Results Q3 - 2014
November 21, 2014
- The statements contained in this presentation that are not purely historical are forward-looking statements. The forward-looking statements include, but are not limited to, statements regarding the expectations, hopes, beliefs, intentions or strategies regarding the future of Golden Ocean Group Limited ("Golden Ocean"), Knightsbridge Shipping Ltd. ("Knightsbridge") and the shipping market in general. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "might", "plan", "possible", "potential", "predict", "project", "forecast", "should", "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this presentation may include, for example, statements about: the shipping markets, sources of and demand for drybulk and other shipping cargo, and the performance of the shipping markets and the Chinese and global economy.
- The forward-looking statements contained in this presentation are based on the current expectations and beliefs of Golden Ocean concerning future developments and their potential effects on Golden Ocean, Knightsbridge, the shipping markets and factors affecting supply and demand for drybulk and other shipping cargo, including, among other things, the expected merger between Golden Ocean and Knightsbridge. All statements and information in this presentation relating to the merger and the resulting combined company are based on the anticipated effectuation of the merger, which is subject to certain conditions precedent. There can be no assurance that future developments affecting any of them will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties (many of which are beyond Golden Ocean's or Knightsbridge's control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of Golden Ocean's assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Neither Golden Ocean nor Knightsbridge undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
- Certain shipping, steel, Chinese and global industry information, statistics and charts contained herein have been derived from several sources. You are hereby advised that such industry data, charts and statistics have not been prepared specifically for inclusion in these materials and Golden Ocean has not undertaken any independent investigation to confirm the accuracy or completeness of such information
• Important Information For Investors And Shareholders
• This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction between Golden Ocean Group Limited ("Golden Ocean") and Knightsbridge Shipping Limited ("Knightsbridge"), Knightsbridge will file relevant materials with the Securities and Exchange Commission (the "SEC"), including a registration statement of Knightsbridge on Form F-4 that will include a joint proxy statement of Golden Ocean and Knightsbridge that also constitutes a prospectus of Knightsbridge, and the joint proxy statement/prospectus will be mailed to shareholders of Golden Ocean and Knightsbridge. INVESTORS AND SECURITY HOLDERS OF GOLDEN OCEAN AND KNIGHTSBRIDGE ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of the registration statement and the joint proxy statement/prospectus (when available) and other documents filed with or furnished to the SEC by Knightsbridge through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with or furnished to the SEC by Knightsbridge will be available free of charge on Knightsbridge's website at http://www.knightsbridgeshipping.com. Additional information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with or furnished to the SEC when they become available.
- Highlights
- Financials
- Operations
- Macro Update
- Q&A
Highlights
- GOGL results Q3 2014
- EBITDA: \$7.2 million
- Loss: \$11.6 million
- Loss per share: \$0.03
- GOGL declares a dividend of \$0.007 for Q3 2014
- GOGL received refund from Jinhaiwan for one contract in July 2014 and application for leave to appeal was dismissed for two contracts in November 2014
- GOGL entered into a plan of merger and agreed to merge with Knightsbridge Shipping Limited in October 2014
Financials
Birgitte Ringstad Vartdal, CFO Golden Ocean Management AS
Profit & Loss
Key figures:
(in thousands of \$)
|
2014 |
2014 |
|
Jul-Sep |
Apr-Jun |
| Operating revenue |
53 442 |
72 800 |
| Vessel voyage expenses |
-17 679 |
-21 842 |
| Vessel operating expenses |
-15 359 |
-14 308 |
| Charter hire expenses |
-4 949 |
-13 206 |
| Administrative expenses |
-2 882 |
-2 788 |
| Depreciation and amortisation |
-12 528 |
-12 185 |
| Other gain/ (losses net) |
-5 399 |
2 523 |
| Operating profit |
-5 354 |
10 994 |
| Interest income |
224 |
412 |
| Interest expense |
-8 263 |
-8 283 |
| Interest swap |
691 |
-3 396 |
| Other financial items |
1 104 |
1 299 |
| Taxation |
-40 |
-40 |
| Profit for the period |
-11 638 |
986 |
| Profit attributable to: |
|
|
| Owners of the parent |
-11 441 |
1 267 |
| Non-controlling interest |
-197 |
-281 |
| Profit for the period |
-11 638 |
986 |
• Less activity on short term trading reduces revenues and costs
• Net voyage results down by ~\$2.0 million
• Profit from sale of KLC shares (previously under OCI)
Balance Sheet
| (in thousands of \$) |
2014 |
2013 |
|
Sep 30 |
Dec 31 |
| ASSETS |
|
|
| Vessels and equipment, net |
824 903 |
667 788 |
| Vessels held under finance leases, net |
123 890 |
130 795 |
| Vessels under construction |
30 578 |
16 144 |
| Instalments on cancelled newbuildings |
- |
192 976 |
| Investment in Joint Venture |
10 388 |
17 419 |
| Derivative instrument receivable amounts |
4 188 |
2 735 |
| Avaiable-for-sale financial assets |
13 141 |
16 916 |
| Other assets |
9 035 |
8 588 |
| Total non-current assets |
1 016 123 |
1 053 360 |
| Cash and cash equivalents |
133 185 |
98 841 |
| Trade receivables and other current assets |
42 272 |
36 270 |
| Refund receivables of cancellations of newbuildings |
102 595 |
- |
| Total current assets |
278 052 |
135 111 |
|
1 294 175 |
1 188 471 |
| Total assets |
|
|
| EQUITY AND LIABILITIES |
|
|
| Equity attributable to equity holders of the parent |
|
|
| Share capital |
44 731 |
44 726 |
| Additional paid in capital |
99 187 |
99 156 |
| Other reserves |
47 890 |
23 466 |
| Retained earnings |
420 181 |
453 434 |
| Non-controlling interest |
15 |
1 108 |
| Total Equity |
612 005 |
621 890 |
| Long term debt |
450 278 |
362 805 |
| Obligations under finance leases |
105 786 |
110 416 |
| Other long term liabilities |
1 677
- |
1 903
- |
Deferred income
Total non-current liabilities |
557 741 |
475 124 |
| Current Liabilities |
|
|
| Long-term debt - current portion |
86 106 |
41 214 |
| Obligations under finance leases – current portion |
6 798 |
7 370 |
| Other current liabilities |
31 525 |
42 873 |
| Total current liabilities |
124 429 |
91 457 |
| Total liabilities and shareholders' equity |
1 294 175 |
1 188 471 |
• Refundable instalments reduced by cash received in Q3
• Increased short term debt due to one facility due September 2015
Equity ratio ~ 47 %
Operations
Birgitte Ringstad Vartdal, CFO Golden Ocean Management AS
Vessels: Deliveries and charters
- The Company redelivered Golden Kiji in September 2014 and will redeliver Ocean Minerva in December 2014
- Four ice class vessels have been fixed out on winter charter contracts for index + ~20%
Newbuildings: Delivery schedule supramax vessels
| Yard |
Vessels |
Contracted out |
Open |
Delivery |
| JMU (Japan) |
2 |
0 |
2 |
Q1-15 |
| Chengxi (China) |
6 |
0 |
6 |
Q1-Q2/2015
Q1-Q2/2016 |
- Paid one instalment in Q3
- Progress according to schedule
- Total newbuilding program consists of 8 Supramaxes
- JMU vessels launched, delivery end January 2015
- Chengxi vessels: 1 Launched and 2 Keel Laid
- Newbuildings with delivery in 2015 to be financed end of this year
Vessel operating expenses
- Based on 20 Panamax/Kamsarmax and 7 Capesize vessels
- Six vessels have been drydocked so far during 2014, one will be drydocked in fourth quarter
Jinhaiwan situation
- Development in all nine arbitrations
- Three final awards obtained, payment received
- Six positive arbitration awards obtained
- Pursued appeal for two awards to High Court in London
- Yard applied for leave to appeal to High Court in London for four awards
- Leave to appeal dismissed on two cases
- Leave to appeal granted on two, to be heared together with the other two end November 2014
- The Board believes that the Company has a strong case on all arbitrations
| MUSD |
Instalment |
Interest accrued
as per awards |
Debt |
Net cash |
Booked PnL
in Q3 |
Book Value
end Q3 |
| Received Q2 |
45.8 |
10.4 |
20.4 |
35.8 |
- |
|
| Received Q3 |
38.65 |
8.7 |
13.19 |
35.8 |
- |
|
| Remaining |
90.8 |
11.8 |
9.61 |
92.99 |
0.1 |
102.6 |
Open positions on sailing vessels
Capesize exposure - Sailing vessels Core Fleet *
|
2014 |
2015 |
2016 |
| Total vessel days |
339 |
2 635 |
2 642 |
| Open vessel days |
297 |
2 613 |
2 638 |
| Open position (%) |
88 % |
99 % |
100 % |
| Average net rate on fixed days |
15 556 |
na |
na |
| No of vessels |
8 |
8 |
8 |
| Panamax exposure - Sailing vessels Core Fleet** |
2014 |
2015 |
2016 |
| Total vessel days |
1 053 |
7 543 |
7 166 |
| Open vessel days |
678 |
5 105 |
5 091 |
| Open position (%) |
64 % |
68 % |
71 % |
| Average net rate on fixed days |
12 863 |
18 118 |
21 060 |
| No of vessels |
23 |
22 |
22 |
* Golden Opus included with 50%
Corporate transactions
- Company is currently in discussion with Lenders on a financing of 19 vessels, of which 10 vessels are refinanced and new financing for 9 vessels
- Sold remaining shares in Korea Line Corporation during September and October 2014, with proceeds of \$1.2 and \$1.6 million respectively
- Total settlement received \$6.3 million after redlivery and rehabilitation of KLC
- The Company will delist from the secondary listing on SGX in conjunction with the planned merger with Knightsbridge Shipping Limited
- The Company held its AGM on September 19, 2014
Proposed merger with Knightsbridge Shipping Limited
- Announced the proposed merger with Knighstbridge Shipping Limited («Knightsbridge») on October 7, 2014
- Knightsbridge will issue 61.5 million shares to shareholders in Golden Ocean, each share of Golden Ocean will have the right to receive 0.13749 shares in Knightsbridge
- Transaction is subject to certain closing conditions, including shareholder approval by the shareholders of each company at separate special general meetings
- Knightsbridge shares are listed on NASDAQ
- The combined company will continue to be listed on NASDAQ, and also will apply for a secondary listing in Oslo
The Company's vision is to create a company with a unique fleet and strong balance sheet and build one of the world's leading dry bulk shipping companies
Macro Update
Herman Billung, CEO Golden Ocean Management AS
2014 Dry Bulk market – f'cast vs actual (prel.)
2014 Dry Bulk trade – f'cast vs actual (preliminary)
Chinese iron ore; domestic production vs imports by countries/regions (million tonnes)
Iron ore expansion
Chinese steel production up 3.2% yoy in September 2014. Up 4.8% ytd
| Change in Chinese iron ore import requirement |
|
|
|
|
|
|
|
|
|
Mill tons |
|
|
|
|
|
|
|
| Domestic i.ore |
|
|
|
Chinese steel production growth |
|
|
|
|
| production |
$-5%$ |
$-3%$ |
0% |
3% |
5% |
7% |
9% |
|
| $-20%$ |
12 |
35 |
70 |
105 |
128 |
151 |
174 |
|
| $-15%$ |
-6 |
18 |
53 |
87
80 |
111 |
134 |
157 |
|
| $-10%$ |
$-23$ |
$\mathbf 0$ |
35 |
70 |
93 |
116 |
139 |
|
| $-5%$ |
$-41$ |
$-17$ |
18 |
52 |
76 |
99 |
122 |
|
| 0% |
$-58$ |
$-35$ |
$\mathbf 0$ |
35 |
58 |
81 |
104 |
|
| 5% |
$-76$ |
$-52$ |
$-18$ |
17 |
41 |
64 |
87 |
|
| 10 % |
$-93$ |
$-70$ |
$-35$ |
0 |
23 |
46 |
69 |
|
| 15 % |
$-111$ |
$-87$ |
$-53$ |
$-18$ |
6 |
29 |
52 |
|
| 20 % |
$-128$ |
$-105$ |
$-70$ |
$-35$ |
$-12$ |
11 |
34 |
|
China's energy industry
| China's energy capacity 2013 - 2020 *new coal scenario policy |
|
|
|
|
|
|
|
| Source |
Capacity (GW) |
Capacity (GW) |
2013 - 2020 |
2013 |
2020 |
|
|
|
2013 |
2020 |
capacaty change (%) energy mix (%) |
|
energy mix (%) |
|
|
| Coal |
804 |
964 |
17 |
65 |
54 |
|
|
| Hydro |
280 |
420 |
33 |
23 |
23 |
|
|
| Wind |
75 |
200 |
63 |
6 |
11 |
|
|
| Natural gas |
52 |
101 |
49 |
4 |
6 |
|
|
| Solar |
13 |
50 |
74 |
|
3 |
|
|
| Nudear |
14 |
30 |
53 |
|
$\overline{2}$ |
|
|
| Biomass |
6 |
30 |
80 |
0 |
$\overline{2}$ |
|
|
| TOTAL |
1244 |
1795 |
31 |
100 |
100 |
|
|
Source: National Energy Administration of China
China's electricity balance reveal that thermal power output have supplied markedly less to overall production in 2014 than in 2013
Chinese coal imports were down 17.4% in October yoy, with coking coal down 37.9%
India's energy mix
| Energy source |
2012
Energy capacity
(GW) |
2012-2017 Energy
capacity increase
(GW) |
2017
Energy capacity
(GW) |
2012 - 2017 Energy
capacity increase
$(\%)$ |
| coal |
120,8 |
67 |
187,8 |
35,68 |
| natural gas |
18,9 |
$\overline{a}$ |
20,9 |
9,57 |
| diesel |
1,2 |
|
1,2 |
0,00 |
| nudear |
4,78 |
5,3 |
10,08 |
52,58 |
| hydro |
39,3 |
4 |
43,3 |
9,24 |
| renewables |
25,86 |
9,7 |
35,56 |
27,28 |
| Total |
210,84 |
88 |
298,84 |
29,45 |
Around 40-50% of China's aluminum ore usage is sourced from abroad
Lower aluminum ore imports to China has reduced dry bulk freight demand by the equivalent to around 40 panamax bulkers in 2014 compared to 2013
- Based on ton-mile calculations, and possibly a conservative estimate for vessel efficiency, we estimate that China's aluminum ore trade ytd has occupied the equivalent of 70 panamax vessels.
- This is a reduction of around 40 vessels from last year, meaning the substantial drop in aluminum ore imports to China unquestionably has contributed to the overall weak freight rate market for dry bulk in 2014.
- However, while import volumes have declined 48% ytd, estimated ton mile demand is down by 35%, due to longer sailing distances.
- China's aluminum ore inventories remain relatively high, but by mid/end 2015 China will have to increase imports by around 50% from current levels as inventories will be depleted. This equates to increased vessel demand of around 20- 25 Panamax bulkers on an annualized basis.
Nickel is likely one of the commodities where China is most import-reliant.
Source: Snow Dragon Advisory
Lower nickel ore imports to China has reduced dry bulk freight demand by the equivalent of around 30 panamax bulkers in 2014 compared to 2013
- Based on ton-mile calculations, and possibly a conservative estimate for vessel efficiency, we estimate that China's nickel ore trade ytd has occupied the equivalent of 50 panamax vessels.
- This is a reduction of around 30 vessels from last year. With inventories already below their pre 2013 levels, China will soon need to increase imports by around 40-45% to meet underlying demand from the industry. This equates to an increase in vessel demand of around 20 panamax bulkers on an annualized basis.
- Due to shorter sailing distance for nickel ore sourced from the Philippines, which has replaced some of the lost volumes from Indonesia, average sailing distances have been reduced, and the estimated ton mile drop is 38% ytd, compared to a drop in volumes of 23%
- We do anticipate that the trade should rebound in 2015, not least through more exports from the Philippines. The distance in the trade will likely continue to be fairly short, but possible logistics issues at exporting ports might lead to congestion issues due to the strong anticipated increase in volumes.
Dry Bulk Market fundamentals
| Assumptions: |
|
|
|
|
|
|
| Year |
12 |
13 |
14 |
15 1 |
16 |
17 |
| Deliveries (dwt) |
98 |
59 |
50 |
55 |
55 |
34 |
| Removals (dwt |
33 |
22 |
14 |
14 |
12 |
11 |
| % change prev yr |
13.8 |
6.8 |
5.1 |
5.0 |
5.2 |
4.1 |
Tonnage demand
% chge from prev yr: 8.3
Fleet utilization rate |
|
9.7 |
4.6 |
5.6 |
6.0 |
5.5 |
| Yearly average in % 83.5 85.7 85.4 |
|
|
|
86.0 |
86.8 |
88.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thank you for your attention !