February 12 th 2019 Q4 2018 Quarterly presentation
2018 in brief Financial results weakened compared to 2017, largely driven by higher bunker prices Rates remained under pressure, but market fundamentals continued to improve New legal and funding structure consistent with the business unit structure was established and a large share of the groups debt were refinanced at attractive terms In late 2018, the USD 120 million in synergy target was confirmed and was immediately succeeded by a USD 100 million performance improvement program The acquisition of Syngin marked the entry into full life cycle logistics, and together with the establishment of Raa Labs increased our digital capabilities 2
Highlights fourth quarter 2018 Adjusted EBITDA of USD 168 million, a 10% improvement q-o-q, but down 8% y-o-y Underlying flat ocean volume development y-o-y Ocean result impacted by biosecurity challenges and weaker project shipments in Atlantic The landbased segment delivered stable performance More than half of the USD 100 million performance improvement target confirmed The board proposes a dividend of up to 12 cents/share, equivalent to USD 50 million 3
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 Underlying flat volume development in the quarter, but overall volumes pulled down by contractual changes Volume and cargo mix development Comments Million CBM and % Auto High & heavy High & heavy share • The underlying ocean volume development was relatively flat, but volumes were down 9% y-o-y due to Million CBM % -9% -1% • Planned reduction in contracted volumes for Hyundai Motor 19.5 19.4 34 20 18.8 18.5 Group (about 550k CBM) 18.2 18.2 32 18.0 18.0 17.3 17.1 17.0 30 16.8 16.5 • A few contracts for Europe-Oceania/Asia not renewed due 16.2 16.2 28 15.5 15.2 to unattractive rates (about 350k CBM) 26 15 24 • Weaker spot cargo shipments in the Atlantic (250k CBM) 22 14.9 14.7 13.1 13.9 20 • Biosecurity challenges causing delays for the Oceania trade 13.7 13.5 13.3 12.2 14.5 12.5 12.6 18 12.5 11.9 12.3 (200k CBM) 10 12.5 11.7 11.3 16 14 • High & heavy volumes down 5% y-o-y driven by 12 10 • Weaker spot cargo shipments in the Atlantic 5 8 6 • Absence of high & heavy volumes to Turkey (currency crisis) 5.4 5.1 4.9 4.7 4.7 4 4.5 4.6 4.6 4.5 4.6 4.6 4.3 3.9 3.9 3.9 3.7 3.7 • 2 Challenges with biosecurity for the Oceania trade 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 Lower volumes to Middle East and Africa 1) Prorated volume (WW Ocean, EUKOR, ARC and Armacup) 2) H&H share calculated based on unprorated volumes. 6
Business Update Financial Performance Market Outlook Outlook and Q&A Negative volume development for the foundation trades – largely explained by a few contractual changes EU - ASIA Asia - EU Atlantic Shuttle -7% +9% -10% +9% 3.4 3.2 3.3 -8% -4% 2.9 3.0 2.7 3.4 3.3 3.1 Q4 ’17 Q3 ’18 Q4 ’18 Q4 ’17 Q3 ’18 Q4 ’18 Q4 ’17 Q3 ’18 Q4 ’18 Asia - NA EU/NA – Oceania 1) -8% -2% -18% -15% 3.3 3.1 3.0 2.0 1.9 Asia - SAWC 1.6 -2% -8% Q4 ’17 Q3 ’18 Q4 ’18 1.3 1.2 1.2 Q4 ’17 Q3 ’18 Q4 ’18 WWL trade routes EUKOR trade routes Q4 ’17 Q3 ’18 Q4 ’18 ARC trade routes Note: Prorated volumes on operational trade basis in CBM 1) Including Cape sailings (South Africa) 7
Business Update Financial Performance Market Outlook Outlook and Q&A Fleet capacity being tightly managed and voyage rationalization efforts helped to reduce the fleet size further Fleet development Comments # of vessels Owned Chartered Short Term T/C In/Out • Wallenius Wilhelmsen controlled a fleet of 124 vessels at the start of the quarter and 123 vessels at the end of the fourth quarter. 137 132 131 131 131 128 127 10 124 125 • Fleet capacity was tightly managed in the quarter through position 123 5 6 6 9 1 swaps and active leveraging of the short-term charter market. • Furthermore, voyage rationalization efforts helped to reduce the 49 49 49 49 48 51 49 49 50 46 fleet size while stink bug challenges caused some delays and additional voyage days. • One long-term charter vessel was redelivered to the tonnage provider during the quarter and the group retains flexibility to redeliver up to 12 vessels by 2020 (excluding vessels on short charter) • Three Post-Panamax vessels are under construction with combined 78 78 78 78 78 77 77 76 76 75 capacity of 24,000 CEU. • Two of these vessels are expected to enter service in 2019 and one is scheduled for delivery in early 2020. -2 • -3 -3 The new buildings are financed through regular bank facilities Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 October November December 8
Business Update Financial Performance Market Outlook Outlook and Q&A Rates remain under pressure, but also some positive development experienced for certain liner business Rate changes and impact for 2018 contract renewals Comments (Circle indicate size of contract in millions) Rate change New rates already effective Percent New rates effective from early 2019 • Rates continued to be under pressure in 2018, and the 50 estimated rate reductions going into 2019 is about USD 10 40 million, well below the USD 30 million going into 2018 30 20 • The group has as part of these negotiations walked away 10 from certain unprofitable business, reduced certain service 0 commitments and won selected new attractive business which more than offsets the negative rate development -10 -20 • A net positive effect of up towards USD 25 million on an all -30 things equal basis is expected for 2019 -40 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 Rate Impact (USD millions) 9
Business Update Financial Performance Market Outlook Outlook and Q&A The 2-year performance improvement program is off to a good start Confirmed and realized improvements Comments USD million in annualized effect 100 • The performance improvement program saw improvements in contractual arrangements and voyage optimization in the fourth quarter, confirming USD 55 million of the USD 100 million target. 56 • The annualized realized effect for performance 43 improvement initiatives were about USD 20 million, derived from voyage optimization and more efficient hull cleaning practices. • The confirmed performance improvements from contractual improvements will be effective from early Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2019. 2018 2018 2019 2019 2019 2019 2020 2020 2020 Contractual improvements More efficient hull cleaning Voyage Optimization Realized improvements Centralized vessel and voyage management 10 1 Not adjusted for USD 1 0 million in negative rate impact from 2018 contract renewals
Financial performance by Rebekka Herlofsen
Business update Financial Performance Market Outlook Outlook and Q&A Consolidated results – fourth quarter 2018 Comments Q4 2018 Q3 2018 Q4 2017 Total income 1 022 1 031 1 033 • Total income was USD 1 022 million in the fourth quarter, down 1% y-o-y due to lower revenues for the Operating expenses (854) (879) (853) ocean segment EBITDA 168 152 177 • Adjusted EBITDA of USD 168 million, down 8% y-o-y, EBITDA adjusted 168 152 182 but a 10% improvement over previous quarter Depreciation (88) (87) (85) • Changes in fair value of the EUKOR put/call option is Other gain/losses 36 (9) 0 recognized as Other gain/(loss) and had a positive effect of USD 36 million in the fourth quarter EBIT 116 56 93 • Net financial items of USD 82 million in the quarter Net financial items (82) (34) (35) • Net interest expense in line with the previous quarter at Profit before tax 34 22 58 about USD 45 million Tax income/(expense) 11 (1) 27 • Net financial expenses negatively impacted by USD 25 million from unrealised interest rate derivates and USD 7 Profit for the period 45 21 86 million in losses on bunker hedges EPS 0.10 0.05 0.20 • Tax income of USD 11 million in the fourth quarter 12
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