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Klaveness Combination Carriers
Investor Presentation • Feb 25, 2020
3644_rns_2020-02-25_74cb4fe7-3b13-44b0-a006-90b372bc2ce8.pdf
Investor Presentation
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Q4 2019 presentation Oslo, 25 February 2020
Strong Q4 performance on firm CABU TCE earnings
Disclaimer
This presentation has been prepared by Klaveness Combination Carriers ASA (the "Company") and is furnished to you for information purposes only and may not be reproduced or redistributed, in whole or in part, to any other person. The presentation does not constitute or form part of any offering of securities, and the contents of this presentation have not been reviewed by any regulatory authority.
The presentation should not form the basis for any investments nor be deemed to constitute investment advice by the Company including its affiliates or any of their directors, officers, agents, employees or advisers. An investment in the Company's securities involves risk, and several factors could cause the actual results, performance or achievements that may be expressed or implied by statements and information in this presentation and by attending or reading the presentation you acknowledge that you will be solely responsible for your own assessment of the market and the market position of the Company and that you must make your own independent assessment of the information contained in the presentation after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates, projections, opinions or other forward-looking statements contained herein necessarily involve significant elements of subjective judgment, analysis and assumptions and each recipient should make its own verifications in relation to such matters.
This presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances, not historical facts, and are sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this presentation (including assumptions, opinions and views of the Company or opinions cited from third party sources) are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company, any of its parent or subsidiary undertakings, or any such person's officers, directors, or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors, nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this Presentation or the actual occurrence of the forecasted developments described herein.
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The information and opinions contained in this document are provided as at the date of this presentation and may be subject to change without notice. Except as required by law, neither the Company nor any of its affiliates undertake any obligation to update any forward-looking statements or other information herein for any reason after the date of this presentation to conform these statements to actual results or to changes in our expectations or publicly release or inform of the result of any revisions to these forward-looking statements which the Company or any of its affiliates may make to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events.
This presentation speaks as of February 2020. Neither the delivery of this presentation nor any further discussions by the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. The Company does not intend to, or will assume any obligation to, update this presentation or any of the information included herein.
This presentation shall be governed by Norwegian law. Any dispute arising in respect of this presentation is subject to the exclusive jurisdiction of the Norwegian courts with the Oslo City Court as exclusive legal venue.
Highlights
Business and market update
2019 Q4 and full year results
Summary and outlook
Enclosures
Purpose built vessels designed for efficient trading Highlights
Unique proprietary vessel designs 9x CABU vessels
Designed to safely and efficiently carry and switch between dry and wet cargo
Servicing the alumina/aluminium industry
3+5x CLEANBU vessels
WET/ DRY
WET/ DRY
Expanding service to the petroleum/petrochemical industries
WET/ DRY
WET/ DRY
WET/ DRY
WET/ DRY
WET/ DRY
The most carbon efficient deep-sea transportation solution today – prepared roadmap to reach carbon neutrality within 2030 Highlights
30-40% more carbon efficient than standard vessels in main trades today
Detailed environmental strategy setting ambitious decarbonization targets
Full transparency of environmental performance – 3rd party audit by EY
Best quarterly results over last 18 months Highlights
| Strong CABU TCE earnings and CLEANBU TCE in combi-trades |
• CABU of \$19,002/day • CLEANBU of \$18,715/day |
|---|---|
| Improved EBITDA and positive EBT for the year |
• 15% EBITDA improvement compared to Q3 2019 • EBT of USD 1.7 million in Q4 2019 and USD 0.6 million for full year 2019 |
| Progress in the phase-in of the CLEANBUs |
• Building track record with increasing number of customers, cargoes and terminals |
| 2020 CSS bookings for the CABUs on track |
• Expected higher TCE on CSS COAs for 2020 ~70% of CSS capacity booked for the full year and 94% for 1st • half 2020 |
| Continue quarterly dividend payments |
• USD 0.5 million / USD 0.01 per share dividends |
Highlights
Business and market update
2019 Q4 and full year results
Summary and outlook
Enclosures
Strong CABU performance – TCE earnings 1.2x to standard MR tankers in 2019 Business and market update | CABU
Quarterly CABU TCE Earnings per onhire day
USD per onhire day and premium to standard MR-tankers (T) and panamax dry bulk (B)
Annual CABU TCE Earnings per onhire day
USD per onhire day and premium to standard MR-tankers (T) and panamax dry bulk (B)
Source: Baltic Exchange, Clarksons Note: TCE Earnings is an alternative performance measure (please see slide 33-37 in enclosures for more details)
High CSS shipments in Q4 2019 with further increase expected in 2020 Business and market update | CABU
of CSS cargoes shipped/booked
- Q4 2019 CSS shipment volumes in line with Q3 2019. Alunorte production back to 90% of nameplate-capacity in Q4
- Higher CSS cargo contract bookings for 1H 2020 in both Pacific and Atlantic
- Expect contract renewals to bring CSS contract volume for 2H 2020 in
Step by step proving performance, expanding customer base and trading pattern Business and market update | CLEANBU
Successful performance - customers ready for more business and terminals welcome the CLEANBU vessels back
Lower share of days in combination trading in Q4 2019 Combi-earnings level maintained at premium to LR1 tankers Business and market update | CLEANBU
CLEANBU onhire days1 CLEANBU TCE earnings per on-hire day (\$/d)1,2
1) Definition of combi trade for CLEANBU corrected from Q3 to Q4
Note: TCE Earnings is an alternative performance measure (please see slide 33-37 in enclosures for more details and reconciliation)
11
CLEANBU 2019 earnings at par with LR1-tankers amidst of a phase-in Business and market update | CLEANBU
CLEANBU TCE Earnings USD per on-hire day and premium to standard LR1 (T) and Kamsarmax dry bulk vessels (B)1
1) Market LR1 earnings is average daily spot LR1 earnings as reported by Clarksons while Kamsarmax spot earnings is average 5TC-routes for a 82,500 dwt vessel as reported by Baltic Exchange Note: TCE Earnings is an alternative performance measure (please see slide 33-37 in enclosures for more details)
Continued improvement in operational performance in Q4 2019, but guarantee works and upgrading lead to off-hire Business and market update | CLEANBU
of CLEANBU offhire days in 2019 and YTD 2020
In yard for 45 days during Q4 2019 for guarantee and upgrading works – no further outstanding guarantee items
- MV Barracuda and MV Barramundi Outstanding guarantee items implying off-hire target repairs during next special survey in 2022
- Delayed deliveries due to Corona-virus outbreak Current expectation basis resumption of production at
- − CLEANBU #4: 2 months delay delivery early May
- − CLEANBU # 5-8: 1-2 months delay
Reach IMO 2030 targets within 2022 and carbon neutrality within 2030 Business and market update | Environmental performance
CO2 emissions reductions – carbon neutral operation
- Within 2022: Reduce average CO2 emissions per vessel in KCC's fleet by minimum 15% compared to actual 2018 levels 1 2
- Within 2030: Achieve carbon neutral operation within 2030
KCC CO2 emission per vessel in KCC's fleet in mt/year
Reach IMO 2030 carbon intensity target in 2022
- Within 2022: Achieving 40% reduction compared to actual standard vessels in KCC's trades in 2018
- Within 2030: Achieving 60% reduction compared to actual standard vessels in KCC's trades in 2018
KCC Target Carbon Intensity1
1) Carbon intensity per tonne-mile for KCC's total fleet and estimated carbon intensity per tonne-mile for standard vessels in KCC's trades in 2018
Improvements in all environmental KPIs in Q4, but mixed results for 2019 due to less optimal CABU trading and CLEANBU phase-in1 Business and market update | Environmental performance
1) EEOI (Energy Efficiency Operational Index) is defined by IMO and represents CO2 emitted per transported cargo per nautical mile for a period of time (both fuel consumption at sea and in port included). The EEOI and % ballast for "Benchmark standard vessels" are calculated based on standard vessels (Panamax dry, MR-tankers and LR1-tankers) making the same transportation work in the same trades as performed by KCC's CABU and CLEANBU vessels. The EEOI for "Benchmark standard vessels" is calculated as the weighted average of EEOI for the individual trades performed. End date of a voyage is decisive for periodization of ballast days and CO2 emission (EEOI). The average CO2 emissions per vessel is calculated based on the total CO2 emissions for the fleet, divided on the number of ship years. Number of ship years is the total calendar time minus offhire time while new delivered vessels are counted from date of delivery. Quarterly figures are annualized for average CO2 emission per vessel.
15
Business and market update | OPEX
CABU OPEX in line with expectation and underlying CLEANBU OPEX moving down, but Q4 OPEX affected by start-up costs and guarantee docking
CABU OPEX in line with expectations Higher CLEANBU OPEX in Q4 partly due to costs linked to guarantee docking of MV Baru
CABU OPEX USD per day CLEANBU OPEX USD per day
Note: OPEX USD per day (CABU Opex \$/d) is an alternative performance measure (please see slide 33-37 in enclosures for more details)
Business and market update
High financial market/coverage in H1 2020
- H2 2020 coverage set to increase over the coming months
Financial/market coverage
Share of estimated rate (i.e. price) exposure that has been fixed for 2020
Freight market bottomed out in February. Several possible positive macro drivers and potential "catch-up" effects once COVID-19 situation is settled Business and market update
- Both tanker and dry bulk markets seems to have bottomed out in the middle of February
- Global industrial production in cyclical low and has just turned a corner
- Signs of China complying with US trade agreement boosting potential demand for grains and coal
- Potential for Chinese economic stimulus impacting growth in iron ore exports from Brazil and Australia
- Effects on effective supply in both tanker and dry bulk markets
-1 400 -1 150
-900
-650
-400
-150
100
350
600
850
Markets pricing in v-shaped recovery for dry bulk and product tankers Business and market update
19
Source: Company data, Clarksons, Baltic Exchange 2) Fuel prices are basis Singapore excl . delivery premiums
Highlights
Business and market update
2019 Q4 and full year results
Summary and outlook
Enclosures
Higher profits driven by more CABU on-hire days 2019 Q4 and full year results
Year-on-year results (MUSD) Q4 2019 vs Q4 2018
Improved EBT on the back of stronger tanker markets, more CABU on-hire days and higher caustic soda in-take 2019 Q4 and full year results
Quarter-on-quarter results (MUSD)
Q4 2019 vs Q3 2019
Positive underlying profit for 2019 of USD 5.2 million and untapped potential through normalized CLEANBU operations 2019 Q4 and full year results
Underlying EBT(MUSD)
2019 EBT impacted by lower caustic soda cargo volumes, CLEANBU introduction and negative MTM 2019 Q4 and full year results
| Income Statement ('000 USD) |
Q4 2019 |
Q4 2018 |
2019 | 2018 |
|---|---|---|---|---|
| Net revenues | 18 826 | 14 990 | 61 327 | 56 393 |
| Operating expenses, vessels | (8 512) | (5 870) | (29 913) | (21 599) |
| SG&A | (1 275) | (1 206) | (5 651) | (4 036) |
| EBITDA | 9 038 | 7 914 | 25 763 | 30 757 |
| Depreciation | (4 530) | (4 457) | (14 070) | (16 841) |
| EBIT | 4 508 | 3 458 | 11 692 | 13 917 |
| Net financial items | (2 759) | (2 852) | (11 081) | (5 140) |
| Profit before tax | 1 749 | 607 | 612 | 8 777 |
| Tax | (15) | 59 | (15) | 59 |
| Profit after tax | 1 734 | 665 | 597 | 8 836 |
| EPS | 0.04 | 0.02 | 0.01 | 0.23 |
- Profit of USD 1.7 million for the quarter and USD 0.6 million for the year
- CABU earnings of USD 19,002/day for the quarter and USD 16,877/day for the year
- CLEANBU earnings of USD 18,715/day for the quarter and USD 18,300/day for the year
- Increase in operating expenses due to CLEANBU
- Administration costs is up compared to 2018 partly due to listing, increased complexity and higher activity level
- Close to zero in changes fair value of derivatives this quarter, however negative non-cash effects from derivatives of USD 2.6 million for the year compared to positive USD 1.1 million in 2018
Limited refinancing risk as KCC03 bond has been refinanced 2019 Q4 and full year results
Maturity profile1
Bond
- Successful NOK 500 mill bond issue in February 2020 (KCC04)
- Margin down from 5.25% in KCC03 to 4.75%
- NOK 138 mill of KCC03 repurchased, remaining NOK 162 mill likely be called in November 2020
Bank
- Bank debt secured for the three newbuilds with delivery in 2020
- Process to finance remaining two vessels with delivery in 2021 initiated with good initial feedback
- Klaveness has a strong relationship to its key banks and has added new banks to the bank group the last year
Continued dividend payments and solid financial position 2019 Q4 and full year results
47% Equity ratio
4%
Adjusted ROCE
14.8MUSD Operating cash flow 2.9MUSD Dividend 2019
Note: ROCE Adjusted is an alternative performance measure (please see slide 33-37 in enclosures for more details)
Highlights
Business and market update
2019 Q4 and full year results
Summary and outlook
Enclosures
Summary and outlook
| CABUs with a strong start of 2020 - high CSS bookings for 2020 |
High CSS bookings with 94% CSS coverage in 1H 2020 and 70% for full year1 • • Strong start of 2020, Q1 2020 is expected in line with Q4 2019 for CABUs • Lagged effect from poor markets in Q1 will affect TCE earnings for Q2 2020 |
|---|---|
| Strong CLEANBU combi | • Proven earnings capacity in combi-trading (2019: ~\$22,400/d) |
| earnings and higher share | • Higher share of CLEANBUs in combi trading as new combi-trades are established |
| in combi-trading in 2020 | • Technical phase-in progressing |
| Still corona-virus risks but likely "catch-up" effects into the spring if situation is resolved |
• Risks connected to Corona virus outbreak, but KCC more resilient to Corona-virus effects than most shipping companies • Signs of Corona cases stabilizing in China and Chinese economy slowly restarting • All freight markets bottomed out - forward markets price in V-shaped recovery |
Future bound.
Highlights
Business and market update
2019 Q4 and full year results
Summary and outlook
Enclosures
Fleet list Enclosures
| Vessel | Type | Built | Yard | DWT | Flag | Manager | Ownership |
|---|---|---|---|---|---|---|---|
| MV Banastar | CABU | 2001 | Oshima, Japan | 72 562 | MI | KSM AS2 | 100% |
| MV Barcarena | CABU | 2001 | Oshima, Japan | 72 562 | NIS | KSM AS | 100% |
| MV Banasol | CABU | 2001 | Oshima, Japan | 72 562 | MI | KSM AS | 100% |
| MV Bangor | CABU | 2002 | Oshima, Japan | 72 562 | NIS | KSM AS | 100% |
| MV Bantry | CABU | 2005 | Oshima, Japan | 72 562 | MI | KSM AS | 100% |
| MV Bakkedal | CABU | 2007 | Oshima, Japan | 72 562 | MI | KSM AS | 100% |
| MV Baffin | CABU | 2016 | Ouhua Zhejiang, China | 80 200 | MI | KSM AS | 100% |
| MV Balboa | CABU | 2016 | Ouhua Zhejiang, China | 80 200 | NIS | KSM AS | 100% |
| MV Ballard | CABU | 2017 | Ouhua Zhejiang, China | 80 200 | MI | KSM AS | 100% |
| MV Baru | CLEANBU | 2019 | YZJ, China | 82 400 | MI | KSM AS | 100% |
| MV Barracuda | CLEANBU | 2019 | YZJ, China | 82 400 | MI | KSM AS | 100% |
| MV Barramundi | CLEANBU | 2019 | YZJ, China | 82 400 | MI | KSM AS | 100% |
| MV Baleen 1 | CLEANBU | 05/2020 (E) | YZJ, China | 82 500 (E) | MI | KSM AS | 100% |
| 1 MV Bangus |
CLEANBU | 10/2020 (E) | YZJ, China | 82 500 (E) | MI | KSM AS | 100% |
| 1 MV Baiaco |
CLEANBU | 12/2020 (E) | YZJ, China | 82 500 (E) | MI | KSM AS | 100% |
| MV Bass 1 | CLEANBU | Q1/2021 (E) | YZJ, China | 82 500 (E) | MI | KSM AS | 100% |
| 1 MV Balzani |
CLEANBU | Q1/Q2/2021 (E) | YZJ, China | 82 500 (E) | MI | KSM AS | 100% |
Structure Enclosures
Definitions and reconciliation
- TCE earnings = time charter equivalent earnings equals net average revenue per on-hire day as further described in the quarterly report for Q4 2109, note 11 (page 24) which is published on the company's homepage: https://www.combinationcarriers.com/investor-relations/#reports-presentation
- CABU and CLEANBU TCE earnings per on-hire day for Q4 periodic and 2019 total are reconciled in the quarterly report for Q4 2109, note 2 (page 16-17).
- CABU and CLEANBU TCE earnings per on-hire day for Q3 and Q2 are reconciled in the quarterly report for respectively Q3 2019 and Q2 2019, note 2 (page 15/page 15).
- CABU and CLEANBU TCE earnings per on-hire day for Q1 2019 are reconciled on next slide.
- CABU TCE earnings for 2016-2018 reconciled on next page.
- CABU Opex \$/d for Q4 periodic and 2019 total are reconciled in the quarterly report for Q4 2019, note 2 (page 16-17).
- CABU Opex \$/d for Q2 2019 Q3 2019 are reconciled in the quarterly report for respectively Q3 2019 and Q2 2019, note 2 (page 15/page 15).
- CABU Opex \$/d for Q1 2019 are reconciled on next slides
- CLEANBU Opex \$/d for Q1-Q4 2019 are reconciled on next slides
- EBT = Earnings before tax equals Profit before tax in the income statement
- Underlying EBT is defined as EBT excluding items that are not considered as part of normal operation and effects from financial items not realized. The Group has adjusted for one off costs related to start up of the CLEANBU vessels and other operating expenses occurred before delivery of the CLEANBU vessels. Underlying EBT is included because the management believes that the measure provide information of the Group's profitability beyond the phase in period of the CLEANBU fleet.
- EBT normalized CLEANBU operations is underlying EBT for 2019 adjusted for lost average earnings for offhire days in 2019 and adjusted for higher opex in the introduction phase of the CLEANBUs. The management believes that the measure provide information of the Group's profitability beyond the phase in of the CLEANBUs.
- ROCE adjusted see definition and reconciliation in Note 11 (page 24) in Q4 2019 report published: https://www.combinationcarriers.com/investor-relations/#reportspresentation
Reconciliation of average TCE earnings USD/day
| USD'000 | 2016 | 2017 | 2018 |
|---|---|---|---|
| Net revenues from operations of vessels | 41 026 | 46 245 | 56 393 |
| Other revenue | 275 | (603) | (675) |
| Commercial fee to Klaveness AS (AS Klaveness Chartering) | 2 195 | 2 522 | |
| IFRS 15 adjustment (load-to-discharge) | 373 | ||
| Net revenues from operations of vessels ex commercial fee | 43 496 | 48 164 | 56 091 |
| Onhiredays | 2 274 | 3 048 | 3 224 |
| TCE earnings (\$/d) | 19 133 | 15 794 | 17 398 |
| USD'000 | CABU | CLEANBU | Total Q1 2019 |
|---|---|---|---|
| Net revenues from operations of vessels | 12 981 | 358 | 13 339 |
| IFRS 15 adjustment (load-to-discharge) | (28) | (28) | |
| Net revenues ex IFRS adjustment | 12 953 | 358 | 13 311 |
| Onhiredays | 805 | 33 | 838 |
| TCE earnings (\$/d) | 16 088 | 10 875 | 15 883 |
Reconciliation CLEANBU earnings in combi trade and outside combi trade
| #Days CLEANBU trading | |||||||
|---|---|---|---|---|---|---|---|
| #Days | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Total 2019 | ||
| In combi trade | 0 | 43 | 112 | 127 | 285 | ||
| Outside combi trade | 33 | 32 | 24 | 91 | 180 | ||
| Total days CLEANBU | 33 | 75 | 136 | 218 | 465 | ||
| Net revenue CLEANBU trading | |||||||
| USD'000 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Total 2019 | ||
| In combi trade | 776 | 2 717 | 2 819 | 6 312 | |||
| Outside combi trade | 358 | 187 | 390 | 1 266 | 2 201 | ||
| Total net revenue CLEANBU | 358 | 964 | 3 107 | 4 085 | 8 514 | ||
| CLEANBU net revenue per on-hire day trading | |||||||
| \$/d | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Total 2019 | ||
| In combi trade | 18 159 | 24 203 | 22 151 | 22 127 | |||
| Outside combi trade | 10 875 | 5 849 | 16 248 | 13 910 | 12 232 | ||
| Total net revenue per on-hire day | 10 875 | 12 905 | 22 802 | 18 715 | 18 300 |
Reconciliation Opex \$/d CABU (Q1-2019) and CLEANBU (Q1-Q4 2019)
| Reconciliation of CABU opex per day Q1 2019 | ||||
|---|---|---|---|---|
| USD'000 | CABU | CLEANBU | Total Q1 2019 | |
| Operating expenses, vessels | 5 733 | 1 229 | 6 962 | |
| Start-up cost CLEANBU vessels | 553 - | 553 | ||
| Opex vessels not delivered | ||||
| Operating expenses, vessels adjusted | 5 733 | 676 | 6 409 | |
| Operating days | 810 | 80 | 890 | |
| Opex per day (\$/d) | 7 078 | 8 451 | 7 202 |
| USD'000 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | 2019 |
|---|---|---|---|---|---|
| Operating expenses, vessels | 1229 | 1 755 | 2 132 | 3 115 | 8 231 |
| Leasing cost previously presented as opex | 18 | 23 | 31 | 12 | |
| Start-up cost CLEANBU vessels | 553 | 369 - |
647 | 155 | 1 724 |
| Crew cost after delivery (adj/reclass) | 109 | 109 | |||
| Operating expenses vessels not delivered | 392 | 144 | 152 | 688 | |
| Operating expenses, vessels in operation | 803 | ਰੇਰੇਪ | 1 364 | 2 839 | 6 000 |
| Operating days | 80 | ਰੀ | 165 | 276 | 612 |
| Opex per day (\$/d) for vessels in operation | 10 032 | 10 921 | 8 267 | 10 287 | 9 804 |
Reconciliation underlying EBT and EBT normalized CLEANBU operation
| USD'000 | Q4 2019 | 2019 |
|---|---|---|
| Profit before tax (EBT) | 1 749 | 612 |
| Start up costs CLEANBU vessels | 155 | 1724 |
| Reversal provision | 285 | 285 |
| Listing costs | 600 | |
| Fair value changes in FFA (Q4 2019, note 7) | 483 | 21 |
| Gain/loss on foreign exchange (Q4 2019, | ਰੇਰੇ 8 | 1 074 |
| Fair value changes interest rate swaps (Q4 2019, note 7) | 1 469 | 3 660 |
| Underlying EBT | 1 631 | 5 216 |
| CLEANBU no off-hire (114 days x 18,300 \$/d) | 2 086 | |
| CLEANBU opex @ 8,000 \$/d ( (10,751 \$/d - 8,000 \$/d) x 579 days) | 1 ਦੇਰੇਤ | |
| EBT Normalized CLEANBU operations | 8 895 |
