD 26 million for early returns of four Panamax bu bulk carriers • Virtually no remaining counterparty y risk • Rates started out very low but impro roved over quarter • China’s iron ore imports increased si significantly in first quarter and was the main positive driver for the freight rates • Furthermore wheat and coal to Chin ina gave extra support to rates in the Panamax segment Greater Efficiency Power • The Company's “Greater Efficiency cy Power” project is progressing according to plan and is still expected to contribute USD 40-60 m million savings on an annual basis effective from 2010 Events after first quarter • TORM has sold two dry bulk vessel ssels for a total of USD 42.5 million with a profit of USD 15.4 million 2
Company facts Key facts Tank market Dry bulk market Finance Strategy Fleet* 139 vessels under management - 122 product tankers (61 owned, 23 ch chartered-in, 38 in pools/comm. mngt) - 17 bulk carriers (7 owned, 10 charter ered-in) Strategy - Superior advantage through modern n tanker fleet, sizeable market share through pool operation, excellent quality delivery mo odel and global reach - Consolidate the Product tanker marke rket Key financials USD m Q1 2009 2008 2007 Revenue 259 1,184 1 774 EBITDA 81 572 304 Net income 40 360 792** NIBD 1,615 1 1,550 1,536 Equity 1,341 1 1,279 1,081 Total # employees 3,500 – hereof 3,200 seafarers Listing Listed on OMX and NASDAQ Market cap USD 600-800 m 3 *Figures are end of February 2009 **Includes a book gain of USD 643 m from the sale of shareholding in Norden
Company facts Tanker market hit bottom in the end of f f first quarter Tank market Dry bulk market Finance Strategy TORM’s tank division had an EBIT of USD 25.5 m in the first quarter 2009 Freight rates (MR and LR’s) Relative to the first quarter of 2008, freight USDt MR1 spot rates and 1 year T/C rates rates realized by TORM were 12% lower for 50 the LR1 segment and 13% lower for the MR 40 segment, whereas the rates obtained for the LR2 segment were 23% lower. 30 1. Positive factors: 20 • Gasoil from the Far East to Europe 10 and of naphtha from Europe to the Far East lead to higher tonnes milles 0 especially in the LR1 segment Jan/08 Apr/08 Jul/08 Oct/08 Jan/09 Apr/09 • Tankers used as floating storage due • Tankers used as floating storage due MR spot rates MR 1 year T/C rates to contango forward curve reduced open vessels in the LR2 market USDt LR1 and LR2 spot rates and 1 year T/C rates • Discharging delays prolonged port 90 calls 80 2. Negative impact: 70 • The decline in global oil consumption 60 50 • A large number of new buildings 40 • Mild winter in the US and Europe and 30 few delays in Bosporus pressured 20 rates for crude transport in the LR2 10 segment 0 Jan/08 Apr/08 Jul/08 Oct/08 Jan/09 Apr/09 After the end of the quarter the MR rates in the LR1 spot rates LR1 1 year T/C rates West have improved quite significantly LR2 spot rates LR2 1 year T/C rates whereas LR1 and LR2 rates remains very low 4 Bunker prices have likewise increased since *Source: Clarksons end of first quarter
Company facts Key routes in the first quarter Tank market Dry bulk market Finance Strategy Primarily trading driven Demand-supply driven Diesel USA to Europe Naphtha Gasoil Crude Oil Europe to Far East Far East to North Africa to Europe Europe Gasoil and diesel US Gulf and Caribean to US Gulf and Caribean to Naphtha Naphtha South America Unl. Gasoline Middle East to Europe to USA Japan, Korea & Taiwan Jet fuel Middle East to Europe Gasoil Intra-Asia Trading Naphtha Middle East to Japan *Source: TORM research 5
Company facts Key products being transported Tank market Dry bulk market Finance Strategy Distribution of cargoes in the TORM Product Tanker segment LR2 - distribution of cargoes LR1 - distribution o of cargoes MR - distribution of cargoes 100% 100% 100% 90% 90% 90% 80% 80% 80% 70% 70% 70% 60% 60% 60% 50% 50% 50% 40% 40% 40% 30% 30% 30% 20% 20% 20% 10% 10% 10% 0% 0% 0% 2006 2007 2008 Q1 2009 2006 2007 200 008 Q1 2009 2006 2007 2008 Q1 2009 Crude oil Naphtha Gasoil Other Naphtha Gasoil O Other Gasoline Gasoil Other Crude oil has in 2008 and Q1 Naphtha and gasoil have ve been Gasoline is the single most 2009 constituted a very large the most important cargo oes for transported product by TORM’s share of TORM’s LR2 vessels ‘ TORM’s LR1 vessels MR vessels cargoes Declining demand from Ja Japan has In Q12009 the gasoline transport Other products consisted among reduced Naphthas’ share re of was lower due to low US demand others diesel and jet fuel in first cargoes in 2008 and Q1 1 2009 quarter Other products consisted among Other products consisted ed among others diesel and jet fuel in first others gasoline and jet fu fuel in first quarter quarter 6
Company facts Declining vessel prices since Q4 2008 Tank market Dry bulk market Finance Strategy Vessel price development* MR newbuild and second hand prices USDm Newbuilding and second hand prices 55 have declined quite significantly since second half of 2008 50 45 However, there is currently very limited activity in the market and it is therefore 40 difficult to estimate a realistic solid level 35 Furthermore no new buildings have been 30 ordered in the last 2 quarters Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 47-51,000 DWT Products Tanker Newbuilding Prices 47-51,000 DWT Products Tanker Newbuilding Prices 47,000 DWT 5 year old secondhand prices MR - 1 year T/C and second hand prices (indexed) 200 180 160 Rates and second hand prices are 140 relatively well correlated 120 100 Thus the sharp decline in TC rates 80 should also be expected in vessel prices 60 40 – based on current estimates this also 20 appear to be the case 0 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 47,000 DWT 5 year old secondhand prices (index) 1 Year Timecharter Rate 47-48,000 Modern Products Tanker - index 7 *Source: Clarksons and TORM research
Company facts Product Tanker market – balance betwe een supply and Tank market Dry bulk market Finance demand Strategy Based on TORM’s research there appear to be a good balance between increase in demand and supply from 2009-2011 Demand and supply development in the Product Tanker market (20 2009-2011) Demand is primarily driven by: Demand Supply • New refineries coming on stream 1,000 Number of vessels* in Middle East and India 111 • Phase out 750 98 8 • Increased oil demand – negative 51 119 in 2009 but positive over the 70 500 913 68 549 period 13 • Increasing port days due to 398 534 250 bottlenecks N 0 Supply side affected by: LR1 into dirty LR2 into dirty Growth in oil Increasing port Total supply Total demand expansions Arbitrage Swing factors Cancellations Phase out Order book gross Refinery • 37 LR1 vessels are replacing increase demand increase market market market phase outs in the crude oil Est. days segment • 30% of LR2 vessels are expected (on average) to trade in the crude oil segment • Expected cancellations of 15% as a consequence of the financial crisis *The number of vessels reflects MR vessels – when necessary a conversion factor for LR2, and L d LR1 have been used A number of swing factors can based on their DWT relative to MR change the picture: • Delays in order book • Delays in refineries 8 • Slow steaming • Clean to crude swap
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