HALF-YEAR REPORT 2008 26 August 2008. 2Half-year report 2008 DIFFICULT MARKET CONDITIONS & HIGH OIL...
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Transcript of HALF-YEAR REPORT 2008 26 August 2008. 2Half-year report 2008 DIFFICULT MARKET CONDITIONS & HIGH OIL...
HALF-YEAR REPORT 2008
26 August 2008
26 August 20082 Half-year report 2008
DIFFICULT MARKET CONDITIONS& HIGH OIL PRICES
• Half-year profit impacted by:• Difficult market conditions• High oil prices• Restructurering costs
• H1 Revenue growth of 4% to DKK 4.2 bill.
• H1 EBITDA reduced by 28% to DKK 434 mill.
• H1 Pre-tax profit reduced by 62% to DKK 68 mill.
• H1 free cash flow of DKK 333 mill.
• Activities are being adjusted to the change in market conditions
Pre-tax profit, H1
0
50
100
150
200
2006 2007 2008
DK
K m
ill.
EBITDA, H1
0
100
200
300
400
500
600
700
2006 2007 2008
DK
K m
ill.
26 August 20083 Half-year report 2008
BACKGROUND FOR CHANGE IN PROFIT EXPECTATIONANNOUNCED 14 AUGUST
• Increasingly difficult market conditions:• Lower market growth than expected leading to overcapacity and more competitive pressure in certain markets• Largest impact on east-west freight flows in Baltic area and Irish-Continental market• Large increase in haulage costs from rise in fuel costs• About 50% of the profit adjustment can be attributed to the change in market conditions
• Higher bunker cost:• Total bunker cost for 2008 set to rise by DKK 400 mill.• Overall high level of coverage for freight activities, less coverage for passenger activities• Approx. a third of profit adjustment due to expected increase in bunker cost
• Restructuring costs:• Increase in restructuring costs for improvement plan for DFDS Seaways• Additional one-off costs related to adjustment of activities to change in market conditions may occur
26 August 20084 Half-year report 2008
BUSINESS AREA PERFORMANCE
Figures in DKK million
• Ro-Ro Shipping: Stable performance on North Sea, downturn on east-west Baltic routes. Increase in tonnage costs (60)
• Container Shipping: Good performance in industrial logistics and chartering, downturn for lo-lo North Sea and Ireland-Continent corridor
• Passenger Shipping: Performance impacted by non-comparable items: Restructuring costs (-28), charter income in 2007 (-16) and change in cost periodization (-20) (Total effect: -64). Higher bunker cost explains remaining deviation
• Terminal Services: Progress for 3rd party volumes, lower volumes from own network, profit improvement plan ongoing in Immingham
• Trailer Services: Good performance except for Belgian operator impacted by rise in haulage costs, lower volumes from automotive industry and management change
EBITDA per business area, H1
-100
0
100
200
300
400
500
Ro-RoShipping
ContainerShipping
PassengerShipping
TerminalServices
TrailerServices
DK
K m
ill.
2007 2008
-60
-20
-83
-1 -7
FINANCIALS H1 2008
Christian Merrild, CFO
5
26 August 20086 Half-year report 2008
HIGHER COST LEVEL ERODES MARGINS
DKK mill. Q2 2007 Q2 2008Change
08/07 H1 2007 H1 2008Change
08/07
Revenue 2.104 2.209 5% 3.984 4.153 4%Revenue growth, % 13,2 5,0 15,5 4,2
Operating profit before depreciation (EBITDA) 396 294 -26% 600 434 -28%EBITDA-margin, % 18,8 13,3 15,1 10,5
Profit on disposal of assets 0 30 -2 30
Operating profit (EBIT) 251 180 -28% 297 177 -40%EBIT-margin, % 11,9 8,1 7,5 4,3
Financing, net -57 -54 -116 -108
Pre-tax profit 194 126 -35% 181 68 -62%
26 August 20087 Half-year report 2008
Q2 PER BUSINESS AREA
DKK mill. Q2 2007 Q2 2008 Change, % Comments
RevenueDFDS Group 2.104 2.209 5,0
Ro-Ro Shipping 904 997 10,3 Volumes down 2%, rate level slightly up, increase in BAF Container Shipping 394 441 11,9 Increase in industrial volumes, increase in BAF Passenger Shipping 517 503 -2,7 Adjusted for ship charter on a level, pax down 2% Terminal Services 174 169 -2,9 Lower internal volumes Trailer Services 250 262 4,8 Prices & surcharges up, consignments down 2%
Q2 2007 Q2 2008Change,
DKK mill.EBITDADFDS Group 396 294 -102
Ro-Ro Shipping 243 211 -32 Increase in cost for chartered tonnage, lower capacity utilization Container Shipping 40 29 -11 Downturn for Irish/Continent market, haulage costs Passenger Shipping 99 55 -44 Restructurering costs (28), periodization, bunker cost increase Terminal Services 3 1 -2 Lower volumes, cost for improvement plan Trailer Services 18 10 -8 Downturn for Belgian operator
26 August 20088 Half-year report 2008
H1 EBITDA MARGIN DEVELOPMENT
• Adjusted for rise in bunker surcharge, revenue for H1 2008 was on a level with H1 2007
• Bunker: Net increase in bunker cost decreases margin by 0.9% point
• Charter: Capacity expansion using chartered tonnage decreases margin by 0.9% point
• Haulage: Rise in cost for door-to-door transport decreases margin by 0.7% point
• Staff: Restructuring costs concerning organizational changes decreases margin by 0.9% point
H1: EBITDA margin development,adjusted for increase in bunker surcharge
0,9
0,4
0,9
0,7
0,9
0,5
10,9
15,1
10
11
12
13
14
15
16
Mar
gin 2
007
Bunke
r
Main
tena
nce
Charte
r
Haulag
eSta
ff
Oth
er
Mar
gin 2
008
%
26 August 20089 Half-year report 2008
CASH FLOW & INVESTMENTS
• Free cash flow of DKK 333 mill. for H1 2008
• Net investments of DKK 104 mill. include sale of Tramp with proceeds of DKK 156 mill. and profit of DKK 22 mill.
• Extension of three ro-ro ships planned for 2009 increases investments in 2008 by DKK 170 mio. Total investment amounts to DKK 280 mill.
• Deposit paid for two ro-ro ships to be delivered beginning of 2009
Cash flow & investments
-200
0
200
400
600
800
Cash f low fromoperations
Net investments Free cash f lowD
KK
mill
.
H1 2007 H1 2008
26 August 200810 Half-year report 2008
CONTINUED SOLID FINANCIAL PLATFORM
• Net interest bearing debt reduced by 14% to DKK 3.68 bill. from end of H1 2007
• Net interest bearing debt reduced by 4% to DKK 3.68 bill. from end of 2007
• Equity ratio rose to 38% from end of H1 2007 and on a level with end of 2007
Debt and Equity Ratio
0
1
2
3
4
5
H1 2007 FY 2007 H2 2008
DK
K b
ill.
32
33
34
35
36
37
38
39
%
Net interest bearing debt Equity ratio, %
26 August 200811 Half-year report 2008
OIL PRICE & EXCHANGE RATES
• Oil price peaked at a rise of 55% in early July – rise down to 28% end of August
• Full year rise in bunker cost of approx. DKK 400 mill. with a direct profit impact of approx. DKK 80 mill.
• Impact on all business units, most severe on passenger routes
• Recovery of further oil price increase may prove difficult
• Exchange rate coverage, H2 2008: 90% USD, 45% GBP, 90% NOK & 45% SEK
Oil price development
400
450
500
550
600
650
700
750
800
850
02/0
1/20
08
18/0
1/20
08
05/0
2/20
08
21/0
2/20
08
10/0
3/20
08
28/0
3/20
08
15/0
4/20
08
01/0
5/20
08
20/0
5/20
08
06/0
6/20
08
24/0
6/20
08
10/0
7/20
08
28/0
7/20
08
13/0
8/20
08
US
D t
on
s
LFSO 180
GOING FORWARD 2008
Niels Smedegaard, President and CEO
12
26 August 200813 Half-year report 200813
• Economic downturn now impacting certain of our key markets
• Turnaround of Baltic market area remains uncertain
• Passenger markets in Scandinavia are relatively stable, UK market expected to come under more pressure
• Irish market expected to remain difficult
• Lower growth will generate overcapacity in some market areas and create more price pressure
• North Sea freight market expected to remain stable
• Overall prospect is a period of differentiated and low growth and a challenging economic outlook
MARKET SITUATION 2008EXPECTATIONS FOR 2ND HALF
26 August 200814 Half-year report 200814
Tonnage
• Return of one ro-pax vessel and one container ship
• Charter out two ro-ro vessels• One passenger ship laid up
PLANNED ADJUSTMENTS OF ACTIVITIES
Reduction of capacity
• Ro-pax route Germany-Latvia reduced from two to one ship (Oct)
• Ro-ro route Sweden-Belgium reduced from four to three ships (Jul)
• Lo-lo routes Ireland-Continent reduced from five to four ships (Aug)
• Lay-up of passenger ship (Sep)
Sales
• Price adjustments• Drive sales of industrial logistics through
new sales organization Freight Sales Solutions
Cost reductions
• Renegotiation of certain rate agreements• Implementation of phase two of DFDS
Seaways’ profit improvement plan concerning productivity onboard
• Immingham profit improvement plan• Extension of sailing time for some routes• Overhead cost review and reductions
26 August 200815 Half-year report 2008
2008 PERFORMANCE EXPECTATIONSDFDS GROUP
• Revenue growth of approximately 2%, previously 3-5%
• EBITDA decrease of 15-20%, previously approximately on a level with 2007
• Total net investments of approximately DKK 400 mill., previously DKK 200 mill.
• Free cash flow expected to be approximately DKK 600 mill.
• Pre-tax profit of DKK 325-375 mill., previously approximately DKK 500 mill.
• The profit expectation is still subject to a higher degree of uncertainty than usual especially concerning market growth trends and oil price development
26 August 200816 Half-year report 2008
Observations:
• Industry-wide impact of change in market conditions and high oil price
• Effects may help drive necessary consolidation
• Industry players better positioned
• Transaction prices expected to decrease
16
Strategy: From Routes to Network:
1. Build sea-based European transport network
2. Integrate value-generating customer solutions for freight and passengers
3. Secure volumes
4. Maintain constant focus on operations
OUR STRATEGIC AGENDA IS SET
FROM ROUTES TO NETWORK
Q&A
Thank you for your attention!