PowerPoint Presentation · 2 Highlights first quarter 2018 Underlying positive volume development,...

Q1 2018Quarterly presentation

May 7th 2018

2

Highlights first quarter 2018

Underlying positive volume development, especially for high & heavy

Seasonally weak results with EBITDA adjusted of USD 128 million

New Corporate Visual Identity and name; Wallenius Wilhelmsen ASA

About USD 85 million in synergies confirmed

Ocean results impacted by rate reductions, reduced HMG volumes, increased bunker cost and currency movements

Landbased results down due to increased SG&A cost allocations

Agenda

Market and business outlook

Summary and Q&A

Business update

Financial performance

Business update

by Craig Jasienski

5

Underlying positive volume development offset by reduced contracted Hyundai Motor Group (HMG) volumes

0

5

10

15

20

25

30

35

0

10

5

20

15

%

20,4%

Q3’15

25,3%

Q2’15

27,9%

Q3’17Q2’17

26,1%

Q1’17

26,1%

Q4’17

26,0%25,2%

18,417,7

16,716,2

18,2

16,216,8

25,4%

22,6%

Q2’16

25,7%

Q4’16Q3’16

24,2%24,9%

Q4’15 Q1’16

-12%+2%

Q1’18

Million CBM

25,1%

Q1’15

24,0%

Q4’14

22,6%

Q3’14

18,719,419,5

15,5

18,2

15,2 15,9

18,0

Total prorated volumes Cargo mix

1) Prorated volume

2) Calculated based on unprorated volumes. Updated figures based on aligned cargo type definition and reporting across all Ocean units

• Underlying positive volume development offset by

reduced contracted HMG volumes (up 2% y-o-y)

• Increased volumes in all foundation trades excluding

AS-NA (especially USWC) where EUKOR had the

largest reduction in contracted HMG volumes

• Adjusted for reduced contracted HMG volumes (0.5

million CBM) volumes were up about 5% y-o-y

• Volumes down 12% q-o-q, driven by seasonality and

contracted reduction in HMG volumes

• Continued positive development for cargo mix with a

high & heavy share of 27.9% in the first quarter, up

from 26.1% in the previous quarter and 24.2% in

same period last year

Business Update Financial Performance Market and Business Outlook Summary and Q&A

Volume and cargo mix development1

Million CBM and %Comments

6

Seasonal reduction in volumes across most foundation trades

WWL trade routes

EUKOR trade routes

ARC trade routes

Atlantic Shuttle

Q1 ’18

+18% -1%

3.42.9

Q4 ’17Q1 ’17

3.4

EU/NA – Oceania1)

1.7

+3%

2.0

-10%

Q1 ’18Q1 ’17 Q4 ’17

1.8

EU - ASIA

+6%

Q1 ’18Q4 ’17

-14%

3.42.92.8

Q1 ’17

Asia - EU

3.3

Q1 ’17

-13%

2.9

Q4 ’17

2.7

Q1 ’18

+7%

Asia - NA

3.3

Q4 ’17 Q1 ’18

-26%

2.4

Q1 ’17

3.3

-26%

Asia - SAWC

Q1 ’17 Q4 ’17

1.21.2

Q1 ’18

+1%+22%

1.0

Note: Prorated volumes on operational trade basis in CBM

1) Including Cape sailings (South Africa)


7

Positive development in net freight/CBM despite rate reductions due to changes in trade and cargo mix

80

85

90

95

100

105

Q2’14 Q3’17Q2’17Q1’16Q1’15 Q3’16Q4’15Q2’15Q4’14Q3’14 Q4’17Q2’16 Q1’17Q3’15 Q1’18Q4’16

-4% +1%

Note: Unprorated volumes excluding US flag operations

1) Net freight = Revenues adjusted for surcharge elements such as BAF, SRC, THC etc

• Net freight / CBM increased by about 1% in the first

quarter compared with the previous quarter due to

changes in trade and cargo mix

• The largest volume reduction in the quarter was seen

in EU-AS and AS-USWC which are trades with

relatively low net freight / CBM

• Furthermore, the increased high & heavy share also

had a positive impact on net freight / CBM

• On the other side, rate reductions from contract

renewals in 2017 impacted the net freight index

negatively with about USD 5 million compared to

last quarter and about USD 15 million compared to

the same period last year


Net freight / CBM development1)

Indexed to 100 per Q2 2014Comments

8

133 vessels operated at the end of the first quarter

128 127 126 126 124132 134 130 127

-6

966128

5125

Q1’17 Q3’17

-5

132

-2

Q3’16

125

Q2’16

128

Q2’17Q4’16

132

Q1’16

128

-4

Q4’17

132

Q1’18

133

Short Term T/C In/OutGroup Fleet

• Wallenius Wilhelmsen operated a core fleet of 124

vessels (851K CEU), representing around 20% of the

global fleet in the first quarter

• In addition, the group continued to leverage the short-

term market and controlled a fleet of 133 vessels at the

end of the first quarter, but with less capacity deployed

during the seasonally slow January & February months

• The group retains flexibility to redeliver two vessels and

up to 19 vessels by 2022 (excl. short term time charters)

• Four Post-Panamax vessels are expected to enter

service in 2018 and 2019, with remaining installments

of about USD 160 million


Fleet development

# of vesselsComments

9

USD 86 million of the USD 120 million synergy target confirmed

000

86

Q4 2017 Q1 2018

120

Q3 2018 Q4 2018Q2 2018

76

Q3 2017

55

Q2 2017

65

Ship Management

Fleet Optimization

SG&A savings

Procurement Realized savings (annualized)

• At the end of the first quarter USD 86 million of the

USD 120 million synergy target was confirmed

• During the quarter about USD 10 million was added

to confirmed synergies, through a combination of

fleet optimization, procurement and SG&A savings

• The annualized run rate for synergies were about

USD 80 million, up from about USD 65 million in the

previous quarter

• The remaining part of the confirmed synergies will

gradually come into effect over the next 3-6 months


Confirmed and realized synergy development

USD millionComments

10

Several key developments for landbased in the first quarter

• VSA results negatively impacted by high auto inventoriescausing congestion and reduced operational efficiencies

• Melbourne terminal fully operational from January 2018

• Keen Transport being integrated into WW Solutions

• WW Solutions credit facility to be increased with USD 150million to allow for further non-organic growth

• Investment and M&A pipeline remains interesting


Key highlights for landbased

11

New Corporate Visual Identity and name; Wallenius Wilhelmsen ASA


raig Jasienski

Financial performance

by Rebekka Herlofsen

13

Consolidated results – first quarter 2018

Q1 2018 Q4 2017ProformaQ1 20171)

Total income 968 1 036 890

Operating expenses (843) (859) (747)

EBITDA 125 177 143

EBITDA adjusted 128 182 143

Depreciation (84) (84) (74)

EBIT 41 93 60

Net financial items (5) (32) n/a

Profit before tax 35 61 n/a

Tax income/(expense) (25) 27 n/a

Profit for the period 10 86 n/a

EPS 0.02 0.20 n/a

• Seasonally weak results with EBITDA adjusted of

USD 128 million, down 10% y-o-y and 30% q-o-q

primarily driven by the ocean segment

• Extraordinary costs of USD 3 million related to the

restructuring and realization of synergies

• Net financial items in the first quarter were

positively impacted by USD 30 million in unrealized

interest rate derivatives and USD 3 million related to

movements in currency

• Tax expense of USD 25 million in the first quarter,

primarily related to changes in deferred tax of USD

12 million and provision for withholding tax on

dividends from EUKOR of USD 7 million

Financial Performance Market and Business Outlook Summary and Q&ABusiness update

1) Comparable numbers are pro forma numbers as if the transaction had taken place back in time

Comments

14

Increased bunker prices and unfavourable currency movements continue to impact the results negatively

409

372

329320

335

240

260

280

300

320

340

360

380

400

420

Q3’17Q2’17 Q4’17 Q1 ’18Q1’17

• BAF in customer contracts are the main mechanism to manage risk

• The business is exposed to changes in the bunker price since BAF iscalculated based on the average price over a historical period, and thenfixed during an application period, creating a “3 month” lag effect (negativeif prices move up and positive if prices move down)

• Bunker prices continue to move upwards, and results in the first quarterwere negatively impacted with more than USD 10 million

91

9494

98100

80

85

90

95

100

Q1 2018Q3’17 Q4’17Q1’17 Q2’17

• Main currency for both revenues and costs in the operating entities areUSD with the majority of revenues in USD while 20% of the operatingcosts in non-USD currencies (mainly EUR, KRW, JPY, SEK and CNY)

• The USD has weakened lately causing a negative currency effect of aboutUSD 15 million y-o-y and about USD 5 million q-o-q

• As a main principle, financial instruments are not used to hedge currencyrisk in the operating entities (assessment done when USD is historicallystrong vs. other currencies)

Bunker price development

USD / ton HFO

Currency development1

Basket of currencies Indexed to 100 per Q1 2017

1) Value weighted basket of currencies consisting of USD/EUR, USD/KRW, USD/JPY, USD/CNY and USD/SEK

USD / Basket of currencies


15

750

832775798

719748

Q1 ’18Q4 ’17Q3 ’17

+4% -10%

Q2 ’17Q4’16 Q1’17

1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time

145 162157

17

109

123135

Q4’16

170

Q1’17 Q2’17

38

162

Q3 ’17

111

-10%

Q4 ’17

160

-31%

Q1 ’18

2

Extraordinary items

Total income • Total income was USD 750 million, up 4% y-o-y due to

increased volumes and fuel compensation

• EBITDA adjusted of USD 111 million, down 10% y-o-y driven by

• Reduced contracted HMG volumes

• Strike at HMG production facilities

• Unfavourable currency movements (USD 15 million)

• Net bunker price increase (USD 10 million)

• Rate reductions (USD 15 million)

• Armacup stink bug challenges (USD 3 million)

• The negative impact from above factors was partly offset by

underlying strong volume development, increased high & heavy

share and realization of synergies

• EBITDA in the first quarter was down 31% compared to the previous

quarter driven by the same factors as described above as well as

seasonally lower volumes


Total income and EBITDA ocean segment1, 2

USD millionComments

EBITDA

Ocean segment – first quarter 2018

16

• Total income was USD 232, up 25% y-o-y primarily

driven by Keen Transport and the Melbourne terminal

• EBITDA was USD 20 million, down 10% y-o-y

• Increased SG&A allocations of USD 3 million

• Congestions and reduced operational efficiencies

at certain locations in North America (VSA) due

to high inventories

• The negative impact of above factors was partly offset

by improved contribution from the terminals

(Melbourne terminal fully operational from Jan 2018)

and Keen transport (acquired 7 December 2017)

Landbased segment – first quarter 2018


221

232

203

192186184

Q3 ’17

-5

Q1’17Q4’16

199

+6%+25%

Q2 ’17

219

-2

Q4 ’17 Q1 ’18

26 2923

-5

202221

1

27

Q2 ’17 Q3 ’17

24

1

Q4’16

-16%

Q4 ’17

24

-10%

Q1’17 Q1 ’18

Extraordinary items

1) Adjusted for extraordinary items; 2) Comparable numbers are pro forma numbers as if the transaction had taken place back in time

Total income

Total income and EBITDA landbased segment1, 2

USD millionComments

EBITDA

17

Cash flow and liquidity development – first quarter 2018

649

5125

796

Liquidity Q4 2017

Other Liquidity Q1 2018

Net financing

Taxes paid

Interest and

financial derivatives

EBITDA CAPEX Dividend to non

controlling interests

Proceeds from sale of assets

-17-42 -6

-148

-50

-14

• CAPEX of USD 50 million includes

• Purchase option for leased vessel (USD 26 million)

• Instalments for new buildings (USD 8 million)

• Dry docking costs (USD 9 million)

• Net financing of USD 148 million includes

• Regular instalments of USD ~100 million

• Early down payment of ship loans USD ~90 million

(refinanced in early April 2018)

• Drawdown on credit facilities (USD 37 million)

• EUKOR distributed USD 70 million in dividend in the

first quarter with USD 14 million to non controlling

interest


CommentsCash flow and liquidity development

USD million

18

Balance sheet review – first quarter 2018

Non current assets

1.4

7.7

Current assets

6.3

1.6

Equity

Non current liabilities 3.3

Current liabilities

2.8

7.7

• Total assets of USD 7.7 billion with equity ratio of

36.3%, up from 35.8% last quarter

• Net interest bearing debt of USD 2.98 billion,

stable compared with last quarter

• Continued high cash and liquidity position with

USD 649 million in cash and about USD 250

million in undrawn credit facilities

• Early repayment of vessel loans of about USD 90

million during the quarter (refinanced in early

April)


Assets

Unaudited Balance Sheet 31.03.2018

USD billionComments

Equity & Liabilities

19

The legal and financial restructuring project finalized on time

New legal and funding structure

• Legal and funding structure consistent with

business unit structure in place

• New USD 445 million term loan and credit facility

to refinance vessel loans maturing in 2018 and

2019 and a revolving credit facility in WW Ocean

• Other loan agreements in WW Ocean have been

harmonized with the new facility agreement

• Main covenants for WW Ocean following the

refinancing process is minimum cash, positive

working capital and loan to value clauses

Comments


20

Debt maturity profile following financial and legal restructuring project


Debt maturity profile after refinancing (per 4 April 2018)

USD million

2021->

2.035

2020

657

2019

644

2018

383

Credit facilities (drawn) Bonds Installments (bank loans and financial leases)Balloons (bank loans and financial leases)

21

Market and business outlook

by Craig Jasienski

22

Auto sales in the first quarter were up 2.6% y-o-y

Global light vehicle (LV) sales per quarter Global LV sales per main sales region1)

Source: IHS Markit1) Size of circle indicates auto sales in Q1 2018

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17%

South America

Oceania

West Europe

CAGR ’17-22

Q1’18 vs Q1’17

Middle East/Africa

Indian Subcontinent

Central Europe

Japan/Korea

Greater China

East Europe

North America

ASEAN

EUR AMME AFAPAC

Q1 2016

22.822.3

Q2 2016

Q4 2017

23.6

Q2 2018

Q1 2018

23.9

Q3 2017

23.022.924.8

23.322.4

Q1 2017

Q3 2016

25.0

Q2 2017

Q4 2016

22.7

-4.0%

Q4 2018

+2.6%

25.6

Q3 2018

• Sales in North America developed sideways y-o-y, but down 8.1% q-o-q (seasonality)

• Sales in Western Europe down 0.8% y-o-y, but was up about 16.8% q-o-q (seasonality)

• The Chinese market started the year with sales up 4.6% y-o-y (down 16% q-o-q) which

was considered positive given that the temporarily tax cut ended in December 2017

• Continued positive development for the Russian and Brazilian markets


23

Auto exports in the first quarter were up 4.6% y-o-y

Global LV export per quarter Global LV export per main sales region1)

Source: IHS Markit1) Size of circle indicates auto export in Q1 2018

-18% -16% -14% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16%

3%

25%

-2%

26%

6%

5%

4%

1%

-1%

2%

7%

0%

Middle East/Africa

South America

Greater China

Europe

CAGR ’17-22

North America

South Asia

Japan

Q1’18 vs Q1’17

South Korea

AMEUR APAC ME AF

Q3 2018

3.9

Q2 2018

3.84.0

Q1 2018

3.7

Q1 2017

3.6

Q3 2017

3.7

Q4 2016

3.8

Q4 2017

3.8

Q2 2017

+4.6%

Q4 2018

-0.2%

3.7

Q2 2016

Q3 2016

Q1 2016

3.73.5 3.7

• Exports from NA increased 6.8% y-o-y and 4.2% q-o-q driven by Mexico

• European exports were up 6.7% y-o-y and 0.6% q-o-q.

• Japanese exports in the first quarter were up 6.5% y-o-y and down 2.4% q-o-q.

• Exports out of South Korea were up 0.9% y-o-y and 1.9% q-o-q.

• Chinese exports were up 34.6% y-o-y due to new export facilities, but flat q-o-q.


24

Construction machinery markets remain very solid globally

Global construction and rolling mining equipment exports1

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%60k

30k

50k

40k

01/1807/1407/13 07/1507/12 01/13 01/14 01/1501/12 07/16 07/17

Machinery exports(Quantity avg. L12M)

01/16 01/17

Machinery exports(Growth L3M y-o-y %)

Machinery export growth (L3M)Machinery exports (L12M)

Source: 1 IHS Markit | Global construction and rolling mining equipment exports (equipment valued >20 kUSD ) (Avg. units L12M (last 12 months) and L3M (last 3 months) y-o-y %). Data cut-off: 01.2018 2 Caterpillar Inc., Volvo AB, Komatsu Ltd., US Bureau of the Census, AIA, Dodge Data & Analytics, Eurostat, IHS Markit, CECE, AiGroup, NAB

Comments

• Global construction trade continues to strengthen, with imports

to North America and Oceania accelerating in the first quarter

• OEM majors continued to report broad-based geographical

demand in the first quarter, with strong order development

across regions

• US construction spending edged up from the previous quarter,

leading non-residential indicators continued to signal expansion,

and housing starts and permits increased again

• EU construction output declined in the period, but the Eurozone

construction PMI expanded and construction confidence

strengthened in the quarter

• Australian construction activity continued expanding at multi-

year highs, with robust growth in the commercial and

engineering sectors


25

Global non-rolling mining machinery exports1 Mining machinery sales2

• Key commodity prices softened in the first quarter, but have since strengthened

• OEMs concluded another quarter of strong y-o-y sales growth in their mining divisions

with broad-based geographical demand, and order development remains positive.

+2%

3 6333 392

4 291

Q317

4 208

Q118Q116

2 957

+26%

Q217Q416Q316 Q417

2 655 2 722

Q117Q216

3 688

3 180

0

400

800

1 200

1 600

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

01/14 07/1607/13 07/15 01/1707/1401/1307/1201/12 01/1801/16

Machinery exports(Quantity avg. L12M)

07/1701/15

Machinery exports(Growth L3M y-o-y %)

Machinery export growth (L3M)Machinery exports (L12M)

Atlas Copco AB Caterpillar Inc.Sandvik AB

Mining equipment demand continues to recover on replacement needs

Source: 1 IHS Markit | Global non-rolling mining equipment exports (equipment valued >20 kUSD ) (Avg. units L12M (last 12 months) and L3M (last 3 months) y-o-y %). Data cut-off: 01.2018 2 Caterpillar Inc., Sandvik AB, Atlas Copco AB | Revenue, mining equipment divisions (MUSD (fixed rate) and growth y-o-y/q-o-q %)


26

Signs of a tightening supply-demand balance. However market rates remain distressed reflecting poorer earnings

Car Carrier Fleet Orderbook1

# vessels equal or above 4000 CEU

Open Vessels and Time Charter Rates2

# of vessels and USD/day

Sources: 1Clarksons Platou, Sea-web, 2Clarksons Platou, 3Vessels equal or above 4000 CEU

10

12

2 1

29

4

14

Orderbook 20212018 2019 2020

Deliveries Confirmed Orders

• The current orderbook stands at 25 vessels3 with the delivery of five car carriers

• Current market rates do not justify new ordering activity

• Time charter rates continue to rise and no open 6000+ CEU vessels reported

• Still some overcapacity in the market, although somewhat improved

0

5

10

15

20

25

30

35

40

45

50

0

5 000

10 000

15 000

20 000

25 000

Number of vessels

6/1

7

2/1

7

10

/16

9/1

6

12

/16

5/1

6

8/1

6

4/1

6

4/1

7

3/1

6

5/1

7

3/1

7

8/1

7

6/1

6

10

/17

11

/17

1/1

7

12

/17

7/1

6

9/1

7

11

/16

7/1

7

1/1

8

7/1

5

3/1

5

8/1

5

1/1

61

2/1

5

6/1

5

2/1

6

11

/15

10

/15

9/1

5

5/1

54

/15

3/1

8

TC Rate, $/day

2/1

8

5000 CEU6500 CEU 2000-5999 CEU 6000+ CEU


Summary and outlook

by Craig Jasienski

28

Outlook

Tonnage supply/demand balance continues to improve

Positive volume development, especially for high & heavy

Lower HMG volumes will continue to impact results

However, market rates remain at a depressed level


Increased realization of synergies will positively impact results

Thank you!

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