q2 presentation - wallenius wilhelmsen logistics asa · pdf fileorganizational restructuring...

Q2 PresentationAugust 9th 2017

Craig Jasienski, President & CEO

Rebekka Glasser Herlofsen, CFO

Agenda

2

Financial Performance

Market and Business Outlook

Business Update

Summary and Q&A

BUSINESS UPDATE

by Craig Jasienski

3

Business update Q2 at a glance…

4

Business Update Financial Performance Market and Business Outlook Summary and Q&A

Still pressure on ocean rates

Positive development for landbased continues

Realization of synergies well on the way

Volume, cargo and trade mix show positive development

Organizational restructuring completed

Organizational restructuring completed

5

- 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


Realization of synergies well on the way…

6


- 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

Volume and cargo mix show positive development

7

Comments

• Ocean transported volumes up 12% q-o-q,

largely driven by seasonality:

• Increased exports out of Asia, mainly to Europe and

North America

• Increased exports from Europe to Asia

• Increased exports from Europe to Oceania

• Improved cargo mix with a high & heavy share

of 24.8%, up from 23.2% q-o-q

• Ocean transported volumes up 6% y-o-y

primarily driven by higher volumes

transported in foundation trades, in particular

export from Asia to Europe

Volume and cargo mix developmentMillion CBM and %


0

5

10

15

20

25

30

35

6

22

20

16

8

0

12

10

2

4

18

14

Q1’17

15.9

23%

+6%

Million CBM

17.8

19.4

18.018.2

Q2’15

18.3

24% 24%

Q4’14

23%

20%

Q2’14

25%

Q1’15 Q3’15Q3’14

18.7

25%

22%

20.5

Q4’15

19.6

15.2

%

24%

Q1’16

21%

24%

16.816.1

Q2’16

24%

Q3’16

+12%

Q4’16

25%

Q2’17

15.5

HH share of volumesVolume

WWL trade routes

EUKOR trade routes

ARC trade routes

8


Good seasonal development in all foundation trades

Atlantic Shuttle

3.0

Q2 ’16

2.9

Q1 ’17

3.3

+5%-10%

Q2 ’17

EU/NA – Oceania1)

+18%

Q2 ’17Q2 ’16

1.82.0

+12%

Q1 ’17

1.7

EU - ASIA

+14%

3.2

Q1 ’17 Q2 ’17

2.8

Q2 ’16

3.1

+1%

Asia - EU

+22%+22%

2.7

Q1 ’17

2.7

Q2 ’16 Q2 ’17

3.3

Asia - NA

Q2 ’16

3.4

+5%

Q2 ’17

3.4

Q1 ’17

3.3

+2%

Asia - SAWC

1.0 1.1

Q2 ’17Q1 ’17

+16%

Q2 ’16

0.9

+9%

Note: Prorated volumes on operational trade basis in CBM

1) Including Cape sailings (South Africa)

9


But there is still significant pressure on rates

80

85

90

95

100

105

Q2’17Q1’17Q2’15 Q4’16Q3’16Q4’15 Q2’16Q1’16Q1’15 Q3’15Q2’14 Q3’14 Q4’14

CommentsNet freight / CBM development1

Indexed to 100 per Q2 2014

• Net freight / CBM development not only

impacted by rates, but also trade, customer

and cargo mix

• There is still significant pressure on rates in

several tenders due to tough competition

and customer procurement focus

Note: Unprorated volumes excluding US flag operations

1) Net freight = Revenues adjusted for BAF elements such as BAF and SRC

Total fleet is 127 vessels, with one delivery in the second quarter

10

Fleet developmentCEU in 1000, # of vessels

Comments

• WWL ASA operates approximately 20% of the global

car carrier fleet

• In Q2, two chartered-in vessels were redelivered to

external owners and a Post-Panamax newbuilding,

“Morning Prosperity”, was delivered in June for

EUKOR

• Regular chartering in and out of short term positions

continued throughout the quarter to balance

capacity

• Four Post-Panamax vessels under construction and

expected to enter service between 2017 and 2019,

with remaining installments of USD 170 million

• The group has the flexibility to redeliver three

vessels by end of 2017 and has 18 vessels on short

term charters

125 127128127130

134133137139140143

147146

0

20

40

60

80

100

120

140

160

180

0

1,000

800

600

400

200

Q3’15

917897

Q2’15

900

Q4’14

886924

Q2’14 Q3’14

CEU ‘000

934

# of vessels

Q3’ 16

865

929

Q2’17

869873

Q4’16Q2’ 16

889

Q1’ 16

865

Q1’15 Q1’17

873

Q4’15


• 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

The positive development for landbased continues…

11


12

Financial Performance

by Rebekka Glasser Herlofsen

Consolidated results – second quarter

13

• Extraordinary items in the second quarter include

• Merger accounting loss of USD 62 million

• Org. restructuring cost of USD 20 million

• Total income adjusted for the merger accounting loss

was USD 974 million, up 9% q-o-q and 6% y-o-y

• EBITDA adjusted for the extraordinary items was

USD 188 million, up 32% q-o-q

• ROCE in the second quarter was 6.0%3

• Underlying improvement in financial performance is

driven by higher transported volumes, reduced SG&A

costs and the US flag operations, as well as improved

results from the landbased business.


Comments

1) Adjusted for extraordinary items2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time3) ROCE calculated as annualized EBIT adjusted for extraordinary items minus restructuring costs divided by average CE in the quarter

Consolidated results - Total income and EBITDA1, 2

USD million

Total income EBITDA

912

62

890913869

919

Q2 ’17

974

+9%+6%

Q1’17Q3’16 Q4’16Q2’16

82

31

143143

162

Q1’17

188

Q2’17

179

Q3’16Q2’16 Q4’16

+16% +32%

Extraordinary items

Ocean segment – second quarter

14

Total income and EBITDA ocean segment1, 2

USD million Comments


• Ocean income was USD 798 million, up 11%

since previous quarter

• EBITDA adjusted for extraordinary items

improved 32% q-o-q

• Increase in transported volumes, reduced

SG&A cost, lower net bunker costs and

revenues from the US flag operations all

contributed to the improved result

• Continued pressure on rates

Total income EBITDA

798

719744

707759

+11%

Q2’16

+5%

Q2 ’17Q1’17Q3’16 Q4’16

1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time

1731

123125

142

162166

Q4’16Q3’16

+14%

Q2’16 Q2’17Q1’17

+32%

Extraordinary items

Landbased segment – second quarter

15

Total income and EBITDA landbased segment1, 2

USD million Comments


• Landbased income was USD 192 million, up 3%

since previous quarter

• EBITDA adjusted for organizational restructuring

cost was USD 27 million, up 21% since previous

quarter

• Continued strong performance for technical

services supported by stable volumes and an

increase in value-adding services for VSA

• Terminals show improved performance in line with

ocean volumes, with the terminals in Baltimore,

Port Hueneme, Pyeoengtaek and Zeebrugge as the

main positive contributors

192186184

177176

Q2’16 Q4’16

+3%

Q3’16

+9%

Q2 ’17Q1’17

26

2221

20

23

Q1’17Q4’16 Q2 ’17

27

1

+18%

Q3’16

+21%

Q2’16

Extraordinary items

Total income EBITDA

1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time

Consolidated results – First Half Year 2017

16

• Extraordinary items in the first half include

• Merger accounting loss of USD 62 million

• Org. restructuring cost of USD 20 million

• Total income adjusted for the merger accounting loss

was USD 1 864 million, up 4% from the same period

last year

• EBITDA adjusted for the extraordinary items was

USD 331 million, an underlying improvement of 10%

compared with same period previous year

• Underlying improvement in financial performance is

driven by higher transported volumes, reduced SG&A

costs, the US flag operations, as well as improved

results from the landbased business


CommentsConsolidated results - Total income and EBITDA1, 2

USD million

Total income EBITDA

1 802

1 794

1H 2016 1H 2017

62

+4%

1 864

249

82

301331

1H 2016

+10%

1H 2017

Extraordinary items

1) Adjusted for extraordinary items; 2) Comparable numbers for H1 2016 and Q1 2017 are pro forma numbers as if the transaction had taken place back in time

ASSETS EQUITY & LIABILITIES

Balance sheet review

17

Unaudited Balance Sheet 30.06.2017USD billion Comments

• Net interest bearing debt of USD ~3.2 billion,

of which cash and cash equivalents of USD 755

million

• Equity ratio at 34.7%

• USD ~310 million in provisions remain to cover

extraordinary costs in jurisdictions with

ongoing anti-trust investigations

• Fair value of assets and liabilities at merger

date (except 100% owned WW ASA entities)

• USD 288 million goodwill element after

allocation of merger consideration to fixed and

intangible assets


Non current assets

1.3

7.7

Current assets

6.4

1.3

Equity

Non current liabilities 3.8

Current liabilities

2.7

7.7

Cash flow and liquidity development

18


755

150

1862106

607

-90-48

Liqudity Q2 2017

-49

Interest and financial

derivatives

Other CAPEX Net financing1Proceeds from sale of financial

investments

Merger lossEBITDALiquidity Q1 2017

Cash flow and liquidity developmentUSD million

1) Includes: Proceeds from issue of debt of USD 131 million, Repayment of debt USD 206 million and loan to related party USD 15 million2) Loss on previously held equity interests in JVs joint ventures as a consequence of the merger transaction

19

Market and Business Outlook

by Craig Jasienski

Auto sales dropped 1.7% q-o-q driven by drop in China

20


Global auto sales per main sales region1

CAGR 2016-2021, Change Q2’17 vs Q1’17

Comments to global auto sales

Source: IHS Markit1) Size of circle indicates auto sales Q2 2017

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35%

CAGR ’16-21

Q2’17 vs Q1’17

West Europe

Greater China

Central Europe

East Europe incl. Russia

ASEAN

Oceania

Japan/Korea

NAFTA

South America

India & Pakistan

Middle East & Africa

APAC AMEUR ME AF• Increased sales of 11.1% q-o-q in the US driven by seasonality,

with y-o-y sales down 1.4%. Despite softer sales, the absolute sales figures are still strong, with inventory building up.

• Flat development for Western Europe both q-o-q and y-o-y. Sales have rebounded after historic low figures and sales rate is now almost on par with sales before financial crisis.

• The Chinese market is down 8.4% q-o-q driven by the implementation of less favorable (tax) incentives. Small improvement of 0.6% y-o-y

• The Russian market shows signs of a fragile recovery continuing during the second quarter

• In Brazil the market looks to have turned a corner in the second quarter as sales have started to pick up

Long term forecast shows ~2% annual growth rate for sales

Auto exports increased with 1.6% q-o-q

21


Global auto export per main production region1,2

CAGR 2016-2021, Change Q2’17 vs Q1’17

Comments to global light vehicle export

• NAFTA exports (driven by Mexico) continue to increase, with 4.2% y-o-y and 0.6% q-o-q

• European exports still strong, mostly driven by strong demand in the US and new models. Exports to China also still solid.

• Exports out of Japan developed with a seasonal lift 3.6% q-o-q while flat y-o-y. NAFTA is still the largest receiving region for light vehicles produced in Japan.

• Exports out of South Korea continue to decline and were down 7.1% y-o-y, but increased 6.9% q-o-q driven by seasonality. The main driver of the decline is less volume to US as production capacity in Mexico is ramped up.

Long term forecast shows ~2% annual growth rate for exports-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

11%

-14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12%

South Korea

Japan

CAGR ’16-21

Q2’17 vs Q1’17

North America

South Asia

Middle East/Africa

Greater China

South America

Europe

AMAPAC ME AFEUR

Source: IHS Markit1) Size of circle indicates auto production Q2 20172) Chinese figures are adjusted

Moderately improving outlook for Construction and Agriculture

22


1) Source: IHS Construction and IMF (International Monetary Fund) | World Construction Spending (% growth y/y in real terms ($2010))2) Source: CEMA (European Agriculture Machinery)) | Business Barometer (Index = sum of 1) evaluation of the current business situation & 2) turnover expectation, 100/-100)

Construction growth picking up World construction spending (% y/y), 12-20E1

Mixed outlook for Agriculture equipment

European business climate (Index 100/-100), 10-172

• World construction growth is picking up, and infrastructure projects look

increasingly important in mid-term spending prospects

• Equipment sales in the China-driven Asian market is the current growth

engine

• Low crop and dairy prices put pressure on the agricultural equipment segment,

but sentiment is improving in some key regions

• Mixed outlook for equipment market, with South America outperforming the

other regions in the short term

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

’19E’14 ’17E’15 ’18E ’20E’13 ’16’12

% y/y

Total

Emerging and developing economies

Advanced economies

-100

-80

-60

-40

-20

0

20

40

60

80

100

Business climate

1Q171Q161Q151Q141Q131Q121Q10 1Q11

Index Present Future

The recovery for the mining segment is still slow

23


Continued uptick in global equipment deliveriesGlobal surface mining equipment shipments (Index ‘07 = 100), 07-171

1) Source: Parker Bay | Surface Mining Equipment Index (Indexed value of surface mining equipment shipments in real terms ($2010), 2007 = 100) 2) Source: IHS Global Trade Atlas | Non-rolling mining equipment deliveries in regions as reported by customs for individual cargo values > USD 20.000.

(12 month rolling average (L12M) units) (Data edge: 04.2017)

0

25

50

75

100

125

150

175

200

1Q14 1Q15 1Q16 1Q171Q10 1Q12 1Q131Q111Q091Q07 1Q08

• Average mining equipment age is at a level not observed since the 1990’s, and the older fleet is driving higher demand for parts and eventually replacements

• OEMs are reporting significantly growing sales with Asia looking the strongest, but much of the growth is related to aftermarket or smaller machines for coal mining activity

• The increase in mining shipments are mainly driven by intraregional shipments of smaller machines in Europe (Russia) and South Asia

• Larger equipment for more traditional regions (Australia, Canada, Peru) also expected to slowly recover, but no significant improvement expected before 2019/2020

Several regions have seen imports bottom outCustoms trade flows of non-rolling mining machines (L12M avg units), 12-172

0

100

200

300

400

500

600

Avg. monthly units

1Q15 1Q161Q13 1Q141Q12 1Q17

Oceania

North America

Latin America

Europe

Asia

Source: SeaWeb, Lloyds List Intelligence Unit

Moderate net fleet growth forecasted going forward

24


3% of fleet are recycling candidates…Fleet by year of build, 1000 CEU

..contributing to moderate net fleet growthForecasted net fleet growth, % p.a.

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

Net fleet growth, %

400

350

300

100

200

50

150

0

250

61

333

20

00

142

72

215

146

321319

84

176

134124

268

20

05

20

20

4561

130

279

227

15

185

388

155

20

15

20

10

1

52

1

118

443026

19

90

19

85

18

161

65

38

19

95

61

112522

12

ACTIVE

OPTION UNCONFIRMED

ORDER

~40 FIRM VESSELS 7-8% OF FLEET CEU

36 VESSELS >25 YRS OLD

3% OF FLEET CEU

• Five vessels were delivered and seven vessels were sold for recycling during the quarter

• The current global order book counts ~40 vessels representing 7-8% of global fleet capacity

• No new orders or negotiations to postpone deliveries were reported, but four newbuildings were converted to tankers during the second quarter

Summary and outlook

25


SUMMARY

Volume, cargo and trade mix showed positive development in the second quarter

Organizational restructuring completed and realization of synergies well under way; USD 100 million target is maintained

Adjusted EBITDA for the second quarter ended at USD 188 million – up 32% q-o-q

Strong results for landbased combined with interesting M&A/ investment pipeline

OUTLOOK

Recovery in the high & heavy segment remains slow and no significant improvement for large mining shipments is expected before 2019

The Ocean business is still faced with tough competition and pressure on rates

26

Q&A

by Craig Jasienski and Rebekka Glasser Herlofsen

27

Thank you!

q2 presentation - wallenius wilhelmsen logistics asa · pdf fileorganizational restructuring...

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