Wallenius Wilhelmsen

Earnings Release • Nov 5, 2019

Q3 2019 Quarterly results presentation

Highlights third quarter 2019

• EBITDA of USD 213 million, showing continued performance improvement
• Ocean results driven by higher net freight per CBM, more efficient operations and lower net bunker cost
• Ocean volume declined 7% y-o-y, due to relinquished volumes and slower markets
• Performance in Landbased fell as a result of lower volumes
• Continuous progress on the performance improvement programme
• Second dividend payment of USD 6 cents per share

Agenda

Business update

by Craig Jasienski

Commercial prioritization of profitable volumes key factor behind the 7% y-o-y volume drop

• Unprofitable volumes not renewed in the Atlantic (effect from January 2019)
• Prioritising winning better-paying cargo, and rationalising sailings to improve operational efficiency
• High & heavy share 29.5%

1) Total volume based on prorated volume (WW Ocean, EUKOR, ARC and Armacup)

²⁾ H&H share calculated based on unprorated volumes. Nominal volume for auto and H&H calculated as total prorated volume x unprorated auto share and total prorated volume x unprorated H&H share, respectively

iness update

Mixed development for the foundation trades

Note: Prorated volumes on operational trade basis in CBM

1) Including Cape sailings (South Africa)

Positive development for net freight/CBM driven by commercial priorities and favourable trade mix

Net freight / CBM development

Net freight = Freight revenues adjusted for surcharge elements such as BAF, SRC, THC etc.

Q1'19 September

August

July

Q2'19

Fleet capacity tightly managed

- flexibility to redeliver up to 12 vessels by end of 2020 (excl. vessels on short charter)

Q1'18

Q3'18 Q4'18

Q3'17 Q4'17 Q2'18

Some smaller renewals with positive rate development in first half 2019

- significant volume remains to be renewed towards end of 2019

Overview of 2019 contract renewals Per cent.

Rate changes and impact for 2019 contract renewals

(Circle indicate size of contract in millions)

Rate impact (USD millions)

Performance improvement programme reaches USD 69 million

- remaining improvements expected to carry a longer lead time

longer lead-time

11

Ready for IMO 2020, but cost of transitioning will impact results in Q4

- well prepared for the transition, expected non-recoverable cost in Q4 about USD 10 million¹

	Key risks		Mitigating actions	Updated risk assessment	Previous risk assesment
Technical readiness	Change over to new fuel		Tried and tested method involving no off-hire period	Low	Low
	Quality of new fuel		Test runs on different types of compliant fuel with good results	Low	Low
Fuel availability	Availability of compliant fuel		Have entered contracts with major suppliers, back-up solution to run on MGO	Low	Medium
Financial and commercial impact	Financial impact in Q4'19, Q1'202		Non-recoverable cost of sloshing tanks and running on new fuel before 1 Jan 2020 estimated to about USD 10m1 , financial hedges in place to manage pot. BAF lag impact	High	High
	Updating BAFs3		Good progress on customer discussions, targeting special reference period	Low	Medium
	Acceptance of scrubbers		Hybrid scrubbers chosen	Low	Low

1 Calculated based on a spread between VLSFO and HFO of approx. USD 185 and spread between MGO and HFO of approx. USD 240

2 Risk related to three factors: i) switching costs, ii) having to buy compliant fuel ahead of new regulation and new BAFs being applicable and 3) increased spread, i.e. higher MGO/VLSFO price outright and lag effect 3 Risk consists of three main parts: i) successfully negotiating change to new BAF, ii) uncertainty of reference period – should refer to a period when VLSFO has started trading, and iii) uncertainty wrt. reference price index – should be an index that is based on actual prices traded in the market

Financial performance

by Rebekka Herlofsen

Consolidated results – Q3 2019

- underlying performance improves as a result of efficiency improvements, despite lower revenues

	Q3 2019	Q2 2019	% change q-o-q	Q3 2018	% change y-o-y
Total income	955	1 005	(3%)	1 031	(7%)
Operating expenses	(741)	(794)	(7%)	(879)	(16%)
EBITDA*	213	211	1%	152	40%
EBIT	94	88	6%	56	69%
Financial income/(expenses)	(72)	(83)	(13%)	(34)	109%
Tax income/(expense)	14	(3)	n/a	(1)	n/a
Profit for the period	36	3	1133%	20	77%
EPS	0.08	(0.00)	n/a	0.05	77%
*IFRS 16 effect on EBITDA	41	42	n/a	n/a	n/a

Ocean segment – Q3 2019

- underlying performance improvement despite lower volumes

1) Adjusted for extraordinary items

Landbased segment – Q3 2019

- underlying performance down as a result of lower volumes in both terminals and technical services

Cash flow and liquidity development – third quarter 2019

Balance sheet – third quarter 2019

- second dividend payment of USD 6 cents per share

equivalent to USD

25 million

Market outlook

by Craig Jasienski

Auto sales slightly down 1.1% y-o-y

- deep sea volumes down 1.4% y-o-y

Global light vehicle (LV) sales per quarter1) Units

• Total light vehicle (LV) sales in the third quarter decreased 1.1% compared to the corresponding period last year and down 0.5% from the previous quarter as soft sales were seen among all major regions.

Global light vehicle (LV) export per quarter1) Units

• Total exports in the third quarter were down 1.4% compared to the corresponding period last year, down 2.1% from the previous quarter.

North America LV sales almost flat, +0.2% y-o-y

North America light vehicle (LV) sales per quarter1,2) Mill units

• In US auto sales still at solid levels thanks to incentives, specially initiated from the dealers, and wide credit availability
• Inventories have been reduced but still at a higher level than the preferred 60-days-of-supply

North America light vehicle (LV) export per quarter1,2) 1000 units

Western Europe LV sales slightly up, 1.0% y-o-y

Western Europe light vehicle (LV) sales per quarter1,2) Mill units

• The implementation of the EU WLTP emission testing scheme contributed to several monthly effects as the market entered different standards both in September 2018 and September 2019.

Western Europe light vehicle (LV) export per quarter1,2) 1000 units

Chinese LV sales flat y-o-y

Chinese light vehicle (LV) sales per quarter1,2) Mill units

• Sales in China are still disrupted by timing of introduction of State emission 6 compliant vehicles which varies depending on region.
• The electrified vehicles, especially the A- and B-segment models, which used to be the main momentum for the passenger market, declined for a couple of months due to the phasing out of current NEV subsidies.

Chinese light vehicle (LV) export per quarter1,2) 1000 units

• Chinese LV production capacity continues to be ramped up and export growth remains to all global markets despite U.S. tariff issues.

Japanese LV export declined 1.9% y-o-y, Korean exports down 3.1% y-o-y

Japanese light vehicle (LV) export per quarter1,2) Mill units

					-1.9%		-1.4%
1 074	1 073	1 072	1 101	1 091	1 067	1 022	1 086	1 071
Q3 2017	Q4 2017	Q1 2018	Q2 2018	Q3 2018	Q4 2018	Q1 2019	Q2 2019	Q3 2019
• Production shift from JP to NA and weak sales of selected model
contributed to most of the decline.

Korean light vehicle (LV) export per quarter1,2) 1000 units

Continued market uncertainty

- auto analysts remain positive about medium-term growth prospects

Global LV forecasts

Units and growth (y-o-y)

Global LV exports

Several factors fuel uncertainty in short and medium term:

• Trade barriers heightened risk with implications for both sales and sourcing shifts globally
• WLTP introduction Europe distortions on both supply and demand side (incl. imports)
• Brexit increased uncertainty raising risk of temporary and permanent production changes
• Softening Chinese momentum despite governmental stimulus there has not been increased LV sales as analysts expected
• US vehicle prices continued incentives from dealers and moderate finance cost expected to contribute to plateauing out sales
• Emerging markets continued risk, most notably Turkey and Argentina with severe near‐term macroeconomic instability, and geopolitical developments in the Middle East

Source: IHS Markit. Exports are sales based

OEM SALES ESTIMATES³

EXPORT¹ & SALES DATA²

High & heavy trade has softened, while the outlook remains mixed

25 Source: ¹ IHS Markit | World (major exporters) construction & rolling mining equipment and agriculture equipment exports (Avg. equipment value >20 kUSD ) (Units last 3 months y-o-y) (Rolling average units last 12 months) ²Caterpillar | 3 month rolling retail sales (Units last 3 months y-o-y) ³Factset data and Analytics (04.11.19) | OEM Revenue Consensus Estimate (y-o-y). Construction: Volvo, Caterpillar, CNH, Komatsu, Hitachi, Terex. Mining: Sandvik, Caterpillar, Hitachi, Atlas Copco(<2018), Epiroc (≥2018). Agriculture: AGCO, CNH, Deere. Sales in construction/agriculture/mining equipment divisions only

Current markets do not justify new ordering activity

• No new orders were confirmed in the quarter*
• One vessel was delivered, one vessel recycled in the quarter

• Deep-sea shipments forecasted to increase with about 2% per year
• Marginal net fleet growth (if any) expected for several years

Outlook and Q&A

by Craig Jasienski

Outlook

• Volume outlook remains uncertain due to macro picture and continued trade tensions
• Gradual improvement in tonnage balance expected to continue, but with more uncertain volume outlook rate improvements may take longer to materialize. Still see strong competition for tendered volumes
• Landbased impacted by lower volumes, outlook is stable. Some operational inefficiencies are expected to be temporary
• Focus on operational efficiency in both Ocean and Landbased to support profitability going forward
• Well prepared for transition to IMO 2020 towards end of year, but will incur some nonrecoverable costs in connection with the change-over in the fourth quarter

Thank you!