Capital Markets Day 2016 Wilh. Wilhelmsen ASA main topics
Global Tonnage Situation
Jan Eyvin Wang President and CEO Wilh. Wilhelmsen ASA
Rough Sailing – Global Market Intelligence
Ari Marjamaa
Vice President Head of Global Market Intelligence Wallenius Wilhelmsen Logistics
WWL's Landbased logistics business
Rune Gisvold
Chief of Staff & CFO Group Management, Central office Wallenius Wilhelmsen Logistics
Capital Markets Day 2016 Wilh. Wilhelmsen ASA
Global tonnage situation
World deep sea fleet has grown significantly
Total orderbook is at 11.3% in terms of capacity
Fleet composition by year of build, pure deep sea fleet Number of vessels above 3500CEU, May 2016
A steady growth in lifting capacity
Driven by vessel size
Historical fleet development Fleet in CEU and # of vessels, 1998-2015
Net fleet development Deliveries, scrapping and net fleet addition in CEU, 1998-2015
4
The average vessel is getting bigger and younger
Average size has grown by 21%, while average age has grown 9% last years
Average size of vessels has grown by 22% in the last decade Average size of vessels, in 1000 CEU, 1998-2014
Average age of vessels has increased 9% since the building boom Average age of vessels, in years, 1998-2014
Average age of vessels being scrapped has risen significantly last 20 years
Vessels are used much longer today than before
WW group is the largest operator group in the market
72 vessels currently on firm orders, representing a 12,3% share of capacity
Current fleet by operator group
kCEU and number of vessels, share of current fleet capacity in %
Current orderbook by operator
kCEU and number of vessels, share of total orderbook capacity in %, firm orders
WWL fleet characterised by stronger High & Heavy capabilities compared to competitors
WWL still ahead on the characteristics of the fleet... Ramp capacity in tons, # of hoistable decks and CEU capacity (size), July 2015
Average max ramp capacity
Average # of hoistable decks
PCTC fundamentals, expected to remain weak for another 2-3 years
Opportunity for low TC tonnage
Rough sailing
Global Market Intelligence Wallenius Wilhelmsen Logistics
September 2016
Rough sailing in global RoRo markets Support to be found in the fundamentals
The market is under pressure
- Global trade development modest
- Fleet growth high, but adjustments being made
A changing auto industry still supports volume
- Auto industry facing significant change, but also opportunities
- Auto trades generally see growth
Construction keeps HH up..
• Weaker than expected, but outlook improving ..while mining see mostly upside
- Shipments still weak
- Pent up demand building
The RoRo markets are rough Auto volumes driving improvement, HH remains under pressure
Development in global cargo shipments has seen some improvement since fall 2015, led by automotive volumes Automotive, HH and BB cargo, exports, y-o-y comparison of 12mo moving average, Q1 2015 – Q1 2016
Note: Total export volume of roro type cargo, not distinguishing on mode of transportation Source: GTA, GMI
Rough sailing in global RoRo markets Support to be found in the fundamentals
The market is under pressure
- Global trade development modest
- Fleet growth high, but adjustments being made
A changing auto industry still supports volume
- Auto industry facing significant change, but also opportunities
- Auto trades generally see growth
Construction keeps HH up..
• Weaker than expected, but outlook improving ..while mining see mostly upside
- Shipments still weak
- Pent up demand building
The automotive industry is rapidly changing
The shift from a product centric to a service driven model creates opportunities for a logistics operator
…but growth in user base, new drivers will lead to more kilometers consumed McKinsey's High-Disruption scenario for automotive industry, Global auto sales in mill
New technology and user habits has the impact to change the auto industry…
Electric vehicles to see significant growth Manufacturers appear to have made the technology choice
Strong growth in number of fully electric car models offered in the global auto market, outgrowing any other alternative technology EV models, number on offer in the market, 2013-2022FC
Deepsea LV volume to expected to growth with a CAGR of 1.5% going forward AS-NA only major trade expected to see decreases
Global auto sales to develop positively going forward…
Sales, domestic production and possible deepsea transport, million units, 2015-23FC
…while AS-NA is the only major trade with decrease
Volume with potential for deepsea –total volume in 2015, growth per trade and total volume in 2023
China still largest light vehicle (LV) market, Indian LV market set to soar Deepsea volume growth below market growth, excluding JP/KR-NA volumes volume growth on par with total market
…but the big markets to develop slower in the next five years than in the previous five
Size of circle indicate size of market in 2015, CAGR 2010-2015 and CAGR 2015-2020
Rough sailing in global RoRo markets Support to be found in the fundamentals
The market is under pressure
- Global trade development modest
- Fleet growth high, but adjustments being made
A changing auto industry still supports volume
- Auto industry facing significant change, but also opportunities
- Auto trades generally see growth
Construction keeps HH up..
• Weaker than expected, but outlook improving
..while mining see mostly upside
- Shipments still weak
- Pent up demand building
Industry forecaster sees construction equipment sales growing by 5% in '17
China returning to growth, developed markets see turn of cycle
Global sales of construction equipment set to recover significantly 1000 units, 2011-2020FC
Seeing the bottom of the cycle
Construction equipment manufacturers' sales are anticipated to bottom out in 2016, seeing growth in 2017-18
Construction equipment producers revenue forecast
Consensus forecasted revenue by sell side analysts, Factset 2016-09-12, Real USD
Rough sailing in global RoRo markets Support to be found in the fundamentals
The market is under pressure
- Global trade development modest
- Fleet growth high, but adjustments being made
A changing auto industry still supports volume
- Auto industry facing significant change, but also opportunities
- Auto trades generally see growth
Construction keeps HH up..
• Weaker than expected, but outlook improving ..while mining see mostly upside
- Shipments still weak
- Pent up demand building
Mining commodity prices remain pressured, but the resource industries appear to have turned a corner
Commodities appear to have turned a corner
Total return metal indices, Coal price index USD based
S&P: Metals and Mining index have fallen significantly since the high valuations in 2011 Total return index, U.S
The mining companies still working hard to improve profitability Miners are addressing cash flow challenges with cost initiatives and restructuring programmes
Miners' share price and return on assets have both declined significantly
Note: Different time scale from above
Illustration of miners' actions following investor pressure on returns
Replacement demand building up
The equipment contraction significantly exceeds the CAPEX drop while production is record high
Australia's investment phase may be slowing, while the production phase has just started – and production will drive equipment demand
Following an investment boom is the production boom Value of projects and estimated mining exports
Value of Australian mining projects in pipeline All major projects under development, est CAPEX
16 Note: Net change in committed capital reflects both newly committed projects and changes in CAPEX estimate of existing projects. Projects at the committed stage have completed their planning activities, have received all necessary Government regulatory approvals and finalized the financing of the project to allow construction (in most cases projects at this stage of development have already started construction), most projects that progress to the committed stage will eventually commence production according to Bree
Source: BREE, ABS, GMI
Significant share of Global Mining Project Pipeline stems from Oceania Largest unused potential of all regions, representing future demand if conditions are right
Global Project Mining Development Pipeline Strong pipeline, particularly in Oceania and South Asia
Global Mining Projects by Commodity and Type
Coal represents largest share, with 2,848 pipeline projects at a total value of 350bn USD
Source: Industrial Info Resources, January 2016
17
World Coal production and consumption will continue to grow towards 2040, Australia fourth largest producer
World coal consumption by region, 1980-2040 Quadrillion Btu
Coal Production 2015, top 10 production countries
Mt
Parker Bay expects mining equipment shipments to have bottomed out
The increased demand in 2016-2020 will be driven mainly by the need to sustain existing capacity
Parker Bay mining equipment population and shipments
Active loading and haulage mining equipment population and shipments (1000 units), additional capacity and replacements
- Over the next five years, more than 10.000 trucks and 2.000 excavators/loaders are needed to replace machines deemed unfit for continued operations due to age and wear
- Capacity increases represent an additional 2.800 trucks and 400 excavators
- Of the total demand, only 500 excavators and nearly three times as many trucks are expected be re-commissioned, representing less than 40% of the idled population
Rough sailing in global RoRo markets Support to be found in the fundamentals
The market is under pressure
- Global trade development modest
- Fleet growth high, but adjustments being made
A changing auto industry still supports volume
- Auto industry facing significant change, but also opportunities
- Auto trades generally see growth
Construction keeps HH up..
• Weaker than expected, but outlook improving ..while mining see mostly upside
- Shipments still weak
- Pent up demand building
WW Capital Markets Day
Rune Gisvold
13 September 2016 at 15:00
WWL's Landbased logistics business
WWL's Landbased business
- Over the past 12 years we have built a > USD 1,2 Bn Landbased logistics business
- We have grown with our customers into their value chain as they expand globally
- Less volatility and different business
- drivers from Ocean services Global products in a network of locations in key markets - supported by best practice processes and systems
- Asset light with good cash flow
- We are set to continue our expansion with a combination of organic growth and M&A
Landbased business is rapidly approaching 50 % of WWL's global turnover
- Landbased revenues have grown by 20 % annually since 2009
- Terminals volumes and revenues vary with trade volumes, but without the BAF impact
- Tech Services have seen steady volume and rate up-lifts
- Distribution is mainly passthrough revenues with limited bottom-line impact
Values based on WWL management accounts
A global network serving outbound logistics needs of global (auto & HH) equipment manufacturers
A Siemens transformer on the way up a vessel ramp
Yard management and distribution at the Thailand FordMazda factory
Volvo wheelloader washing at Singapore EPC
Landrovers stored at Shanghai VPC
We provide services to our customers throughout their outbound supply chain
| Terminal services |
Technical services |
Inland Distribution |
| Receipt and delivery |
Repairs and rectifications |
Truck |
| Storage |
Accessory fitting |
Rail |
| Stevedoring |
Storage management |
Barge |
| Customs clearance |
Pre Delivery Inspections |
… based on procurement |
|
|
|
The customers are the same as those we serve on the Ocean side
Established > 10 years ago as a defensive strategy evolving into a global service provider
| Early 1990s |
2005 |
2009 |
2010/11 |
2016 |
Southamton and
Port Huemne |
DAS acquired
from Nissan
North America
(known as VSA) |
Castor Green
Terminal –
our zero
emission vision for
terminal and
processing services |
EPC 's in Panama,
Galveston and
Dubai |
VSA and CAT-WWL
100% takeover
Landbased
business
reaches USD 1.2 bn
revenues |
-
2005:
Defensive strategy |
2005 –
2013:
From lines to Logistics |
|
|
2013 –
The growth
engine |
| "2000" |
2006 |
2009 |
|
2014 |
Zeebrugge
in
1999 |
A strategy shift
towards fully |
Pyoengteak
terminal in Korea |
|
MIRRAT
terminal |
Baltimore
(2001) |
integrated
logistics services
from factory to |
& Investments in
two Chinese
terminals |
|
concession
won |
Kotka
(2003) |
dealer |
|
|
|
The Landbased business has shown consistent growth since the financial crisis
Revenue growth and margin improvements Nissan largest customer, but good diversity
Nissan Ford Toyata VW JLR BMW Subaru Volvo GM Top 10 customers Excluding distribution revenues
Revenues MUSD
The VSA quantum leaps 1) Acquisition 2) End of profit-share 3) 100 % ownership
- WWL acquired 50% of DAS from Nissan in 2005 together with a financial investor
- Low acquisition price + profit sharing
- The Nissan based network was set to grow with new customers
- Expansion to Mexico in 2008
- Multiple new customers and operating sites added every year
- Profit sharing with Nissan ended 2012
- In January 2016 we called the shares of our financial investor partner
- Nissan now represent around 50 % of VSA's Tech Services revenues
- The Nissan contract was extended to 2027 in March this year
The VSA story The VSA network
The terminal business has grown into a truly global services provider
- Established to secure land access and priority birthing
- Efficient time in port is key to voyage financial performance
- Has proven to be a robust and profitable business model on it's own merits
- Offering valuable storage capacity as a hedge against fluctuating sales volumes
60 – 80 % of volumes in our ports are WWL shipments
– Mutual ocean/land dependencies create long term win-win situations
MIRRAT is our new RoRo terminal in Melbourne completed on time & budget and now in operations
Construction period: Q3 2014-Q1 2016
- MIRRAT established
- Construction started in August 2014 and the construction work will be completed in Q1 2016
Exclusive operator : Jan 2018
From Jan 2018, MIRRAT will take over operations at Webb Dock West and all RoRo vessels will be routed to the new combined terminal
Tender: Q2 2012 – Q2 2014
WWL awarded the 25 year concession period to build and operate the new RoRo terminal with capacity potential of up to 1 million units annually (size of terminal is ~350 Ha)
Interim period: April 2016 – Jan 2018
- MIRRAT will be operational from April 1st 2016
- Until Jan 2018, both Webb Dock West and Appleton Dock will also be operational and compete for volumes
3 distinct "products" with differing financial characteristics
| Terminal services |
Technical services |
Inland Distribution |
"Captive business" with high
margins and long concessions |
"Nickels & dimes" business
with variable costbase |
Generally a low margin
business |
Either somewhat capital
intensive and/or with material
lease commitments
Capacity utilization drives
financial performance |
Efficient use of labor force
drives financial performance
Margins vary with service &
value-add content
In-port or in-land/in-plant |
Competitive environment with
low entry levels
WWL apply a low-risk
"Procurement model" |
|
|
|
3 distinct "products" with differing financial characteristics
3 distinct "products" with differing financial characteristics
Strategies have changed over time Size matters also on land
- Initially established as a defensive ocean trades strategy : Port rationalization and priority birthing
- The customer base provided opportunities
- Growth created size and scale
- Advanced process management was required to solidify competitiveness
- The environmental profile opened doors to new opportunities
- Portfolio management will further optimize yield
- Continued growth will be based on OEM's expansion and a combination of organic growth and M&A
The legal & financial structure allows focus and continued growth
- The Landbased strategy has common touch-points with Ocean - but separate targets
- KPI's are tailored to market characteristics and business drivers
- Financing & funding is nonrecourse to parent and owners
- Shared services create efficiency and scale
Strategies going forwards reflect the level of maturity
Portfolio management
- The Landbased portfolio includes >50 individual sites in a truly global network
- WWL will maximize value creation with active portfolio management (grow, fix or exit)
Organic growth & M&A
Organic growth will continue with new customers and sites
… and M&A will expand the network, fill holes and support the overall growth strategy
New services in a digital age
- WWL continuously evaluate technology developments amongst customers and as a supplier
- Alternative fuel vehicles
- Car sharing
- 3D printing
WWL's Landbased logistics business
The Baltimore terminal and processing center