Wallenius Wilhelmsen

Quarterly Report • Aug 21, 2019

Q2 and First Half Year 2019

Report

Highlights second quarter 2019

• EBITDA of USD 211 million, showing continued positive improvement y-o-y
• Ocean results driven by higher net freight/CBM, more efficient operations and lower net bunker cost
• Ocean volume declined 8% y-o-y, driven in part by commercial priorities and in part by weaker auto markets
• The landbased segment delivered overall stable performance, with strong results in H&H and APAC/EMEA
• Continued progress on the performance improvement program with about USD 65 million of the USD 100 million target confirmed

Commenting on the second quarter results, Craig Jasienski, President and CEO of Wallenius Wilhelmsen, says:

"I am very happy to see that our efforts to improve our operations are continuing to bear fruit. While volumes are lower compared to one year ago, our EBITDA increased as we carry better-paying cargo and operate more efficiently. With the uncertain volume outlook and volatile macro environment we continue to focus on efficiency and flexibility in our operations and agility in our organisation to be able to respond to changes in the market."

Consolidated results and key figures – second quarter 2019

EBITDA for the second quarter of 2019 was USD 211 million, up USD 55 million compared to the same period last year as a result of improved profitability for the Ocean segment and IFRS 16 implementation

USD million	Q2 2019	Q1 2019	% change q-o-q	Q2 2018	% change y-o-y
Total income	1 005	1 018	-1%	1 044	-4%
EBITDA	211	218	-3%	156	35%
EBIT	88	95	-8%	72	22%
Profit for the period	3	22	-87%	23	-87%
EPS 1)	0.00	0.05	n/a	0.04	n/a
Net interest-bearing debt	3 851	3 882	-1%	3 207	20%
ROCE	4.8%	5.2%	n/a	4.5%	n/a
Equity ratio	35.3%	35.0%	n/a	37.5%	n/a
EBITDA adjusted	211	218	-3%	159	33%
IFRS 16 EBITDA effect	42	42	n/a	n/a	n/a

1) After tax and non-controlling interests

Consolidated results

Total income was USD 1 005 million in the second quarter, down 4% compared to the same period last year due to lower revenues for the ocean segment. The decrease in ocean revenues was a result of lower volumes and reduced other operating income, partly offset by higher fuel cost compensation from customers. Ocean volumes were down 8% y-o-y due to lower auto volumes. A key driver behind the reduced volumes are commercial priorities whereby Wallenius Wilhelmsen is choosing not to carry low paying cargo. In addition, slower auto markets are impacting the volumes. Compared to the first quarter total income was down 1% driven by the ocean segment.

EBITDA came in at USD 211 million in the second quarter, up by USD 55 million compared to the same quarter last year of which USD 42 million was related to the implementation of IFRS 16 for leases as of 1 January 2019, with underlying improvement driven by the Ocean segment. See note 12 to the financial statements for more information about IFRS 16 effects. Compared to the first quarter, EBITDA was down USD 7 million mainly driven by the Ocean segment.

At the end of the second quarter about USD 65 million of the USD 100 million performance improvement program has been confirmed (concrete improvement measures identified and quantified) and the same amount realized (improvement measures actually implemented), up from USD 60 million in the previous quarter. The increase of USD 5 million comes mainly through further voyage optimization and more efficient hull cleaning.

Net financial expenses were USD 83 million for the second quarter, compared with a net expense of USD 70 million in the previous quarter. Interest expense was USD 51 million, down by USD 2 million compared to last quarter, but

increase of USD 10 million compared to second quarter 2018 entirely due to the implementation of IFRS 16. Net financial expenses were negatively impacted by USD 31 million in unrealised interest rate derivatives.

The group recorded a tax expense of USD 3 million for the second quarter 2019, compared with an expense of USD 4 million the same quarter last year. The average Return on Capital Employed (ROCE) in the second quarter was 4.8%.

Capital and financing

The equity ratio was 35.3% at the end of the second quarter, slightly up from 35.0% in the previous quarter. Cash and cash equivalents at the end of the second quarter was USD 487 million, down from USD 555 million in the previous quarter. In addition, Wallenius Wilhelmsen had about USD 285 million in undrawn credit facilities. Net interest-bearing debt was USD 3 851 million at the end of the second quarter.

In June, Wallenius Wilhelmsen Solutions refinanced and increased its revolving credit facility for general corporate and investment purposes.

Ocean operations

EBITDA for the second quarter was USD 184 million, with the underlying improvement compared to same quarter last year driven by higher net freight/CBM, improved operational efficiency and positive net bunker effect

USD million	Q2 2019	Q1 2019	% change q-o-q	Q2 2018	% change y-o-y
Total income	800	812	-2%	842	-5%
EBITDA	184	190	-3%	134	37%
EBIT	84	90	-6%	62	35%
Volume ('000 cbm)	17 003	16 240	5%	18 500	-8%
High & heavy share	29.1%	30.0%	n/a	26.9%	n/a
EBITDA adjusted	184	190	-3%	136	35%
IFRS 16 EBITDA effect	31	31	n/a	n/a	n/a

Total income and EBITDA

Total income was USD 800 million in the second quarter, down 5% compared to the same period last year. The ocean revenues decline was due to lower auto volumes and reduced other operating revenue, while fuel cost compensation from customers contributed positively. Ocean volumes were down 8% y-o-y due to lower auto volumes. In part, the reduced auto volumes are explained by commercial priorities whereby Wallenius Wilhelmsen is choosing not to carry low paying volumes, particularly in the Atlantic, and rationalising sailings to improve efficiency. In addition, weaker auto markets affected the total volumes. Furthermore, the y-o-y comparison is also impacted by a high base effect as the EU WLTP implementation led to large volumes being pushed to Europe in the second quarter last year, ahead of the implementation in September.

The Asia-Europe trade was down compared to the same period last year, but largely driven by the unusually high volumes in Q2 2018 due to the WLTP implementation as described above. The Europe – Asia trade was flat y-o-y, returning to normalised levels in the second quarter from lowest level in three years in Q1. The Asia-North America trade was up 5% y-o-y with positive impact from both Auto and H&H. Auto volume in the Atlantic trade saw a large drop y-o-y that is to a large extent explained by unprofitable volumes not renewed with effect from January 2019, but was partly offset by strong H&H volumes. The Oceania trade was also down significantly compared to same period last year as both the auto segment and agriculture equipment demand has weakened. The high & heavy share was at 29% (up from about 27% one year ago) primarily because of lower auto volumes.

Total income was down 2% from the last quarter, despite a volume increase of 5%, as a result of net freight/CBM coming down from the high level in Q1 combined with lower fuel compensation and other operating income.

EBITDA for the second quarter ended at USD 184 million, an improvement of USD 50 million compared to second quarter last year, of which USD 31 million was related to the IFRS 16 implementation effect. The results benefitted from realisation of synergies and performance improvements, contributing about USD 18 million, better cargo mix

and higher net freight/CBM, lower net bunker cost (adjusted for lower bunker consumption) of about USD 10 million and currency effect of about USD 8 million. On the other side, results were negatively impacted by lower volumes. Compared to the first quarter, EBITDA decreased by USD 6 million despite higher volumes and further improved operational efficiency, mainly due to negative net bunker and higher SG&A expenses.

Wallenius Wilhelmsen fleet

In the second quarter, Wallenius Wilhelmsen controlled a fleet of 127 vessels at the start and maintained 127 vessels at the end of the quarter. A relatively slow charter market has been continued throughout the quarter and fleet capacity was managed tightly by position swaps within the group and leveraging of the shortterm charter market. Currently, the group retains flexibility to redeliver up to 12 vessels by end 2020 (excluding vessels on short charter).

Delivery of vessel number two (8 000 CEU) in the Post-Panamax newbuilding programme of total four vessels took place on 11 April

1. The remaining two vessels are under construction, with one vessel expected to enter service in the last quarter of 2019 and the last one scheduled for delivery in Q1 2020. The outstanding instalments for these vessels are about USD 80 million. The newbuildings have been financed through regular bank facilities.

Landbased operations

EBITDA for the landbased segment ended at USD 35 million, with strong performance in High & Heavy and efficiency improvements making up for lower auto volumes

USD million	Q2 2019	Q1 2019	% change q-o-q	Q2 2018	% change y-o-y
Total income	235	232	1%	222	6%
EBITDA	35	33	5%	25	38%
EBIT	11	10	6%	13	-17%
EBITDA adjusted	35	33	5%	25	40%
IFRS 16 EBITDA effect	11	11	n/a	n/a	n/a
EBITDA by segment
Solutions Americas (auto)	17	15	7%	11	56%
Solutions Americas (H&H)	6	5	14%	4	63%
Solutions APAC/EMEA	4	3	61%	1	262%
Terminals	10	11	-8%	9	10%
Other	(3)	(2)	29%	0	n/a

Total income and EBITDA

Total income in the second quarter was USD 235 million, up 6% compared to the second quarter last year. While revenue was positively impacted by strong performance in Solution Americas H&H and Solutions APAC/EMEA, volume reductions drove revenue down in Solutions Americas - Auto and Terminals.

EBITDA for the second quarter was USD 35 million, an improvement of USD 10 million compared to the second quarter last year, with EBITDA positively impacted by USD 11 million related to the IFRS 16 implementation. Weak performance for Terminals pulled the underlying results down, while strong performance for Solutions Americas – H&H and Solutions - APAC/EMEA, and acquisition of Syngin, contributed positively. Compared to the first quarter, EBITDA was up 5% as a result of stronger performance in most segments, while weaker results in Terminals contributed negatively.

EBITDA for Solutions Americas – Auto was USD 17 million. VSA experienced some decrease in volumes from key customers y-o-y, but was able to maintain performance due to efficiency improvements. Strong performance in Syngin also contributed positively.

EBITDA for Solutions Americas – H&H was USD 6 million, with results benefitting from strong volumes.

EBITDA for Solutions – APAC/EMEA was USD 4 million, with improvement compared to both same period last year and first quarter 2019 driven by volumes in high-margin and value-added services. Solutions APAC/EMEA are also positively impacted by freight forwarding and supply-chain management business moved from Ocean segment and Terminals to this segment from 2019.

EBITDA for the Terminals was USD 10 million. Compared to the same period last year, volumes were down for most terminals, and results were further impacted by increased costs.

Consolidated results – first half year 2019

EBITDA for the first half year 2019 ended at USD 430 million, up from USD 281 million in the same period last year driven by improved profitability for the Ocean segment and IFRS 16 implementation

USD million	st half 2019 1	st half 2018 1	% change
Total income	2 022	2 013	1%
EBITDA	430	281	53%
EBIT	183	72	153%
Profit for the period	25	-7	n/a
EPS 1)	0.04	(0.03)	n/a
Net interest-bearing debt	3 851	3 207	21%
ROCE 2)	4.9%	3.4%	n/a
Equity ratio	35.3%	37.5%	n/a
Total income adjusted	2 022	2 013	0%
EBITDA adjusted	430	286	50%
IFRS 16 EBITDA effect	84	n/a	n/a

1) After tax and non-controlling interests

2) ROCE calculated as annualised EBIT adjusted for non-recurring items minus restructuring costs divided by average CE in the quarter

Total income was USD 2 022 million in the first half of 2019, marginally up compared to the same period last year. The revenues were negatively impacted by lower auto volumes, other income in Ocean and lower revenues in Landbased, but was compensated by increased fuel surcharges. Ocean volumes were down 5% driven by lower auto volumes for most trades.

EBITDA ended at USD 430 million in the first half of 2019, up by USD 149 million from the same period previous year, of which USD 84 million was related to the implementation of IFRS 16 for leases as of 1 January 2019, with underlying improvement driven by the Ocean segment.

The underlying improvement in EBITDA is mainly a result of the ocean segment synergy realization and impact of the performance improvement program, in addition to improved cargo mix, higher net freight/CBM and lower net bunker cost. Biosecurity challenges in first quarter and lower auto volumes impacted EBITDA negatively.

Net profit amounted to USD 25 million for the first half of 2019 compared to a negative USD 7 million in 2018.

Market update

Auto exports in the second quarter declined 4.9% as auto sales are weak and uncertainty in the markets continue. High & heavy growth has weakened throughout the first four months of 2019, but volumes remain at high levels

Auto markets

Total light vehicle (LV) sales in the second quarter decreased 4.9% compared to the corresponding period last year but was up 1.9% from the previous quarter.

North American sales declined 3.2% y-o-y (up 11.6% q-o-q) partly explained by higher loan costs, lower OEM incentives and vehicles coming off lease and being pushed out to the market. Sales in Western Europe dropped 6.0% y-o-y, although the y-oy comparison is impacted by a high basis in Q2 2018 due to the implementation of the EU WLTP emission testing scheme last

September. Market negatively impacted by continued UK Brexit uncertainty and confusion around diesel vehicles. Several OEMs have been struggling to get vehicles compliant and some vehicles have also been subject to increased taxes. Sales in Europe were down 0.7% q-o-q. The Chinese market continued to lose momentum and declined 6.2% y-o-y (up 0.2% q-o-q). The Chinese auto market is influenced by the US trade tensions and currency depreciation, and governmental stimulus has not given the consumers the confidence they have been looking for. The Russian market was down 2.7% y-o-y (+11.2% q-o-q), while the Brazilian market continued the rebound with 11.8% and 13.5% y-o-y growth.

Total exports in the fourth quarter were down 3.1% compared to the corresponding period last year, but up 3.5% from the previous quarter. Exports out of North America was down 9.2% y-o-y (up 0.1% q-o-q), due to falling exports to China and a drop in exports to Europe. European exports declined 0.6% y-o-y and 1.1% q-o-q, as reduced volume to North America dragged the figures down in the quarter. Japanese exports in the second quarter declined 1.4% y-o-y (up 5.4% q-o-q) where North America-bound export contributed to most of this decline. Exports out of South Korea continued to soften and was down 4.9% y-o-y, but up 6.2% q-o-q.

Global light vehicle exports (mill units)

Source: IHS Markit / LMCA

Chinese exports were up 7.0% y-o-y and 2.8% q-o-q driven by continued production ramp-up with broad geographic growth despite U.S. tariff increases.

High and heavy markets

__________________________

Global high & heavy trade has weakened throughout the first four months of 2019, with exports of construction, mining and farm machinery declining 3% y-o-y.

Global construction & rolling mining equipment exports decreased 5% y-o-y where all regions except Europe experienced negative growth. Asia and North America accounted for the largest volume drops as exports from both regions declined 7% and 10% y-o-y respectively. The Eurozone construction PMI has consistently remained at levels indicating expansion in the first half of 2019, recording 50.8 at the end of the second quarter (down from 52.2 in Q1). Nevertheless, both European imports and exports of construction equipment experienced flat growth y-o-y. Conversely, the Australian construction PMI has persisted at levels indicating contraction in 10 consecutive months dating back to Q3 2018, recording 43 in June 2019. In line with this sentiment, Australian import declined by 21% y-o-y in the 3-month rolling period ending in May. Global sales growth of construction equipment going forward is expected to slow down after last year's record-setting volumes, still the market is expected to remain close to current levels over the next 18 months with OEM majors estimated to post flat to slightly negative growth y-o-y in the period.

The OEM majors have reported mixed growth levels in mining equipment sales in the second quarter led by Hitachi and Caterpillar which experienced double-digit growth y-o-y in the low to medium twenties. Global mining machinery demand is expected to remain relatively strong throughout 2019 with OEM majors projected to grow overall sales in the low tens, though still well below last year's high levels.

Farm machinery exports experienced flat development y-o-y as demand for large agriculture equipment was unsynchronised across several key markets. US large tractor sales increased 3% y-o-y in the quarter, however with June sales showing negative growth (-11 % y-o-y), as lingering trade issues and poor planting conditions continue to weigh on farmer sentiment. European registrations varied across the biggest markets with Germany recording growth of 7% y-o-y, while UK saw a decline of 2% y-o-y. Australia also experienced a decline in sales of 4% y-o-y as drought in the Eastern States entered its second year. Brazil tractor sales were down double-digit (19% y-o-y) which has been largely attributed to a lack of subsidized credit. Demand for farm machinery is expected to increase slightly over the next 18 months with OEM majors expected to see flat to modest single-digit sales growth.

¹ All import/export data refer to the three-month rolling period ending in April 2019, with the exception of imports to Oceania, referring to the three-month rolling period ending in May 2019. Source: IHS Markit

Global fleet

The global car carrier fleet (>1 000 CEU) totalled 737 vessels with a capacity of 4.06 million CEU at the end of the second quarter. During the quarter two vessels were delivered, while two vessels were recycled. Two new orders were confirmed in the period (for vessels >4000 CEU). The orderbook for deep-sea vehicle carriers (>4 000 CEU) counts 15 vessels, which amount to about 3% of the global fleet capacity.

Health, safety and environment

Ocean LTIF saw a significant improvement compared to previous quarters, with one incident in the second quarter of 2019. Landbased LTIF is showing continuous improvement. Fleet CO2 emissions relative to cargo work has improved significantly relative to the same quarter last year.

Health & safety

The Ocean LTIF has fluctuated continuously over the past 12 months, with no clear trend observed. LTIF for this quarter decreased compared to the previous quarter and is back to the level seen in fourth quarter 2018.

Landbased has through several safety initiatives achieved a significant improvement in LTIF, and the downward trend continued y-o-y. Incident root causes are being investigated and many preventive actions being taken to continue to improve Safety 1st focus.

Environment

The total CO² emitted for the quarter was about 6.5% lower than the same quarter in 2018, the corresponding total cargo work done decreased by about 2% as measured in tonne kilometers. The lowered emissions trumped this decline and resulted in 4.6% reduction in the grams of CO² emitted per tonne kilometer. The reduced emissions compared with last year are influenced by efficiency improvements coming from the de-fouling initiative.

Wallenius Wilhelmsen won the 'Greener Supply Chain award' at the Automotive Logistics award ceremony for demonstrating the most significant commitment to reducing emissions, pollution and waste in the supply chain. The award was made for the company's role in founding and promoting the Ship Recycling Transparency Initiative (SRTI), which is helping to improve the social and environmental impact of vessel recycling while advancing the interests of responsible industry stakeholders.

Risk update

The group is through its global operation within ocean transportation and landbased services for the car and ro-ro industry exposed to market, operational and financial risks.

Main risk factors

Wallenius Wilhelmsen has established a group wide enterprise risk management model and maps all main risks on a regular basis. On a quarterly basis, management presents a detailed risk assessment, including mitigating actions, covering all business units and functional areas, to the Board of Directors. The group is, through its global operation within ocean transportation and landbased services to the car and rolling equipment industry, exposed to certain market, operational and financial risks as described in the Wallenius Wilhelmsen Annual report 2018. For a thorough explanation of the risk factors, please refer to pages 29 ‐ 31 and note 22, page 160 ‐ 168.

Demand for the ocean and land-based service offerings are cyclical and closely correlated with global economic activity in general and deep-sea transportation of automotive and high & heavy equipment in particular. Changes in the global economy are therefore highly decisive for the development of Wallenius Wilhelmsen's volumes and financial performance. As such, the ongoing trade tension and possibility of new tariffs on automotive imports to the US represents a risk for Wallenius Wilhelmsen. A short-term direct effect of some reduction in automotive volume shipments to the US is not expected to be substantial, as the group can reduce its fleet size, and the profitability for automotive volumes in certain trade lines is very low (e.g. Atlantic trade). On the other hand, the indirect effects of slower global economic growth, combined with reduced deep-sea volumes across all cargo segments (not only US automotive imports), will not only directly impact the results, but could also lead to continued and increased overcapacity, and create further pressure on rates.

Implementation of the IMO 2020 0.5% global sulphur cap represents a challenge and risk for the shipping industry, with fuel costs potentially to increase significantly due to lack of availability and quality of fuels. Wallenius Wilhelmsen is relatively well-covered through Sulphur (BAF) clauses already in place for the majority of the larger customer contracts and aims to introduce relevant clauses for remaining customer contracts. To handle this uncertainty, Wallenius Wilhelmsen has chosen a balanced approach which gives the best chance of managing risks and costs. The group has therefore arrived at a strategy of combining operating with different types of low sulphur fuel and installing scrubbers on some vessels.

Prospects

The board maintains a balanced view on the prospects for Wallenius Wilhelmsen. However, there is uncertainty around the volume outlook in light of weaker auto sales in all major markets, potential risk of increased trade barriers and a volatile macro picture. Market rates remain at a low level although a few contracts have been renewed at improved rates in the first half of the year.

Wallenius Wilhelmsen has a solid platform for growth and is well positioned to succeed in a challenging market. Furthermore, the two-year performance improvement program and continuous focus on efficiency in operations will continue to support profitability going forward.

Responsibility statement

We confirm, to the best of our knowledge, that the condensed set of financial statements for the period 1 January to 30 June 2019 have been prepared in accordance with IAS 34 – Interim Financial Reporting and gives a true and fair view of the group's assets, liabilities, financial position and profit as a whole.

We also confirm, to the best of our knowledge, that the interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the set of financial statements, a description of the principal risks and uncertainties for the remaining six months of the financial year, and major related parties' transactions.

Lysaker, 21 August 2019 The board of directors of Wallenius Wilhelmsen ASA

Håkan Larsson – Chair

Thomas Wilhelmsen Jonas Kleberg Marianne Lie Margareta Alestig

Forward-looking statements presented in this report are based on various assumptions. The assumptions were reasonable when made but are inherently subject to uncertainties and contingencies that are difficult or impossible to predict. Wallenius Wilhelmsen ASA cannot give assurances that expectations regarding the outlook will be achieved or accomplished.

Income statement

USD million	Notes	Q2 2019	Q2 2018	1H 2019	1H 2018	2018
Operating revenue	4	1,005	1,044	2,022	2,013	4,063
Gain/(loss) from disposal of assets	2	0	(0)	0	(0)	1
Total income		1,005	1,044	2,022	2,012	4,065
Operating expenses	4	(794)	(888)	(1,593)	(1,731)	(3,463)
Operating profit before depreciation, amortisation and
impairment (EBITDA)		211	156	430	281	601
Other gain / (loss)	3	1	2	1	(39)	(12)
Depreciation and amortisation	5, 6	(124)	(86)	(247)	(170)	(345)
Operating profit (EBIT)		88	72	183	72	244
Share of profit from joint ventures and associates		0	0	0	1	2
Financial income/(expenses)	7	(83)	(45)	(153)	(51)	(169)
Profit before tax		6	27	30	22	78
Tax income/(expenses)		(3)	(4)	(5)	(29)	(20)
Profit for the period		3	23	25	(7)	58
Profit for the period attributable to:
Owners of the parent		(1)	19	18	(12)	52
Non-controlling interests		4	4	7	4	6
Basic earnings per share (USD)	8	(0.00)	0.04	0.04	(0.03)	0.12
Statement of comprehensive income
USD million		Q2 2019	Q2 2018	1H 2019	1H 2018	2018
Profit for the period		3	23	25	(7)	58
Other comprehensive income:
Items that may subsequently be reclassified to the income statement Changes in fair value of cash flow hedge instruments Currency translation adjustment Items that will not be reclassified to the income statement Remeasurement pension liabilities, net of tax		(1) (1) -	- (8) -	2 (1) -	- (5)	(4) (12) 2
Other comprehensive income for the period		(1)	(8)	1	(5)	(13)
Total comprehensive income for the period		1	15	26	(12)	45
Total comprehensive income attributable to:
Owners of the parent		(4)	11	18	(16)	40
Non-controlling interests		5	4	8	4	5
Total comprehensive income for the period		1	15	26	(12)	45

Balance sheet

USD million	Notes	30 June 2019	30 June 2018	31 Dec 2018
ASSETS
Non-current assets
Deferred tax assets		114	91	105
Goodwill and other intangible assets	5	679	695	711
Vessels, other tangible and leased assets	6, 12	5,955	5,316	5,225
Investments in joint ventures and associates		2	3	2
Other non-current assets	3	150	142	162
Total non-current assets		6,900	6,247	6,204
Current assets
Bunkers/luboil		93	128	107
Trade receivables		534	499	489
Other current assets		129	128	130
Cash and cash equivalents		487	517	484
Total current assets		1,242	1,272	1,210
Total assets		8,142	7,519	7,414
EQUITY and LIABILITIES
Equity
Share capital	8	28	28	28
Retained earnings and other reserves		2,610	2,578	2,619
Total equity attributable to owners of the parent		2,639	2,606	2,647
Non-controlling interests		237	215	228
Total equity		2,876	2,822	2,876
Non-current liabilities
Pension liabilities		64	73	65
Deferred tax liabilities		110	106	116
Non-current interest-bearing debt	11, 12	3,853	3,052	3,054
Non-current provisions		133	135	133
Other non-current liabilities		43	35	63
Total non-current liabilities		4,203	3,400	3,431
Current liabilities
Trade payables		221	219	220
Current interest-bearing debt	11	485	672	530
Current income tax liabilities		14	21	14
Current provisions		44	58	46
Other current liabilities		299	328	298
Total current liabilities		1,063	1,297	1,107
Total equity and liabilities		8,142	7,519	7,414

Cash flow statement

USD million	Notes	Q2 2019	Q2 2018	1H 2019	1H 2018	2018
Cash flow from operating activities
Profit before tax		6	27	30	22	78
Financial (income)/expenses		83	44	153	50	169
Share of net income from joint ventures and associates		0	(0)	0	(1)	(2)
Depreciation and amortisation		124	86	247	170	345
(Gain)/loss on sale of tangible assets		(0)	0	(0)	0	1
Change in net pension assets/liabilities		0	(3)	(1)	(1)	(11)
Change in derivative financial assets	3	(2)	(2)	(2)	39	12
Other change in working capital		5	(234)	(65)	(253)	(292)
Tax paid (company income tax, withholding tax)		(7)	(6)	(9)	(12)	(27)
Net cash flow provided by operating activities 1		209	(87)	353	15	272
Cash flow from investing activities
Proceeds from sale of tangible assets		0	1	1	6	10
Investments in vessels, other tangible and intangible assets		(56)	(56)	(65)	(106)	(171)
Investments in subsidiaries, net of cash aquired		-	-	-	-	(22)
Investments in joint ventures		-	-	-	-	(1)
Interest received		2	3	5	5	9
Changes in other investments		-	1	-	(1)	-
Net cash flow provided by/(used in) investing activities		(54)	(52)	(60)	(97)	(174)
Cash flow from financing activities
Proceeds from issue of debt		343	553	568	590	1,269
Repayment of debt		(462)	(472)	(698)	(658)	(1,455)
Interest paid including interest derivatives		(51)	(39)	(104)	(86)	(177)
Realised other derivatives		(27)	(32)	(29)	(27)	(30)
Dividend to non-controlling interests		(1)	(2)	(2)	(16)	(17)
Dividend to shareholders		(25)	-	(25)	-	-
Net cash flow used in financing activities		(223)	7	(290)	(197)	(410)
Net increase in cash and cash equivalents		(68)	(132)	3	(279)	(312)
Cash and cash equivalents, excluding restricted cash,
at beginning of period		555	649	484	796	796
Cash and cash equivalents at end of period1)		487	517	487	517	484

1) The group is located and operating world wide and every entity has several bank accounts in different currencies. Unrealised currency effects are included in net cash provided by operating activities.

Statement of changes in equity

USD million	Notes	Share capital	Own shares	Total paid in capital	Retained earnings and other	Total	Non controlling interests	Total equity
2019					reserves
Balance at 31 December 2018		28	(0)	28	2,619	2,647	228	2,876
Profit for the period		-	-	-	18	18	7	25
Other comprehensive income		-	-	-	(0)	(0)	2	1
Total comprehensive income		-	-	-	18	18	8	26
Transactions with non-controlling interests		-	-	-	(2)	(2)	3	1
Dividend to owners of the parent	9	-	-	-	(25)	(25)	-	(25)
Dividend to non-controlling interests		-	-	-	-	-	(2)	(2)
Balance 30 June 2019		28	(0)	28	2,610	2,638	237	2,876

		Share capital	Own shares	Total paid in capital	Retained earnings and other reserves		Total Non controlling interests	Total equity
2018
Balance at 31 December 2017		28	-	28	2,594	2,622	228	2,850
Profit for the period		-	-	-	52	52	6	58
Other comprehensive income		-	-		(12)	(12)	(1)	(13)
Total comprehensive income		-	-	-	40	40	5	45
Acqusition of own shares	8	-	(0)	(0)	(3)	(3)	-	(3)
Put option non-controlling interests on acquisition of subsidiary		-	-	-	(12)	(12)	-	(12)
Transactions with non-controlling interests on acquisition of subsidiary		-	-	-	-	-	13	13
Dividend to non-controlling interests		-	-	-	-	-	(17)	(17)
Balance 31 December 2018		28	(0)	28	2,619	2,647	228	2,876

Note 1 - Accounting Principles

This consolidated interim financial report has been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting. The consolidated interim financial reporting should be read in conjunction with the annual financial statements for the year end 31 December 2018 for Wallenius Wilhelmsen ASA group (the group), which has been prepared in accordance with IFRS's endorsed by the EU.

The accounting policies implemented are consistent with those of the annual financial statements for the group for the year end 31 December 2018, with the exception of IFRS 16 Leases as described below.

Changes in accounting policies – implementation of IFRS 16 Leases

IFRS 16 Leases replaces IAS 17 Leases that relate to the recognition of leases and related disclosures. The adoption of IFRS 16 Leases from 1 January 2019 resulted in significant changes to the group's accounting for leases previously defined as operating leases under IAS 17.

In accordance with the implementation of IFRS 16, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

• fixed payments (including in-substance fixed payments), - variable lease payment that are based on an index or a rate, and

• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the lessee's incremental borrowing rate.

Right-of-use assets are measured at cost comprising the following:

-the amount of the initial measurement of lease liability - any lease payments made at or before the commencement date less any lease incentives received

• any initial direct costs, and

• restoration costs.

Payments associated with short-term leases and leases of lowvalue assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.

Time charter contracts contain a lease element and a performance obligation for the provision of time charter services. The lease of the vessel, representing the use of the vessel without any associated performance obligations or warranties, is accounted for in accordance with IFRS 16. Typically, lease revenues are recognized on a straight-line basis over the lease term. Revenues for time charter services are recognised over time as the service is rendered in accordance with IFRS 15.

Use of judgements and estimates

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The effect of a change in an accounting estimate is recognised in profit or loss in the period where the estimate is revised or in the period of the revision and future periods if the change affects both.

The significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements, except for the critical judgements in determining the lease term following the implementation of IFRS 16.

Critical judgements in determining the lease term From 1 January 2019 the Group has implemented the new leasing standard IFRS 16. For all leases, except for short-term leases and leases of low value, a lease liability and a corresponding right-of-use asset is recognised in the consolidated statement of financial position.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.

As a result of rounding adjustments, the figures in one or more columns may not add up to the total of that column.

Note 2 - Gain/(loss) from disposal of assets

USD million	Q2 2019	Q2 2018	1H 2019	1H 2018	2018
Deferred consideration Syngin Technology LLC (Landbased)	-	-	-	-	2
Other	0	(0)	0	(0)	(1)
Net gain/(loss) on sale of assets	0	(0)	0	(0)	1

Note 3 - Other gain/(loss)

Non-controlling shareholders hold a put option for their 20% shareholding in EUKOR through a shareholder agreement entered into in 2002. The shareholder agreement also contains a symmetrical call option held by the group.

Non-controlling interests containing a symmetrical put and call option held by the non-controlling interest shareholders and the group, respectively, is recognised as one integrated derivative financial instrument. The derivative financial instrument is recognised as a non-current asset when the options are exercisable and the fair value of the non-controlling interest exceed the value of the exercise price for symmetrical put and call option.

During second quarter 2019 the change in the value of the derivative was USD 1.9 million recognised as a positive effect under Other gain/(loss) in the income statement. The change in value during second quarter 2018 was a positive USD 1.8 million. The year-to date 2018 effect was a loss of USD 39 million due to a significant loss recognised in first quarter 2018 of USD 40 million. The loss was mainly related to a change in the fair value of the non-controlling interest reflected in the net financial derivative value.

The financial derivative is recognised as an other non-current asset and has a carrying value of USD 96 million at the end of second quarter 2019.

Syngin Technology LLC - Deferred consideration

In the second quarter, the group recognised a loss of USD 1.1 million related to the deferred consideration arising from the acquitisiton of Syngin Technology LLC ("Syngin") in July 2018. The deferred consideration was related to achieved results for 2018 and ended at USD 7.2 million.

Note 4 - Segment reporting

USD million	Ocean		Landbased		Holding & Eliminations		Total
	Q2	Q2	Q2	Q2	Q2	Q2	Q2	Q2
	2019	2018	2019	2018	2019	2018	2019	2018
Net freight revenue	705	750	-	-	-	-	705	750
Surcharges	62	52	-	-	-	-	62	52
Other operating revenue	33	41	205	202	(0)	-	238	242
Internal operating revenue	0	-	30	20	(30)	(20)	(0)	-
Gain/(loss) on sale of assets	0	(1)	0	0	0	-	0	(0)
Total income	800	842	235	222	(30)	(20)	1,005	1,044
Cargo expenses	(178)	(191)	-	-	27	19	(151)	(172)
Bunker	(175)	(188)	-	-	-	-	(175)	(188)
Other voyage expenses	(113)	(124)	-	-	0	-	(113)	(124)
Ship operating expenses	(54)	(56)	-	-	-	-	(54)	(56)
Charter expenses	(51)	(99)	-	-	-	-	(51)	(99)
Manufacturing cost	-	-	(61)	(64)	3	-	(58)	(64)
Other operating expenses	(5)	(7)	(107)	(102)	1	-	(111)	(109)
Selling, general and administrative expenses	(42)	(42)	(33)	(30)	(7)	(2)	(82)	(75)
Total operating expenses	(617)	(707)	(201)	(197)	24	17	(794)	(888)
Operating profit before depreciation,
amortisation and impairment (EBITDA)	184	134	35	25	(7)	(3)	211	156
Other gain/(loss)	2	2	(1)	-	-	-	1	2
Depreciation	(96)	(66)	(13)	(4)	(0)	-	(109)	(70)
Amortisation	(6)	(8)	(9)	(8)	0	-	(15)	(16)
Impairment	(0)	-	-	-	-	-	(0)	-
Operating profit (EBIT)1)	84	62	11	13	(7)	(3)	88	72
Share of profit from joint ventures and
associates	0	-	0	-	0	-	0	0
Financial income/(expenses)	(80)	(37)	(17)	(3)	14	(6)	(83)	(45)
Profit before tax	4	26	(6)	10	7	(9)	6	27
Tax income/(expense)	(1)	(2)	(2)	(4)	-	2	(3)	(4)
Profit for the period	3	24	(8)	6	7	(7)	3	23
Profit for the period attributable to:
Owners of the parent	(0)	21	(8)	5	7	(7)	(1)	19
Non-controlling interests	4	3	1	1	(0)	-	4	4

1) Cash settled portion of bunker hedge swaps is included in net operating profit by reduction/(increase) of voyage related expenses.

Note 4 - Segment reporting

USD million		Ocean		Landbased			Holding & Eliminations			Total
	1H	1H		1H	1H		1H	1H		1H	1H
	2019	2018	2018	2019	2018	2018	2019	2018	2018	2019	2018	2018
Net freight revenue	1,403	1,412	2,815	-	-	-	-	-	-	1,403	1,412	2,815
Surcharges	133	96	234	-	-	-	-	-	-	133	96	234
Other operating revenue	76	84	172	410	420	842	(0)	-	-	487	504	1,014
Internal operating revenue	1	-	-	57	34	69	(57)	(34)	(69)	0	-	-
Gain/(loss) on sale of assets	0	(1)	(1)	0	0	2	0	-	(0)	0	(0)	1
Total income	1,613	1,592	3,220	467	454	914	(57)	(34)	(69)	2,022	2,012	4,065
Cargo expenses	(361)	(351)	(697)	-	-	-	51	33	62	(310)	(318)	(635)
Bunker	(351)	(354)	(740)	-	-	-	-	-	-	(351)	(354)	(740)
Other voyage expenses	(224)	(248)	(483)	-	-	-	0	-	(1)	(224)	(248)	(484)
Ship operating expenses	(107)	(110)	(226)	-	-	-	-	-	-	(107)	(110)	(226)
Charter expenses	(106)	(183)	(362)	-	-	-	-	-	-	(106)	(183)	(362)
Manufacturing cost	-	-	-	(122)	(137)	(266)	5	-	6	(118)	(137)	(259)
Other operating expenses	(10)	(14)	(25)	(214)	(211)	(433)	1	-	1	(223)	(225)	(456)
Selling, general and administrative
expenses	(79)	(88)	(160)	(63)	(61)	(125)	(11)	(6)	(15)	(154)	(155)	(301)
Total operating expenses	(1,239)	(1,348)	(2,692)	(400)	(409)	(824)	46	26	53	(1,593)	(1,731)	(3,463)
Operating profit before depreciation,
amortisation and impairment (EBITDA)	374	243	528	68	45	90	(11)	(7)	(16)	430	281	601
Other gain/(loss)	2	(39)	(12)	(1)	-	-	-	-	-	1	(39)	(12)
Depreciation	(190)	(130)	(262)	(26)	(9)	(17)	-	-	-	(216)	(139)	(279)
Amortisation	(12)	(16)	(32)	(19)	(16)	(34)	-	-	-	(31)	(32)	(67)
Operating profit (EBIT)1)	174	59	222	21	21	39	(11)	(7)	(16)	183	72	244
Share of profit from joint ventures and
associates	0	1	2	(0)	0	0	0	-	(0)	0	1	2
Financial income/(expenses)	(163)	(44)	(164)	(32)	(3)	(14)	42	(5)	9	(153)	(51)	(169)
Profit before tax	11	15	60	(11)	18	25	30	(12)	(7)	30	22	78
Tax income/(expense)	(3)	(24)	(20)	(2)	(8)	(3)	0	3	4	(5)	(29)	(20)
Profit for the period	8	(9)	40	(13)	10	22	30	(9)	(4)	25	(7)	58
Profit for the period attributable to:
Owners of the parent	2	(11)	35	(14)	9	20	30	(9)	(4)	18	(12)	52
Non-controlling interests	6	3	5	1	2	1	(0)	-	(0)	7	4	6

1) Cash settled portion of bunker hedge swaps is included in net operating profit by reduction/(increase) of voyage related expenses.

Note 5 - Goodwill, customer relations/contracts and other intangible assets

USD million		Customer	Otherintangible	Total intangible
	Goodwill	relations/contracts	assets	assets
2019
Cost at 1 January	350	421	49	819
Adjustment of purchase price allocation	(3)	-	-	(3)
Additions	-	-	2	2
Disposal	-	-	(0)	(0)
Currency translation adjustment	0	-	(0)	(0)
Cost at 30 June	346	421	50	817
Accumulated amortisation and impairment losses at 1
January	-	(91)	(16)	(107)
Amortisation	-	(28)	(2)	(31)
Accumulated amortisation and impairment losses at
30 June	-	(119)	(18)	(138)
Carrying amounts at 30 June	346	301	32	679

		Customer	Otherintangible	Total intangible
	Goodwill	relations/contracts	assets	assets
2018
Cost at 1 January	332	398	33	763
Additions	2	5	7	14
Acquisitions through business combination	16	17	8	42
Currency translation adjustment	-	-	-	(1)
Cost at 31 December	350	420	49	819
Accumulated amortisation and impairment losses at 1
January	-	(37)	(4)	(41)
Amortisation	-	(54)	(12)	(67)
Accumulated amortisation and impairment losses at
31 December	-	(91)	(16)	(107)
Carrying amounts at 31 December	350	329	32	711

Note 6 - Vessels, other tangible and leased assets

USD million	Property and	Other tangible	Vessels &	Newbuilding	Leased assets	Total tangible
	land	assets	docking	contracts		assets
2019
Cost at 1 January	114	67	5,953	95	-	6,230
Additions	6	7	6	41	23	82
Implementation IFRS 16	-	-	-	-	861	861
Reclassification	4	(6)	(2,443)	(72)	2,518	0
Disposal	(1)	(2)	(9)	-	(2)	(15)
Currency translation adjustment	(0)	0	-	-	4	5
Cost at 30 June	123	66	3,507	63	3,404	7,163
Accumulated depreciation and
impairment losses at 1 January	(2)	(15)	(988)	-	-	(1,005)
Depreciation	(5)	(6)	(79)	-	(125)	(216)
Disposal	1	2	9	-	2	14
Reclassification	(1)	2	227	-	(228)	0
Impairment	-	-	-	-	-	-
Currency translation adjustment	0	(0)	-	-	(0)	(1)
Accumulated depreciation and
impairment losses at 30 June	(6)	(17)	(832)	-	(352)	(1,207)
Carrying amounts at 30 June	117	48	2,676	63	3,052	5,955

USD million	Property and land	Other tangible assets	Vessels & docking	Newbuilding contracts	Leased assets	Total tangible assets
2018
Cost at 1 January	135	37	5,840	120	-	6,132
Additions	-	44	63	50	-	157
Reclassification	-	-	75	(75)	-	-
Disposal	(13)	(11)	(24)	-	-	(49)
Currency translation adjustment	(7)	(2)	-	-	-	(9)
Cost at 31 December	114	67	5,953	95	-	6,230
Accumulated depreciation and
impairment losses at 1 January	(6)	(8)	(757)	-	-	(770)
Depreciation	(4)	(18)	(256)	-	-	(278)
Disposal	6	10	24	-	-	40
Currency translation adjustment	2	1	-	-	-	3
Accumulated depreciation and
impairment losses at 31 December	(2)	(15)	(988)	-	-	(1,005)
Carrying amounts at 31 December	113	52	4,965	95	-	5,225

2019 material additions

In the second quarter 2019 the group took delivery of the Post-Panamax vessel M/V Traviata with a capital expenditure of USD 39 million recorded in the quarter. Further, a revision

of T/C contracts for one vessel, increased the leased assets with USD 15 million in the second quarter.

Specification on leased assets

USD million	Property and	Vessels	Vehicles	Other assets	Total leased
2019	land				assets
IFRS 16 implementation at 1 January	419	440	1	0	861
Existing financial leases under IAS 17	-	2,515	2	-	2,518
Total leases assets at 1 January	419	2,955	3	0	3,378
Additions	4	19	-	-	23
Change in lease payments	0	(0)	-	-	(0)
Disposal	(1)	(1)	(0)	-	(2)
Currency translation adjustment	4	-	0	(0)	4
Cost at 30 June	427	2,973	3	0	3,404
Accumulated depreciation and
impairment losses at 1 January	-	-	-	-	-
Existing financial leases under IAS 17	-	(227)	(1)	-	(228)
Depreciation	(21)	(104)	(0)	(0)	(125)
Disposal	0	1	0	-	2
Impairment	-	-	-	-	-
Currency translation adjustment	(0)	-	-	-	(0)
Accumulated depreciation and
impairment losses at 30 June	(21)	(330)	(2)	(0)	(352)
Carrying amounts at 30 June	406	2,643	2	0	3,052

In the second quarter assumptions in one time-charter agreements were revised, as options to purchase the vessel was expected to be exercised. The revision increased leased vessels and leasing commitments with USD 15 million.

Note 7 - Financial income and expenses

USD million	Q2 2019	Q2 2018	1H 2019	1H 2018	2018
Financial income
Interest income	2	3	5	5	9
Other financial items	0	2	1	2	4
Net financial income	2	4	6	6	13
Financial expenses
Interest expenses	(51)	(41)	(100)	(76)	(161)
Interest rate derivatives - realised	(0)	(5)	(4)	(10)	(17)
Interest rate derivatives - unrealised	(31)	12	(53)	43	32
Other financial items	(2)	(2)	(3)	(2)	(8)
Net financial expenses	(84)	(35)	(160)	(46)	(154)
Currency
Net currency gain/(loss)	(1)	(7)	(3)	(18)	(8)
Derivatives for hedging of foreign currency risk - realised	(27)	(27)	(29)	(27)	(30)
Derivatives for hedging of foreign currency risk - unrealised	28	18	32	33	16
Net currency	(0)	(15)	(0)	(12)	(21)
Financial derivatives bunker
Unrealised bunker derivatives	(1)	-	1	-	(7)
Net bunker derivatives	(1)	-	1	-	(7)
Financial income/(expenses)	(83)	(45)	(153)	(51)	(169)

Note 8 - Shares

Earnings per share takes into consideration the number of outstanding shares in the period. The company had no outstanding shares in the period.

The annual general meeting on 25 April 2018, authorised the company to acquire up to 10% of own shares. In 2018, Wallenius Wilhelmsen purchased a total of 800,000 shares in the market to cover for management's share incentive program and for an employee share purchase program financially

supported by "The Foundation for WW Group employees". In December 2018, 14 136 of own shares were used in the employee share purchase program.

Basic earnings per share is calculated by dividing profit for the period after non-controlling interests, by average number of total outstanding shares. Basic earnings per share for the second quarter was USD 0.00 compared with a USD 0.04 in the same quarter last year.

The company's share capital is as follows:	Number of shares	NOK million	USD million
Share capital 30 June 2019	423,104,938	220	28
Own shares 30 June 2019	785,864

Note 9 - Dividend

Ordinary dividend of 6 cent per share, total of approximately USD 25 million, was paid to the shareholders in May 2019. The Annual General Meeting also gave the board authority to pay a second dividend payment of up to USD 6 cents per share for a

period limited in time up to the annual general meeting in 2020, but no longer than to 30 June 2020. In total, the dividend for 2018 may total USD 50 million.

Note 10 - Tax

The effective tax rate for the group will, from period to period, change dependent on the group gains and losses from investments inside the exemption method and tax exempt revenues from tonnage tax regimes. Tonnage tax is considered as operating expense in the accounts.

The group recorded a tax expense of USD 3 million for the second quarter 2019, compared with an expense of USD 4 million the same quarter last year .

The effective tax rate has increased in the second quarter as a consequence of non-recognition of new deferred tax asset in the balance sheet related to tax losses in the Norwegian entities. Future utilisation of such tax losses are uncertain and hence not recognised in the accounts.

Note 11 - Interest-bearing debt

USD million		30 June 2019 30 June 2018	31 Dec 2018
Non-current interest-bearing debt	3,853	3,052	3,054
Current interest-bearing debt	485	672	530
Total interest-bearing debt	4,338	3,723	3,584
Cash and cash equivalents	487	517	484
Net interest-bearing debt	3,851	2,977	3,100

Repayment schedule for interest-bearing debt	Bank loans	Leasing	Bonds	Other	30 June 2019
		commitm		interest
Due in one year	190	285	9	0	485
Due in year +1	104	171		3	278
Due in year +2	233	279	88		600
Due in year +3	176	277	219		672
Due in year +4 and later	1,017	1,273		14	2,303
Total interest-bearing debt	1,720	2,285	316	17	4,338

Reconciliation of liabilities arising from	31 Dec		Cash flow Debt assumed	Foreign	Amorti	Other 1)	Reclass	30 June 2019
financing activities	2018		as	exchange	sation		ification
			part of	movement
			acquisition
Bank loans	1,409	165		-	4	(4)	(44)	1,530
Leasing commitments	1,274	125		(1)	-	708	(106)	2,000
Bonds	309	-		5	-	3	(10)	306
Bank overdraft / other interest-bearing debt	63	-		0	-	3	(50)	16
Total non-current interest-bearing liabilities	3,055	290	-	4	4	710	(210)	3,853
Current portion of non-current debt	530	(419)		0	0	164	210	485
Total liabilities from financing activities	3,584	(130)	-	4	4	875	-	4,338

1) Mainly effects from implementation of IFRS 16 Leases. See note 12 for more information.

Reconciliation of liabilities arising from financing activities	31 Dec 2017		Cash flow Debt assumed as part of acquisition	Foreign exchange movement	Amorti sation	Other 2)	Reclass ification	31 Dec 2018
Bank loans	1,344	25	-	-	6	-	34	1,409
Leasing commitments	1,435	171	-	-	-	-	(333)	1,274
Bonds	324	89	-	(12)	-	5	(98)	309
Bank overdraft / other interest-bearing debt	-	51	12	-	-	-	-	63
Total non-current interest-bearing liabilities	3,103	336	12	(12)	6	5	(396)	3,055
Current portion of non-current debt	661	(522)	-	(5)	-	-	396	530
Total liabilities from financing activities	3,764	(186)	12	(17)	6	5	-	3,584

2) Interest on corporate bond with maturity in 2022.

Note 12 - IFRS 16 - Leases

The new IFRS 16 Leasing standard is effective from 1 January 2019. The standard will significantly change how the company accounts for its lease contracts for vessels, land, buildings and equipment currently accounted for as operating leases. Virtually all leases will be brought into the balance sheet increasing the groups assets and liabilities, in addition to affecting income statement figures. This note summarizes the expected impact on the financial reporting of Wallenius Wilhelmsen group from implementing the new standard. According to the company's existing loan agreements, the new standard will not impact the covenant requirements.

The lease contracts

The company has a number of leases related to vessels and land that account for the significant part of the lease liability. The group also leases office space and equipment. A lease liability and right-of-use asset will be presented for these contracts which previously were reported as operating leases.

Recognition and measurement approach on transition Wallenius Wilhelmsen will apply IFRS 16 retrospectively with recognition of the cumulative implementation effect recognised at the date of initial application 1 January 2019. By doing this, comparative financial information shall not be restated, but the cumulative effect of initially applying this standard shall be reflected as an adjustment to the opening balance. At the time of transition, leases entered under IAS 17 will not be

reassessed.

As of 1 January 2019, the lease liabilities will be measured at the present value of remaining lease payments, discounted using the incremental borrowing rate at such date. The right-ofuse assets will be measured at an amount equal to the lease liability less prepayments and other direct costs.

The standard has provided options on scope and exemptions and below the group's policy choices are described:

• The standard will not be applied to leases of intangible assets and these will continue to be recognized in accordance with IAS 38 Intangible assets.

• All leases deemed short-term (<12 months) by the standard are exempt from reporting.

• All leases deemed to be of low value by the standard, or considered insignificant to the group, are exempt from reporting, which are mainly office equipment and company cars.

• Non-lease components shall be separated from the lease component in all vessel leases. For other lease agreements, the group will apply a materiality threshold when evaluating separation.

USD million

The effect on balance sheet as at 1 January 2019 is presented below.

Lease liability at 1 January 2019	855
Right-of-use asset at 1 January 2019	861
Difference between lease liability and right-of-use asset at 1 January 2019	6
Effect from prepayments and currency translation	6
Reconciliation of lease commitment and lease liability
Operating lease commitment as at 31 December 2018	1,164
Relief option for short-term leases 1)	(1)
Relief option for leases of low-value assets	(7)
Option periods not previously reported as lease commitments	18
Undiscounted lease liabililty	1,173
Effect of discounting lease commitment to net present value	(318)
Lease liability as at 1 January 2019	855

1) Mainly related to current vessel leases.

Note 12 - IFRS 16 - Leases

IFRS 16 effect income statement

	Ocean		Landbased		Total1)
USD million	Q2 2019	1H 2019	Q2 2019	1H 2019	Q2 2019	1H 2019
Operating expenses	31	62	11	21	42	84
Operating profit before depreciation,
amortisation and impairment (EBITDA)	31	62	11	21	42	84
Depreciation and amortisation	(28)	(56)	(9)	(18)	(37)	(75)
EBIT	3	6	1	3	4	9
Interest expense	(5)	(11)	(5)	(10)	(10)	(21)
Profit for the period	(3)	(5)	(4)	(7)	(6)	(12)

1) There are no leases in the Holding segment

Expected future impact on the income and cash flow statement

IFRS 16 Leasing will have a significant impact on the income statement when implemented in 2019. The estimated reduction of annual lease expense gives an improvement of EBITDA of approximately USD 168 million. Annual depreciation expense of leased assets will increase approximately USD 149 million.

Annual net interest expense will increase approximately USD 40 million. IFRS 16 has been implemented in the reporting from the operating segments.

Reconciliation of alternative performance measures

Definitions of Alternative Performance Measures (APMs)

This section describes the non-GAAP financial alternative performance measures (APM) that are used in the quarterly and annual reports.

The following measures are not defined nor specified in the applicable financial reporting framework of IFRS. They may be considered as non-GAAP financial measures that may include or exclude amounts that are calculated and presented according to the IFRS. These APMs are intended to enhance comparability of the results and cash flows from period to period and it is the Group's experience that these are frequently used by investors, analysts and other parties. Internally, these APMs are used by the management to measure performance on a regular basis. The APMs should not be considered as a substitute for measures of performance in accordance with IFRS.

EBITDA is defined as Total income (Operating revenue and gain/(loss) on sale of assets) adjusted for Operating expenses excluding other gain/(loss). EBITDA is used as an additional measure of the group's operational profitability, excluding the impact from financial items, taxes, depreciation and amortization.

EBITDA adjusted is defined as EBITDA excluding restructuring related items and gain/loss on sale of vessels and other tangible assets. These items have been excluded as they are not regarded as part of the underlying operational performance for the period.

EBIT is defined as Total income (Operating revenue and

gain/(loss) on sale of assets) less Operating expenses excluding other gain/(loss), Other gain/loss and depreciation and amortization. EBIT is used as a measure of operational profitability excluding the effects of how the operations were financed, taxed and excluding foreign exchange gains & losses.

EBIT adjusted is defined as EBIT excluding restructuring related items, gain/loss on sale of vessels and other tangible assets and other gain/loss.

For the quarters Capital Employed (CE) is calculated based on quarterly average of Total assets, Total liabilities and total interest-bearing debt. For the full year CE is calculated based on yearly average of Total assets, Total liabilities and total interestbearing debt. CE is measured in order to assess how much capital is needed for the operations/business to function and evaluate if the capital employed can be utilized more efficiently and/or if operations should be discontinued.

In the quarterly reporting Return on Capital Employed (ROCE) is based on annualized EBIT divided by capital employed. For the annual reporting the EBIT in the ROCE calculation is the actual EBIT for the full year. ROCE is used to measure the return on the capital employed without taking into consideration the way the operations and assets are financed during the period under review. The group considers this ratio as appropriate to measure the return of the period.

Reconciliation of alternative performance measures

USD million

	Q2 2019	Q2 2018	1H 2019	1H 2018	2018
Reconciliation of Total income to EBITDA and EBITDA adjusted
Total income	1,005	1,044	2,022	2,012	4,065
Operating expenses excluding other gain/(loss)	(794)	(888)	(1,593)	(1,731)	(3,463)
EBITDA	211	156	430	281	601
EBITDA Ocean	184	134	374	243	528
Restructuring costs	-	1	-	3	3
Loss on sale of tangible assets	-	1	-	1	1
EBITDA adjusted Ocean	184	136	374	247	532
EBITDA Landbased	35	25	68	45	90
Gain on sale of tangible assets	-	(0)	-	(0)	(0)
EBITDA adjusted Landbased	35	25	68	45	89
EBITDA Holding/Eliminations	(7)	(3)	(11)	(7)	(16)
Restructuring costs	-	1	-	2	2
EBITDA adjusted Holding/Eliminations	(7)	(2)	(11)	(5)	(15)
EBITDA adjusted	211	158	430	286	606
Reconciliation of Total income to EBIT and EBIT adjusted
EBITDA	211	156	430	281	601
Other gain/loss	1	2	1	(39)	(12)
Depreciation and amortisation	(124)	(86)	(247)	(170)	(345)
EBIT	88	72	183	72	244
Restructuring costs	-	2	-	5	5
Gain on sale of other tangible assets	-	0	-	0	0
Derivative financial asset	(2)	(2)	(2)	39	12
EBIT adjusted	86	73	181	116	261
	Quarter average		1H average		Yearly average
Reconciliation of total assets to capital employed and ROCE	Q2 2019 Q2 2018		1H 2019	1H 2018	31 Dec 2018
calculation and return on equity calculation
Total assets	8,156	7,636	8,072	7,477	7,638
Total liabilities	5,272	4,821	5,189	4,629	4,776
Total equity	2,883	2,815	2,884	2,849	2,863
Total interest-bearing debt	4,346	3,675	4,384	3,654	3,674
Capital employed	7,229	6,490	7,267	6,503	6,537
EBIT adjusted annualised	346	291	356	218	261
ROCE	4.8%	4.5%	4.9%	3.4%	4.0%
Profit for the period	12	92	25	(7)	58
Return on equity	0.4%	3.3%	0.9%	-0.3%	2.0%
			Q2 2019	Q2 2018	31 Dec 2018
Net interest-bearing debt
Cash and cash equivalents			487	517	484
Non-current interest bearing debt			3,853	3,052	3,054
Current interest-bearing debt Net interest-bearing debt			485 3,851	672 3,207	530 3,100