Scorpio Bulkers Q2 2019 Earnings July 22, 2019
Disclaimer This presentation includes “forward - looking statements” within the meaning of the safe harbor provisions of the United States Pr ivate Securities Litigation Reform Act of 1995. These forward- looking statements reflect Scorpio Bulkers Inc.’s (“Scorpio’s”) current views with respect to future events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,” “expect” and simi lar expressions identify forward-looking statements. The forward-looking statements in this presentation 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 Scorpio’s records an d other data available from third parties. Although Scorpio believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond Scorpio’s control, Scorpio cannot assure you that i t will achieve or accomplish these expectations, beliefs, projections or future financial performance. Risks and uncertainties include, but are not limited to, the failure of counterparties to fully perform their contracts with Scorpio, the strength of world economies and currencies, general market conditions, including fluctuations in charter hire rates and vessel values, changes in demand in the bulk carrier markets, changes in Scorpio’s operating expenses, including bunker prices, drydocking and insurance costs, the fuel efficiency of our vessels, the market for Scorpio's vessels, availability of financing and refinancing, charter counterparty performance, ability to obtain financing and comply with covenants in such financing arrangements, changes in governmental and environmental rules and regulations or actions taken by regulatory authorities including those that may limit the commercial useful lives of tankers, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports Scorpio files with, or furnishes to, the Securities and Exchange Commission, or the Commission, and the New York Stock Exchange, or NYSE. Scorpio undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are not guarantees of Scorpio's future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements. Earnings before interest, taxes, depreciation and amortization (“EBITDA”), earnings before interest and taxes (“EBIT”), adjus ted net income and related per share amounts, as well as adjusted EBITDA, adjusted EBIT and TCE Revenue are non-GAAP performance measures that the Company believes provide investors with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance. These non -GAAP financial measures should not be considered in isolation from, as substitutes for, nor superior to financial measures prepared in accordance with GAAP. Unless otherwise indicated, information contained in this presentation concerning Scorpio’s industry and the market in which it operates, including its general expectations about its industry, market position, market opportunity and market size, is based on data from various sources including internal data and estimates as well as third party sources widely available to the public such as independent industry publications, government publications, reports by market research firms or other published independent sources. Internal data and estimates are based upon this information as well as information obtained from trade and business organizations and other contacts in the markets in which Scorpio operates and management’s understanding of industry conditions. This information, da ta and estimates involve a number of assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed above. You are cautioned not to give undue weight to such information, data and estimates. While Scorpio believes the market and industry information included in this presentation to be generally reliable, it has not independently verified any third-party information or verified that more recent information is not available. 2
Corporate and Financial Highlights • GAAP Net Profit of $35.0 million / Earnings per Share of $0.50 • Includes gain and dividends totalling $53.1 million or $0.77 per share from the STNG investment primarily; a write-down of assets held for sale including the write – off of related deferred financing costs of $5.2 million or $0.08 per share and the write-off of Q2-2019 deferred financing costs of $2.7 million or $0.04 related to the refinancing of existing debt Financial Results • Adjusted Net Income $40.1 million / Adjusted Earnings per Share of $0.58 excluding the write-down of assets held for sale and write- off of related deferred financing costs • EBITDA of $65.2 million (Adjusted EBITDA of $70.0 million) and cash flow used in operations of $0.7 million • Ultramax TCE of $8,993 per day in Q2 2019 • Ultramax TCE of $9,603 per day booked to date in Q3 2019 TCE • Kamsarmax TCE of $10,830 per day in Q2 2019 • Kamsarmax TCE of $12,656 per day booked to date in Q3 2019 Liquidity • Liquidity position as of July 19, 2019 is $160.0 million in cash • Completed the sale of the SBI Electra and SBI Flamenco for approximately $48.0 million • Classified two Ultramax vessels as held for sale Fleet • Capex of $1.4 million incurred in Q2-19 for exhaust gas cleaning systems (“Scrubbers”) . Capex to date on scrubbers is $8.7 million Development • Exercised the option to purchase and install scrubbers on nine Kamsarmax vessels in 2020 • Time chartered-in four Kamsarmax vessels • Closed the sale and lease back of 16 vessels for a total of $144.5 million in additional liquidity including scrubber financing Financing • Issued a notice of redemption for all $73.6 million of the outstanding Senior Notes Dividends • The Company’s Board of Directors declared a dividend of $0.02 per share on July 22, 2019 3
Historical Rates $16,000 $14,000 $12,656 $12,000 $9,603 $10,000 $8,000 February 10, 2016 BDI hits 40 year low $6,000 $4,000 $2,000 $0 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 Q3-19* Ultramax Kamsarmax 4 * Projections based on 42% of the days for each of the Ultramax fleet and Kamsarmax fleet, respectively as of July 17, 2019.
Financial Performance Summary Revenue Adjusted EBITDA $70 $60.6 $62.5 $65.2 $90 $70.0 $60 $54.3 $70 $51.1 $50.4 $49.1 $50 $50 $34.7 $37.7 $38.6 $32.8 $40 $28.1$28.8$23.3 $22.9$20.4 $30 $23.9 $26.8 $30 $7.3 $10.8$12.4 $10 $0.9 $17.4 $20 $10.2 -$5.8 -$1.3 -$10 $10 -$17.0 -$30 $0 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 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 Operating Cash Flow Adjusted EBIT $65 $25 $21.1$18.6 $19.6 $50.9 $55 $13.5$11.1 $15 $45 $5.3 $4.5 $35 $2.5 $5 $25 $15.5 $10.6 $9.4 -$0.7 $15 -$5 -$4.5 -$2.1 -$1.7 $6.0 $2.9 $3.5 $5 -$15 -$5 -$14.1-$9.9 -$6.2 -$4.1 -$18.1 -$15 -$25 -$16.2 -$25 -$19.2 -$27.5 -$28.8 -$35 -$35 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 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 5 Figures in $USD millions.
Trading Summary Q2-19 Headwinds • Reduction in coal imports in Europe and China • Europe: weakness due to industrial slow down and low natural gas prices saw substitution for coal • China: heavy rainfall boosted hydro power and increasing domestic coal production • Loss of iron exports from Vale’s tailing dam failure • Outbreak of African Swine Flu in China • Continued disruptions from the US-China trade war Q2-19 Tailwinds • Strong South American grain season • Reduction in Australia coal exports, offset by increasing Indonesian coal exports to India • India could has the potential to import as much thermal coal as China in 2019 • Despite the continued outbreak of Africa Swine Flu , soybean demand remained surprisingly strong in China . Looking Forward • Announcement of trade war cease fire, expected to benefit grains and agri-bulks • Brazilian government approval to resume operations at the Brucutu mine (30 mtpa) • Record Russian/Ukrainian grain harvest expected to drive exports from Black Sea 6
Appendix 7
Scrubber CAPEX & Installation Schedule 30 $140 Estimated Payments by Year $120 25 2018 $1.2 million Accumulated Scrubber CAPEX ( in Millions USD) 2019 $46.9 million $100 2020 $70.3 million Number of Vessels per Quarter 20 2021 $4.3 million Total $122.7 million $80 15 $60 12 12 1 10 10 4 $40 7 4 7 11 4 5 4 4 $20 8 6 4 3 3 0 0 $- Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2018 2019 2020 2021 Ultramax Kamsarmax Accumulated CAPEX (in millions USD) 8
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