Wallenius Wilhelmsen

Earnings Release • Feb 11, 2020

Q4 2019 Quarterly results presentation

2019 in brief

• Adjusted EBITDA of USD 837 million, with improvement compared to 2018 driven by the Ocean segment
• Ocean volume declined 6% compared to 2018, due to a combination of commercial prioritization of volumes and slower markets
• Performance improvement in Ocean due to higher net freight per CBM and operational efficiencies
• Performance improvement programme gained strong traction early on and had a material impact on 2019 performance
• Performance in Landbased fell primarily as a result of lower volumes in Terminals

Highlights fourth quarter 2019

• Adjusted EBITDA of USD 194 million, impacted by lower volumes and cost of IMO 2020 transition
• Ocean volume declined 8% y-o-y, due to a combination of commercial prioritization of volumes and slower markets
• Performance in Landbased fell as a result of lower volumes
• HMG contract renewed at stable rates in Q4. Some contracts not renewed due to rates pushed to levels not economically sustainable
• Successful transition to IMO 2020
• The board has decided to propose a dividend of up to USD 14 cents per share, equivalent to about USD 60 million

Agenda

Business update

by Craig Jasienski

Commercial prioritization of profitable volumes key factor behind the 8% y-o-y volume drop, but slower markets also impacting both auto and H&H

• Some contracts not renewed (in Atlantic with effect from January 2019, and in EU/NA-OC with effect from Nov 2019)
• Prioritising winning better-paying cargo, and rationalising sailings to improve operational efficiency
• High & heavy share 27.2%

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

Lower volumes experienced across the main trades

Note: Prorated volumes on operational trade basis in CBM

1) Including Cape sailings (South Africa)

The positive development for net freight per CBM seen throughout 2019 is sustained in the fourth quarter

Net freight / CBM development

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

8

Fleet capacity tightly managed

- flexibility to redeliver up to 11 vessels by end of 2020 (excl. vessels on short charter)

HMG contract renewed at stable rates in Q4. Some contracts not renewed due to rates pushed to levels not economically sustainable

Overview of 2019 Ocean contract renewals Per cent.

Summary of 2019 contract renewals and new business for the Ocean segment

• EUKOR renewed its contract with Hyundai Motor Group (HMG) in Q4 2019, maintaining a 40% volume share on existing rates
• Of contracts up for renewal in 2019, some contracts were not renewed as the rates were pushed to levels considered not economically sustainable but were partially offset by new business won during 2019
• Negative net revenue impact for 2020 (vs. 2019) of approx. USD 40 million
• Expected EBITDA impact of contracts not renewed estimated at about negative USD 20 - 25 million (not netted against business won)
• Contracts up for renewal in 2020 equate to approx. 20% of total Ocean freight revenue

Estimated rate impact from renewals going into 2020 about USD -15 million as a result of some larger extensions and renewals in Q4

Rate changes and impact from 2019 contract renewals

(Circle indicate size of contract in millions)

• Graph shows rate impact from 2019 renewals1, many of which had an impact already during 2019
• Early extension of key H&H volumes for three years and key Auto contract option extension
• Contracts renewed in Q4 saw continued rate pressure

¹EUKOR HMG contract renewed at flat rates not shown in graph

100

Performance improvement programme reaches USD 74 million

- remaining improvements expected to carry longer lead time

• Increase comes from improved hull cleaning, in addition to initial findings from the first digitally connected vessels
• Majority of remaining initiatives, primarily digitalised operations, require longer lead time
• Realised annualised savings from improvements implemented reached USD 69 million

Successful transition to IMO2020

- transition cost of USD 8 million vs USD 10 million estimated

Financial performance

by Rebekka Herlofsen

Consolidated results – Q4 2019

- underlying performance impacted by lower volumes and cost of IMO 2020 transition

	Q4 2019	Q3 2019	% change q-o-q	Q4 2018	% change y-o-y
Total income	932	955	(2%)	1022	(9%)
Operating expenses	(770)	(741)	4%	(854)	(10%)
EBITDA*	162	213	(24%)	168	(3%)
EBITDA adjusted	194	213	(9%)	168	16%
EBIT	81	94	(14%)	116	(30%)
Financial income/(expenses)	(22)	(72)	(70%)	(83)	(74%)
Tax income/(expense)	(19)	14	n/a	11	n/a
Profit for the period	41	36	15%	45	(8%)
EPS	0.10	0.08	26%	0.10	(5%)
*IFRS 16 effect on EBITDA	41	41	n/a	n/a	n/a

Ocean segment – Q4 2019

- underlying performance down as a result of lower volumes and IMO 2020 transition costs

Landbased segment – Q4 2019

- underlying performance down y-o-y as a result of lower volumes

Consolidated results – Full year 2019

	Full year 2019	Full year 2018	% change q-o-q
Total income	3 909	4 065	(4%)
Operating expenses	(3 104)	(3 463)	(10%)
EBITDA*	805	601	34%
EBITDA adjusted	837	606	38%
EBIT	358	244	46%
Financial income/(expenses)	(247)	(169)	46%
Tax income/(expense)	(10)	(20)	(50%)
Profit for the period	102	58	76%
EPS	0.22	0.12	77%
*IFRS 16 effect on EBITDA	166	n/a	n/a

Cash flow and liquidity development – fourth quarter 2019 - free cash flow of USD 47 million

USD million

Undrawn credit facilities

Balance sheet – fourth quarter 2019

Market outlook

by Craig Jasienski

Auto sales down 1.5% y-o-y as Chinese sales are slow

- deep sea volumes down 0.7% y-o-y

Global light vehicle (LV) sales per quarter1) Units

• Total light vehicle (LV) sales in the fourth quarter decreased 1.5% compared to the corresponding period last year and up 6.2% from the previous quarter as Chinese LV sales typically show strong seasonality in Q4.

Global light vehicle (LV) export per quarter1)

• Total exports in the fourth quarter were down 0.7% compared to the corresponding period last year, up 0.6% from the previous quarter.

North America LV sales still at high levels, fifth year in a row above 17m

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 and now lower than the preferred 60-days-of-supply

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

Western Europe LV sales influenced by timing of WLTP modules, diesel woes and Brexit

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

contributed to several monthly effects as the market entered different standards in September 2018 and September 2019 and January 2020.

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

figure down due to model shift for one OEM from Europe to NA.

Chinese LV sales disrupted by introduction of emission standards and a wait-and see attitude among consumers

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 second half of 2019 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 increased 0.5% y-o-y, Korean exports up 1.9% y-o-y

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

volumes to Europe increased due to new models.

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

gaining traction while volumes to Europe are slowing due to model at end of life cycle and not replaced.

Continued market uncertainty

- auto analysts remain positive about medium-term growth prospects

Global LV forecasts

Units and growth (y-o-y)

3.6 3.7

Q4 2019 Q2 2020

Q1 2020 Q3 2020

3.7 3.8

Q4 2020

3.7

3.7

3.7

Q3 2019

Several factors fuel uncertainty in short and medium term:

• Trade barriers
• WLTP introduction of different phases in Europe
• Brexit Continued uncertainty and downside risks related to a Brexit
• Softening Chinese momentum despite governmental stimulus
• US vehicle prices
• Emerging markets continued risk

3.8

Q2 2019

Q1 2019

High & heavy trade has softened

- Global sales are expected to decline over the next 12 months

28 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) ²Parker Bay | Large Mining Equipment Deliveries (Units last 3 months y-o-y) ³Factset data and Analytics (03.02.20) | 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*
• No vessel deliveries, two vessels 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 with markets softening for both auto and high & heavy
• 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 performance impacted by lower volumes, outlook is stable
• Focus on operational efficiency in both Ocean and Landbased to support profitability going forward
• Outbreak of the novel coronavirus is likely to have some short-term effects on volumes

Thank you!