Q2 Presentation August 9 th 2017 Craig Jasienski, President & CEO Rebekka Glasser Herlofsen, CFO
Agenda Business Update Financial Performance Market and Business Outlook Summary and Q&A 2
BUSINESS UPDATE by Craig Jasienski 3
Business Update Financial Performance Market and Business Outlook Summary and Q&A Business update Q2 at a glance… Organizational restructuring completed Realization of synergies well on the way Volume, cargo and trade mix show positive development Still pressure on ocean rates Positive development for landbased continues 4
Business Update Financial Performance Market and Business Outlook Summary and Q&A Organizational restructuring completed - Organizational restructuring completed with a ~20% reduction in office staff - USD 20 million in personnel related restructuring costs accounted for in the second quarter, well below savings achieved - Landbased separation in place, tasks from owners absorbed and organizations from WW ASA and WWL AS merged - Foundation for increased cooperation between WWL Ocean and EUKOR established 5
Business Update Financial Performance Market and Business Outlook Summary and Q&A Realization of synergies well on the way… - Approximately half of the targeted annualized synergies have been confirmed, through actions related to the organizational restructuring and procurement - USD 5 million already realized in Q2 (annualized effect of USD 20 million) - The remainder of confirmed synergies gradually taking effect over the next 3-9 months - Realization of remaining synergies on fleet optimization, ship management and IT carry a longer lead time - USD 100 million synergy target within 2019 remains 6
Business Update Financial Performance Market and Business Outlook Summary and Q&A Volume and cargo mix ix show posit itive development Volume and cargo mix development Comments Million CBM and % Volume HH share of volumes • Ocean transported volumes up 12% q-o-q, Million CBM % largely driven by seasonality: 22 35 20.5 +6% +12% • Increased exports out of Asia, mainly to Europe and 19.6 19.4 20 18.7 18.3 18.2 18.0 30 North America 17.8 18 16.8 16.1 • Increased exports from Europe to Asia 15.9 25% 15.5 16 15.2 25 25% • Increased exports from Europe to Oceania 25% 24% 24% 24% 14 24% 24% 23% 23% 22% 20 21% • Improved cargo mix with a high & heavy share 12 20% 10 of 24.8%, up from 23.2% q-o-q 15 8 • Ocean transported volumes up 6% y-o-y 10 6 primarily driven by higher volumes 4 5 transported in foundation trades, in particular 2 export from Asia to Europe 0 0 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 7
Business Update Financial Performance Market and Business Outlook Summary and Q&A Good seasonal l development in in all ll foundation trades EU - ASIA Asia - EU Atlantic Shuttle +1% +14% +22% +22% 3.2 -10% +5% 3.1 3.3 2.8 2.7 2.7 3.3 3.0 2.9 Q2 ’16 Q1 ’17 Q2 ’17 Q2 ’16 Q1 ’17 Q2 ’17 Q2 ’16 Q1 ’17 Q2 ’17 Asia - NA EU/NA – Oceania 1) +2% +5% +12% +18% 3.4 3.4 3.3 2.0 1.8 Asia - SAWC 1.7 +16% +9% Q2 ’16 Q1 ’17 Q2 ’17 1.1 1.0 0.9 Q2 ’16 Q1 ’17 Q2 ’17 WWL trade routes EUKOR trade routes Q2 ’16 Q1 ’17 Q2 ’17 ARC trade routes Note: Prorated volumes on operational trade basis in CBM 8 1) Including Cape sailings (South Africa)
Business Update Financial Performance Market and Business Outlook Summary and Q&A But there is is still ill sig ignif ificant pressure on rates Net freight / CBM development 1 Comments Indexed to 100 per Q2 2014 • Net freight / CBM development not only 105 impacted by rates, but also trade, customer and cargo mix 100 • There is still significant pressure on rates in 95 several tenders due to tough competition and customer procurement focus 90 85 80 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 Note: Unprorated volumes excluding US flag operations 9 1) Net freight = Revenues adjusted for BAF elements such as BAF and SRC
Business Update Financial Performance Market and Business Outlook Summary and Q&A Total fle leet is is 127 vessels ls, wit ith one deliv livery in in the second quarter Flee Fl eet de develo lopment Co Comments CEU in 1000, # of vessels • WWL ASA operates approximately 20% of the global CEU ‘000 # of vessels car carrier fleet 1,000 180 934 929 924 917 • 900 In Q2, two chartered-in vessels were redelivered to 897 889 886 873 873 869 865 865 160 external owners and a Post-Panamax newbuilding, 800 140 147 “Morning Prosperity”, was delivered in June for 143 146 140 139 137 134 133 130 EUKOR 128 120 127 127 125 600 • Regular chartering in and out of short term positions 100 continued throughout the quarter to balance 80 capacity 400 60 • Four Post-Panamax vessels under construction and 40 expected to enter service between 2017 and 2019, 200 with remaining installments of USD 170 million 20 • The group has the flexibility to redeliver three 0 0 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 vessels by end of 2017 and has 18 vessels on short term charters 10
Business Update Financial Performance Market and Business Outlook Summary and Q&A The positive development for landbased continues… • Continued strong performance for technical services supported by stable volumes and high content value adding services for VSA • Build-up of auto inventories in the US continued in Q2 2017 • Terminals experienced improved performance in line with overall increase in ocean volumes with the terminals in Baltimore, Port Hueneme, Pyeongtaek and Zeebrugge as the main positive contributors • On the business development side several smaller positive developments took place • Network expanded with three new yard management contracts (two in Mexico for VSA and one in Europe) • Expansion of Oxnard VPC to facilitate growth with new and existing customers • 25% of Vehicle Services South Africa (VSS) sold to local new partner to ensure compliance and improve competitive position • Interesting pipeline of investment and M&A opportunities for landbased 11
Financial Performance by Rebekka Glasser Herlofsen 12
Business Update Financial Performance Market and Business Outlook Summary and Q&A Consolid idated result lts – second quarter EBITDA 1, 2 Cons Co nsol olid idated resu esult lts - Tot otal al inc ncome and and EBIT Comments Co USD million • Extraordinary items in the second quarter include Total income EBITDA • Merger accounting loss of USD 62 million Extraordinary items • Org. restructuring cost of USD 20 million +6% +9% +16% +32% • 974 188 Total income adjusted for the merger accounting loss 179 919 913 890 869 was USD 974 million, up 9% q-o-q and 6% y-o-y 162 143 143 • EBITDA adjusted for the extraordinary items was USD 188 million, up 32% q-o-q 912 • ROCE in the second quarter was 6.0% 3 • Underlying improvement in financial performance is 82 driven by higher transported volumes, reduced SG&A 31 costs and the US flag operations, as well as improved 62 results from the landbased business. Q2’16 Q3’16 Q4’16 Q1’17 Q2 ’17 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 1) Adjusted for extraordinary items 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time 13 3) ROCE calculated as annualized EBIT adjusted for extraordinary items minus restructuring costs divided by average CE in the quarter
Business Update Financial Performance Market and Business Outlook Summary and Q&A Ocean segment – second quarter egment 1, 2 Tot otal inc ncome and and EBIT EBITDA oce ocean segm Co Comments USD million • Ocean income was USD 798 million, up 11% Total income EBITDA since previous quarter Extraordinary items • EBITDA adjusted for extraordinary items +5% +11% +14% +32% improved 32% q-o-q 166 798 162 759 744 • Increase in transported volumes, reduced 719 707 142 SG&A cost, lower net bunker costs and 125 123 revenues from the US flag operations all contributed to the improved result • Continued pressure on rates 31 17 Q2’16 Q3’16 Q4’16 Q1’17 Q2 ’17 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time 14
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