SALT Company Presentation - Scorpio Bulkers€¦ · statement, the preliminary prospectus...

SALT Company PresentationNovember 2018

2

This presentation includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities

Litigation Reform Act of 1995. These forward-looking statements reflect Scorpio Tanker Inc.’s (“Scorpio’s”) current views with respect to future

events and financial performance. The words “believe,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “plan,” “potential,” “may,” “should,”

“expect” and similar expressions identify forward-looking statements. The forward-looking statements in this presentation are based upon

various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of

historical operating trends, data contained in Scorpio’s records and other data available from third parties. Although Scorpio believes that these

assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies

which are difficult or impossible to predict and are beyond Scorpio’s control, Scorpio cannot assure you that it will achieve or accomplish these

expectations, beliefs, projections or future financial performance.

Risks and uncertainties include, but are not limited to, the failure of counterparties to fully perform their contracts with Scorpio, the strength of

world economies and currencies, general market conditions, including fluctuations in charter hire rates and vessel values, changes in demand

in the tanker vessel markets, changes in Scorpio’s operating expenses, including bunker prices, drydocking and insurance costs, the fuel

efficiency of our vessels, the market for Scorpio's vessels, availability of financing and refinancing, charter counterparty performance, ability to

obtain financing and comply with covenants in such financing arrangements, changes in governmental and environmental rules and

regulations or actions taken by regulatory authorities including those that may limit the commercial useful lives of tankers, potential liability from

pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or

political events, and other important factors described from time to time in the reports Scorpio files with, or furnishes to, the Securities and

Exchange Commission, or the Commission, and the New York Stock Exchange, or NYSE. Scorpio undertakes no obligation to update or revise

any forward-looking statements. These forward-looking statements are not guarantees of Scorpio's future performance, and actual results and

future developments may vary materially from those projected in the forward-looking statements.

Scorpio has filed a registration statement (including a base prospectus) and has or expects to file a preliminary prospectus supplement with the

Commission for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration

statement, the preliminary prospectus supplement and other documents Scorpio files with, or furnishes to, the SEC for more complete

information about Scorpio and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov.

Disclaimer and Forward-looking Statements

3

This presentation describes time charter equivalent revenue, or TCE revenue, which is not a measure prepared in accordance with IFRS (i.e. a

"Non-IFRS" measure). TCE revenue is presented here because we believe that it provide investors with a means of evaluating and

understanding how the Company's management evaluates the Company's operating performance. This Non-IFRS measure should not be

considered in isolation from, as substitute for, or superior to financial measures prepared in accordance with IFRS.

The Company believes that the presentation of TCE revenue is useful to investors because it facilitates the comparability and the evaluation of

companies in the Company’s industry. In addition, the Company believes that TCE revenue is useful in evaluating its operating performance

compared to that of other companies in the Company’s industry. The Company’s definition of TCE revenue may not be the same as reported

by other companies in the shipping industry or other industries. For a reconciliation of TCE revenue to revenue, please see the Appendix of

this presentation.

Unless otherwise indicated, information contained in this presentation concerning Scorpio’s industry and the market in which it operates,

including its general expectations about its industry, market position, market opportunity and market size, is based on data from various

sources including internal data and estimates as well as third party sources widely available to the public such as independent industry

publications, government publications, reports by market research firms or other published independent sources. Internal data and estimates

are based upon this information as well as information obtained from trade and business organizations and other contacts in the markets in

which Scorpio operates and management’s understanding of industry conditions. This information, data and estimates involve a number of

assumptions and limitations, are subject to risks and uncertainties, and are subject to change based on various factors, including those

discussed above. You are cautioned not to give undue weight to such information, data and estimates. While Scorpio believes the market and

industry information included in this presentation to be generally reliable, it has not independently verified any third-party information or verified

that more recent information is not available.

Disclaimer and Forward-looking Statements (Cont’d)

4

Company Overview

Scorpio Bulkers Inc. (“Scorpio” or the “Company”) owns

or finance leases 56 mid-size dry bulk ‘Eco’ vessels with

an average age of 2.8 years and time charters in one

vessel

The Company is headquartered in Monaco, and

incorporated in the Marshall Islands, making it exempt

from U.S. income tax. It has NYSE-compliant governance

and transparency for foreign private issuers and is listed

under the ticker “SALT”

• Scorpio’s strategy is to:

✓ Capture rising freight rates by employing

vessels in the spot market through the Scorpio

Ultramax and Scorpio Kamsarmax pools

✓ Operate vessels efficiently and minimize costs

✓ Maintain a strong balance sheet through

conservative leverage

✓ Take advantage of market dislocation to

opportunistically grow fleet

Key Facts Fleet Profile

Low Average Age vs. Worldwide Fleet

37

19

1

0

5

10

15

20

25

30

35

40

Ultramax Kamsarmax

Owned TC/BB Chartered-In

3.02.5

8.79.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Handymax/Ultramax Panamax/Kamsarmax

Scorpio Bulkers Active Fleet

5

Q3-18 Corporate & Financial Highlights

Q3-2018

Financial Results

• GAAP Net Loss of $0.4 million / Loss per Share of $0.01 (includes $0.03 write off of deferred

financing costs)

• EBITDA of $28.8 million and cash flow from operations of $18.6 million

TCE

• Ultramax TCE of $11,342 per day in Q3 2018

• Ultramax TCE of $13,388 per day booked to date in Q4 2018

• Kamsarmax TCE of $13,649 per day in Q3 2018

• Kamsarmax TCE of $14,382 per day booked to date in Q4 2018

Time Charter Coverage• Entered into Time Charters for 11 vessels at rates of $14,500-$16,500 per day that end in 1H

2019

Liquidity • Liquidity position as of October 19, 2018 is $58.0 million in cash

Investment in Scorpio

Tankers Inc.

• Invested $100 million in a related party, Scorpio Tankers Inc. for approximately 54.1 million

shares, or 10.9% of Scorpio Tankers’ issued and outstanding shares

Stock Buyback Program

• From July 1, 2018 to October 12, 2018, approximately 1.8 million shares were purchased by

the Company under its share buyback program at a cost of $6.80 per share or $11.9 million in

aggregate

• The Board of Directors approved a new share repurchase plan for the repurchase of up to

$50.0m of our common stock, replacing the existing authorization

Dividend• The Company’s Board of Directors declared a dividend of $0.02 per share on October 19,

2018

Fleet Development

• Agreed letters of intent to cover the purchase and installation of exhaust gas cleaning systems

between Q2 2019 and Q3 2020 for a cost of between $1.5m - $2.2m per vessel

• Anticipated to be financed at 60-70%

6

Company Highlights

Youngest ECO dry bulk

fleet ✓• High specification best-in-class fleet built at top tier yards with an

average age of 2.8 years, youngest fleet among publicly listed peers

Attractive Mid Size Segment ✓• Mid size cargo segment provides access to all types of dry cargo

commodities and is strongly correlated to global GDP growth

Positive & Increasing

EBITDA ✓• $28.8 million in EBITDA in Q3-18, the ninth consecutive quarter of

positive EBITDA

Significant trading liquidity

and inside ownership ✓• One of the most liquid dry bulk stocks with around $3.2 million in

trading liquidity per day and insider ownership of 23%

Well prepared for BWT

system & IMO 2020

regulation ✓

• Fleet is already fully fitted with BWT systems, no capex required

• Scrubbers manage the downside risk of rising fuel prices and provide

upside potential through fuel savings

7

Youngest & Largest Fleet in Mid Size Segment

Source: Clarksons Research Services, November 2018

6.1

10.3

10.6

8.2

11.9

8.9

8.6

2.8

29

32

32

39

49

47

72

56

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0

Golden Ocean

Genco

Diana

Safe Bulkers

Navios MH

Eagle Bulk

Star Bulk

Scorpio Bulkers

# of Owned Handymax/Panamax Vessels Average Age

8

$3,462

$5,335

$7,083 $7,238

$8,230 $8,360

$8,949

$10,886

$9,757

$11,569$11,342

$13,388

$3,331

$5,263

$6,349

$7,401

$9,164 $9,273 $9,211

$12,605$12,881 $12,823

$13,649

$14,382

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18*

Ultramax Kamsarmax

Strengthening Market for Our Vessels

• The increase in reported TCE earnings over the last 2 plus years has defied traditional seasonality, and

in the face of record newbuild deliveries, shows the underlying strength of the market and supports the

continuation of the market recovery

February 10, 2016 BDI hits 40 year

low

* Projections based on 47% and 49% of the days for the Ultramax fleet and Kamsarmax fleet, respectively as of October 17, 2018.

9

-$28.8

-$19.2-$16.2

-$14.1

-$9.9

-$6.2-$4.1

$6.0$2.9

$10.6 $9.4

-$35

-$30

-$25

-$20

-$15

-$10

-$5

$0

$5

$10

$15

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

-$27.5

-$18.1

-$4.5-$2.1 -$1.7

$2.5$5.3

$13.5$11.1

$21.1$18.6

-$35

-$25

-$15

-$5

$5

$15

$25

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

$17.0

$5.8$1.3 $0.9

$7.3$10.8 $12.4

$22.9$20.4

$28.1 $28.8

-$30

-$20

-$10

$0

$10

$20

$30

$40

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

$10.2

$17.4

$23.9$26.8

$34.7$37.7 $38.6

$51.1$54.3

$60.6$62.5

$0

$10

$20

$30

$40

$50

$60

$70

Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Financial Performance Summary

Operating Cash Flow EBIT

Revenue EBITDA

Figures in $USD millions.

10

Industry Regulations

IMO 2020 Ballast Water Treatment Systems

• The International Maritime Organization (IMO) will

require shipowners to reduce sulfur emissions from 3.5%

currently to 0.5% in January 2020.

How will Scorpio comply?

• The Company plans to install scrubbers on substantially

all of its owned and finance leased Kamsarmax and

Ultramax vessels between the second quarter of 2019

and the third quarter of 2020.

• The majority of scrubber installations will be coordinated

with scheduled dry docks, reducing the amount of off hire

• The Scrubbers and their installation will cost between

$1.5 - $2.2 million per vessel, and the Company

anticipates that between 60-70% of these costs will be

financed.

• The IMO will require all vessels trading internationally to a

install ballast water treatment system (BWTS) after

September 8, 2019 at their next special survey.

• BWT systems for small to mid size modern vessels cost at

least $450,000 per vessel based on $350,000 for

equipment and $100,000 for installation

• Retrofits on older, existing ships, can be more challenging

and expensive as they were designed without the space in

the engine room to fit BWTS (see how large these BWTS

are)

How will Scorpio comply?

All 56 of SALT’s vessels are fitted

with BWT systems

No $25.2 million in future capex

(56 vessels x $450,000)

Scrubbers manage the downside

risk of rising fuel prices and provide

upside potential through fuel savings

11

Market Update

12

Fleet Focused on Mid Size Asset Classes

Vessel Type DWT CargoesVessels

Owned

Handysize/Handymax < 50,000 Grain, minor bulks -

Supramax/Ultramax 50,000-64,000Iron ore, coal,

grain, minor bulks37

Panamax/Kamsarmax 65,000-100,000

Iron ore, coal,

grain, bauxite,

steel

19

Capesize >100,000 Iron ore, coal -

Major Bulks: Iron ore, coal, grain

Minor Bulks: Bauxite, steel, scrap, cement, salt, forest products, potash/fertilizer, coke, nickel ore, sugar.

13

Cargo Carriage 2018 YTD

Kamsarmax Ultramax

Coal Products,

33%

Grain Products,

15%Minerals, 15%

Steel products,

11%

Ore, 7%

Fertiliser, 5% Others, 14%

Coal Products,

59%

Grain Products,

18%

Ore, 14%

Minerals, 7%Others, 1%

14

Industry Highlights

✓ Ton mile demand driven by solid global GDP growth and industrial production

✓ Baltic supramax and panamax average earnings indices near their 10 year

average

✓ Strong spot rates and future expectations push assets values for young vessels

above newbuilds

✓ Growing dry bulk demand in major and minor bulks

✓ Limited fleet growth in mid size segments due to lowest newbuilding orders since

2007 (excluding 2016)

✓ Potential for accelerated scrapping given age profile and upcoming

environmental regulations

15

Synchronized Global Industrial Production


-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Aug-13 Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 Jul-16 Dec-16 May-17 Oct-17 Mar-18 Aug-18

Atlantic Region Industrial Production Growth Pacific Region Industrial Production Growth

16

Vessel Earnings Continue to Increase


Baltic Supramax Avg of 6 T/C Routes

Baltic Panamax Avg of 4 T/C Routes

$0

$4,000

$8,000

$12,000

$16,000

$20,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$/D

ay

Baltic Supramax Avg Earnings FY-16 FY-17 FY-18 10 Yr Avg

$0

$4,000

$8,000

$12,000

$16,000

$20,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

$/d

ay

Baltic Panamax Average Earnings FY-16 FY-17 FY-18 10 Yr Avg

17

Asset Values Continue to Recover, With Room to Grow

Figures in million US$, Source: Clarksons Research Services, November 2018

Resale defined as to be delivered before year end of less than one year old.

$1 million increase in asset values equates to $0.74 in NAV per share

Current rates and future expectations push

values for young vessels above newbuilds

$15

$20

$25

$30

$35

$40

Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Nov-17 May-18 Nov-18

Ultramax NB Kamsarmax NB Ultramax Resale Kamsarmax Resale

18

Dry Bulk Demand Continues Steady Growth


2009-2018

Iron Ore Coal Grains Minor Bulks Total Dry Bulk

CAGR 5.9% 5.2% 5.8% 4.4% 5.1%

Mill

ion

To

nn

es

3,401

3,821

4,068

4,302

4,558

4,816 4,812 4,892

5,095 5,215

5,338

-

1,000

2,000

3,000

4,000

5,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f)

Iron Ore Coal Grain Minor Bulk

19

7.3%

2.0%

4.9%

1.5% 1.6% 0.0%3.1% 2.9% 3.2%

-0.5%

9.4%

5.2%

12.2%

5.3% 4.9%6.1%

1.3%2.5%

7.8%

11.3%

6.4%

2.9%

-6.5%

0.2%

5.3%4.0%

2.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

2011 2012 2013 2014 2015 2016 2017 2018e 2019e

Minor Bulks Grains Coal

Steady Growth in Our Primary Cargoes


20

Limited Fleet Growth in Mid Size Segments


Ultramax scrapping assumptions: 2018 (0.8m dwt), 2019 (1.6m dwt), 2020 (3.5m dwt)

Kamsarmax scrapping assumption: 2018 (0.5m dwt), 2019 (1 m dwt), 2020 (5.7m dwt)

2.8%

2.8%1.2%

-10.0%

0.0%

10.0%

20.0%

30.0%

-10

0

10

20

30

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

(mill

ion

DW

T)

Demolition Delivery Net Fleet Growth

ForecastActual

21

302512

1,064778

921

157

267

369

677

706 432

221

569

881

1,741

1,4841,353

378

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2001-2003 2004-2006 2007-2009 2010-2012 2013-2015 2016-2018 YTD

# o

f V

esse

ls

Newbuilding Orders in Three Year Periods

Historically Low Ordering

Newbuilding orders for ultramax

and kamsarmax vessels, aside

from 2016, are at their lowest

level since 2001


46 101 155 112 120

280

567

361

136

455

214109

504

278139

1985 53

28

91

14899 101

169

358

238

81

473

152

81

202

150

805

14175

74

192

303

211 221

449

925

599

217

928

366

190

706

428

219

24

226

128

0

200

400

600

800

1,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

# o

f V

esse

ls

Newbuilding Orders Per Year: 2001-2018 YTDHandymax/Ultramax Panamax/Kamsarmax

22

Historically Low Scrapping

Scrapping 2018 YTD is at its lowest levels since 2007


2

1129

9

47

104

8072 71

96

67

14

2 17

32

9

76

127

74

69

96

117

49

2

4

28

61

18

123

231

154

141

167

213

116

16

0

50

100

150

200

250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

# o

f V

essels

Handymax Scrapping Panamax Scrapping

23

Scrapping Expected to Increase

Newbuild Deliveries (2018-2020) vs. Vessels over 20 Years Old in 2020

• Potential acceleration in scrapping of older tonnage due to:

• Age: significant number of vessels 20 years and older in the mid size segment

• Environmental regulations: Increasing fuel costs of older less fuel efficient tonnage (IMO 2020)

and cap ex for BWT systems

There will be more potential scrapping candidates (20+ years) than newbuildings

delivered between 2018-2020


253300

-387

-298

-500

-400

-300

-200

-100

0

100

200

300

400

Ultramax Kamsarmax

# o

f V

essels

NB Deliveries (2018-2020) 20 Years & Older in 2020

24

Appendix

25

Time Charter-Out Agreements

Vessel TypeEarliest Redelivery

DateRate/day

SBI Jaguar Ultramax April 2019 $16,000

SBI Ursa Ultramax June 2019 $15,000

SBI Tango Ultramax March 2019 $14,500

SBI Cougar Ultramax March 2019 $16,500

SBI Echo Ultramax February 2019 $15,000

SBI Thalia Ultramax April 2019 $16,500

SBI Lyra Ultramax April 2019 $16,500

SBI Bolero Kamsarmax May 2019 $14,500

SBI Macarena Kamsarmax February 2019 $16,000

SBI Samba Kamsarmax April 2019 $15,500

SBI Mazurka Kamsarmax May 2019 $16,000

26

Fleet List

Owned & Finance Leased Vessels

# Name Year Yard Type # Name Year Yard Type

1 SBI Athena 2015 Chengxi Ultramax 29 SBI Aries 2015 Chengxi Ultramax

2 SBI Bravo 2015 Nacks Ultramax 30 SBI Gemini 2015 Chengxi Ultramax

3 SBI Antares 2015 Nacks Ultramax 31 SBI Taurus 2015 Chengxi Ultramax

4 SBI Leo 2015 Dacks Ultramax 32 SBI Pisces 2016 Chengxi Ultramax

5 SBI Echo 2015 Imabari Ultramax 33 SBI Virgo 2017 Chengxi Ultramax

6 SBI Lyra 2015 Dacks Ultramax 34 SBI Libra 2017 Chengxi Ultramax

7 SBI Subaru 2015 Dacks Ultramax 35 SBI Puma 2014 Chengxi Ultramax

8 SBI Tango 2015 Imabari Ultramax 36 SBI Jaguar 2014 Chengxi Ultramax

9 SBI Maia 2015 Nacks Ultramax 37 SBI Cougar 2015 Chengxi Ultramax

10 SBI Hydra 2015 Nacks Ultramax 38 SBI Samba 2015 Imabari Kamsarmax

11 SBI Pegasus 2015 Chengxi Ultramax 39 SBI Rumba 2015 Imabari Kamsarmax

12 SBI Ursa 2015 Dacks Ultramax 40 SBI Capoeira 2015 Hudong Kamsarmax

13 SBI Thalia 2015 Chengxi Ultramax 41 SBI Electra 2015 Yangzijiang Kamsarmax

14 SBI Cronos 2015 Imabari Ultramax 42 SBI Carioca 2015 Hudong Kamsarmax

15 SBI Orion 2015 Chengxi Ultramax 43 SBI Conga 2015 Hudong Kamsarmax

16 SBI Achilles 2016 Imabari Ultramax 44 SBI Flamenco 2015 Hudong Kamsarmax

17 SBI Hercules 2016 Chengxi Ultramax 45 SBI Bolero 2015 Hudong Kamsarmax

18 SBI Perseus 2016 Chengxi Ultramax 46 SBI Sousta 2016 Yangzijiang Kamsarmax

19 SBI Hermes 2016 Imabari Ultramax 47 SBI Rock 2016 Yangzijiang Kamsarmax

20 SBI Zeus 2016 Mitsui Ultramax 48 SBI Lambada 2016 Hudong Kamsarmax

21 SBI Hera 2016 Mitsui Ultramax 49 SBI Reggae 2016 Hudong Kamsarmax

22 SBI Hyperion 2016 Nacks Ultramax 50 SBI Zumba 2016 Hudong Kamsarmax

23 SBI Tethys 2016 Nacks Ultramax 51 SBI Macarena 2016 Hudong Kamsarmax

24 SBI Phoebe 2016 Chengxi Ultramax 52 SBI Parapara 2017 Hudong Kamsarmax

25 SBI Poseidon 2016 Mitsui Ultramax 53 SBI Mazurka 2017 Hudong Kamsarmax

26 SBI Apollo 2016 Mitsui Ultramax 54 SBI Swing 2017 Hudong Kamsarmax

27 SBI Samson 2017 Chengxi Ultramax 55 SBI Jive 2017 Hudong Kamsarmax

28 SBI Phoenix 2017 Chengxi Ultramax 56 SBI Lynx 2018 Yangzijiang Kamsarmax

SALT Company Presentation - Scorpio Bulkers€¦ · statement, the preliminary prospectus...

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