21 August 2019 Q2 and First Half 2019 Presentation
Highlights second quarter 2019 EBITDA of USD 211 million, showing continued positive improvement y-o-y Ocean results driven by higher net freight/CBM, more efficient operations and lower net bunker cost Ocean volume declined 8% y-o-y, driven in part by commercial priorities and in part by weaker auto markets The landbased segment delivered overall stable performance, with strong results in H&H and APAC/EMEA Continued progress on the performance improvement program with about USD 65 million of the USD 100 million target confirmed 2
Agenda Business update Financial performance Market outlook Outlook and Q&A
Business update by Craig Jasienski
Business update Financial performance Market outlook Outlook and Q&A Volumes declined 8% compared to same period last year - High & heavy share increases due to the decline in auto volumes Volume and cargo mix development Comments Million CBM and % Auto High & heavy High & heavy share • Commercial prioritization of profitable volumes main factor behind the 8% volume drop Million CBM % -8% +5% 19.5 20 19.4 32 • Additionally, 18.8 Q2 2018 volumes over-inflated 18.4 18.2 18.2 30 18.0 18.0 17.3 17.1 17.0 17.0 ahead of WLTP introduction impact the y-o-y 28 16.8 16.5 16.2 16.2 16.2 26 15.5 15.2 comparison, coupled with generally weaker auto 15 24 markets 22 20 14.9 14.7 13.9 • Focusing on profitable cargo rather than volumes: 13.5 13.7 13.3 13.5 12.1 18 12.1 14.5 12.0 12.6 12.5 11.9 11.3 12.3 10 16 12.5 11.7 11.3 • Unprofitable volumes not renewed in the Atlantic 14 (effect from January 2019) 12 10 • Prioritising winning better-paying cargo, and 5 8 rationalising sailings to improve operational 6 5.1 5.0 5.1 5.0 4 4.9 4.9 4.7 4.7 4.6 efficiency 4.5 4.6 4.6 4.5 4.3 3.9 3.9 3.9 3.7 3.7 2 • High & heavy share 29%, up from 27% in Q2 2018, 0 0 Q4’14 Q1’15 Q2’15 Q3’15 Q4’15 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2 ’18 Q3’18 Q4’18 Q1’19 Q2’19 driven by lower auto volumes 1) Prorated volume (WW Ocean, EUKOR, ARC and Armacup) 2) H&H share calculated based on unprorated volumes 5
Business update Financial performance Market outlook Outlook and Q&A Mixed development for the foundation trades - overall volumes down y-o-y, but strong growth q-o-q in certain trades EU - ASIA Asia - EU Atlantic Shuttle -1% +20% -7% +13% 3.0 3.0 -21% -4% 3.4 3.2 2.5 2.8 3.6 3.0 2.9 Q2’18 Q1’19 Q2’19 Q2’18 Q1’19 Q2’19 Q2’18 Q1’19 Q2’19 Asia - NA EU/NA – Oceania 1) +5% -1% 3.1 3.1 -13% -6% 2.9 2.0 1.9 1.8 Asia - SAWC -16% +3% Q2’18 Q1’19 Q2’19 1.3 1.1 1.0 Q2’18 Q1’19 Q2’19 WWL trade routes EUKOR trade routes Q2’18 Q1’19 Q2’19 ARC trade routes Note: Prorated volumes on operational trade basis in CBM 1) Including Cape sailings (South Africa) 6
Business update Financial performance Market outlook Outlook and Q&A Fleet capacity tightly managed - voyage rationalization efforts continued to minimize use of tonnage Fleet development Comments # of vessels Owned Chartered Short Term T/C In/Out • Wallenius Wilhelmsen controlled a fleet of 127 vessels at the start of the quarter and the same at the end 137 132 131 131 131 130 129 124 127 127 10 • Fleet capacity managed tightly with position swaps 123 5 3 6 6 2 9 0 1 within the group and leveraging of the short-term charter market 48 48 48 49 49 49 48 48 49 50 46 • Flexibility to redeliver up to 12 vessels by end of 2020 (excluding vessels on short charter) • Delivery of vessel number two of four in the Post- Panamax newbuilding program, MV Traviata, took place 78 78 78 78 79 79 79 77 77 76 75 on 11 April 2019 • Remaining two vessels are under construction, next vessel expected delivery Q4 and last one due first half -3 -3 of 2020 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 April May June 7
Business update Financial performance Market outlook Outlook and Q&A Some smaller renewals with positive rate development in Q2 - majority of volume still remains to be renewed in the second half of 2019 Overview of 2019 contract renewals Rate changes and impact for 2019 contract renewals USD and percent (Circle indicate size of contract in millions) Contract renewals Q2 2019 Contract renewals Q1 2019 Rate change Percent Contractually agreed rate adjustments 50 40 Renewed 28% 30 20 10 To be renewed 72% 0 -10 -20 2019 -30 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 Rate impact (USD millions) 8
Business update Financial performance Market outlook Outlook and Q&A Positive development for net freight/CBM - driven by favourable cargo mix and commercial priorities Net freight / CBM development 1) Comments • Net freight/CBM increased 2% y-o-y, down 4% 44 +2% -4% compared to the unusually high level in first 43.0 quarter • Improvement driven by cargo mix and commercial 42 41.4 41.4 priorities; 41.0 40.9 40.5 40.5 • Increased High & Heavy share due to lower 40.2 40.2 40.0 auto volumes 40 • Commercial priorities focused on profitability rather than volume (choosing not to carry 38 low paying volumes, particularly in the Atlantic) • Negative impact on the freight index from contract 36 renewals in 2018 of about USD 2 - 3 million y-o-y Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 1) Net freight = Freight revenues adjusted for surcharge elements such as BAF, SRC, THC etc. 9
Business update Financial performance Market outlook Outlook and Q&A Continued progress on the performance improvement program - although most of remaining improvements expected to carry a longer lead time Confirmed and realized improvements Comments USD million in annualized effect • USD 65 million of the USD 100 million performance 100 improvement program confirmed (concrete improvement measures identified and quantified), up from USD 60 million in the previous quarter 65 61 • Annualised impact from improvement measures 56 implemented (realized improvements) was also up to 43 USD 65 million from USD 60 million in the previous quarter • The increase of USD 5 million comes mainly through more efficient hull cleaning and further voyage optimization • Majority of remaining initiatives require longer lead- Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 time; 2018 2018 2019 2019 2019 2019 2020 2020 2020 • Centralised voyage management • Further voyage optimisation Contractual improvements Centralized vessel and voyage management Realized improvements Voyage Optimization More efficient hull cleaning 10 1 Not adjusted for USD 10 million in negative rate impact from 2018 contract renewals
Business update Financial performance Market outlook Outlook and Q&A Getting ready for IMO 2020 - well prepared for the transition, key uncertainty remains around price impact in Q4 Key risk areas Mitigating actions Risk assessment Change over to new fuel Tried and tested method involving no off-hire period Low Technical readiness Test runs on different types of compliant fuel with good Quality of new fuel Low results Fuel Have entered and are negotiating contracts with major Availability of fuel Medium availability suppliers, back-up solution to run on MGO Financial hedges to manage lag impact in Q4, aim to Financial impact in Q4 1 High Financial minimise period of running on new fuel before 1 Jan 2020 and Good progress on customer discussions, targeting special commercial Updating BAFs 2 Medium reference period in Q4 impact Acceptance of scrubbers Hybrid scrubbers chosen Low 1 Risk related to three factors: i) switching costs, ii) having to buy compliant fuel ahead of new regulation and new BAFs being applicable and 3) increased spread, i.e. higher MGO/VLSFO price outright and lag effect 2 Risk consists of three main parts: i) successfully negotiating change to new BAF, ii) uncertainty of reference period – should refer to a period when VLSFO has started trading, and iii) uncertainty wrt. reference 11 price index – should be an index that is based on actual prices traded in the market
Financial performance by Rebekka Herlofsen
Business update Financial performance Market outlook Outlook and Q&A Consolidated results – second quarter 2019 Comments Q2 2019 Q1 2019 Q2 2018 Total income 1 005 1 018 1 044 • Total income was USD 1 005 million in the second Operating expenses (794) (799) (888) quarter, down 4% y-o-y due to lower revenues for the ocean segment EBITDA* 211 218 156 • EBITDA of USD 211 million, up USD 55 million y-o-y EBITDA adjusted 211 218 159 of which USD 42 million was due to IFRS16 Depreciation (124) (123) (86) • Underlying improved performance driven by the Other gain/losses 1 0 2 ocean segment EBIT 88 95 72 • Net financial expense of USD 83 million Financial income/(expenses) (83) (70) (45) • Interest expense was USD 51 million, up USD 10 Profit before tax 6 25 27 million y-o-y as a result of implementation of IFRS Tax income/(expense) (3) (3) (4) 16 • Net financial expenses negatively impacted by USD Profit for the period 3 22 23 31 million interest rate derivatives EPS 0.00 0.05 0.04 • Tax expense of USD 3 million in the quarter *IFRS 16 effect on EBITDA 42 42 n/a 13
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