Download - Mercator Lines (Singapore) Q2 FY2013 results presentation

Mercator Lines (Singapore) Ltd.

Q2 FY 2013 Results Quarter Ended September 30th 2012

Stock Code : EE6

DISCLAIMER

This document contains forward-looking statements which are statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project” and similar terms and phrases. These statements include, among others, statements regarding our business strategy, future financial position and results, and plans and objectives of our management for future operations. Forward-looking statements are, by their nature subject to substantial risks and uncertainties, and investors should not unduly rely on such statements. Forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Although we believe the assumptions upon which these forward looking statements are based are reasonable, any of these assumptions could prove to be inaccurate, and the forward-looking statements based on these assumptions could be incorrect. Actual results may differ materially from information contained in the forward-looking statements as a result of a number of factors, many of which are beyond our control . Because of these factors, we caution you not to place undue reliance on any of our forward-looking statements. Forward-looking statements we make represent our judgment on the dates such statements are made. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Save as required by all applicable laws of applicable jurisdictions, including the SFA, and/or rules of the SGX-ST, we assume no obligation to update any information contained in this document or to publicly release the results of any revisions to any forward-looking statements to reflect events or circumstances that occur, or that we become aware of, after the date of this document.

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PRESENTATION OUTLINE

Financial Overview

Market Review & Outlook

Company Overview


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Financial Overview

FINANCIAL HIGHLIGHTS FOR 6 MONTHS (H1 FY 2013)

REVENUE

Revenue at USD 66.2 mn. as compared to USD 73.2 mn. for the corresponding period previous year

EBITDA

EBITDA at USD 22.8 mn. as compared to USD 28.3 mn. for the corresponding period previous year

INCOME

Net Profit at USD 0.1 mn. as compared to USD 5.6 mn. for the corresponding period previous year

OPERATING DAYS

Operating days at 2918 days as compared to 3120 days for the corresponding period previous year

Note : FY /Financial Year refers to the period from April 1st of current year to March 31st of following year * Market rate refers to average of Time charter routes for Panamax vessels

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• Decrease in Revenue and Income mainly due to weaker spot markets as compared to previous year

• Decrease in operating days due to idle days and higher scheduled drydock days as compared to previous year

FINANCIAL HIGHLIGHTS FOR THE QUARTER (Q2 FY 2013)

REVENUE

Revenue at USD 35.5 mn. as compared to USD 35.1 mn. for the corresponding period previous year

EBITDA

EBITDA at USD 11.2 mn. as compared to USD 13.0 mn. for the corresponding period previous year

INCOME

Net loss at USD 0.3 mn. as compared to net profit of USD 1.7 mn. for the corresponding period previous year

OPERATING DAYS

Operating days at 1476 days as compared to 1558 days for the corresponding period previous year

Note : FY /Financial Year refers to the period from April 1st of current year to March 31st of following year * Market rate refers to average of Time charter routes for Panamax vessels

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BALANCE SHEET HIGHLIGHTS

(In USD millions) 30 September 2012 30 September 2011

Cash & Bank Balances 6.4 17.1

Trade Receivables 35.6 15.0

Vessel, Property & Equipment

597.0 626.8

Debt 236.2 264.2

Trade Payables 18.3 15.7

Shareholders Equity 391.7 391.5

Debt Equity Ratio 0.60 0.67

Market Price per share SGD 0.115* SGD 0.139

EPS (for 6 months ended) SGD 0.0002 SGD 0.006

* As on

November 07, 2012

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HISTORICAL FINANCIAL PERFORMANCE

Particulars FY 09 FY 10 FY 11 FY 2012 H1 FY 2013

Revenue (USD mn.) 186.1 144.5 155.4 147.7 66.2

Net Profit (USD mn.) 75.8 40.7 31.1 7.8 0.1

Approx. TCE Earnings per day (in USD)

41,886 27,605 26,049 20,600 16,665

Average Baltic Panamax TC rate (USD per day)

36,954 24,251 21,276 12,290 8,087

Operating days 4,084 4,703 5,543 6,259 2,918

Total Fixed Assets (USD mn.) 485.4 570.8 644.5 610.5 597.0

Revenue and earnings have been impacted due to continued weak markets However, the Company has continued to perform much better than the industry average rate Significant increase attained in fixed assets and operating days over the past years

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Q2 FY 2013

H1 FY 2013

Owned vessels

Number of vessels 14 14

Operating days 1219 2374

Fleet utilization % 96.8% 97.8%

Chartered-in vessels*




Total fleet




TCE Revenue (US$’000s) 23,670 48,628

Approx. TCE Rate (US$ per day) 16,035 16,665

HIGH CAPACITY UTILIZATION

“TCE Revenue” is defined as revenue less voyage expenses before taking into account revenues attributable to vessels chartered- in on a voyage charter. * Company charters in vessels on short term basis to maximize earnings out of its contract.

FLEET UTILISATION

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We have consistently outperformed the market in terms of Time Charter Equivalent (TCE) Earnings per day

PER DAY TCE EARNINGS Vs. MARKET

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

FY 2009 FY 2010 FY 2011 FY 2012 H1 FY 2013

Our TCE per day rate

Average Baltic Panamax TC rate

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Next 6 months FY

2013

FY 2014 FY 2015 FY 2016 FY 2017

13.1

25.5

32.9

24.5 21.8

US$113.5

Our debt repayment commitments are structured to ensure cash flow flexibility

Note: 1. Schedule as on 30th Sep 2012. 2. Amounts in US$ Millions

3. Repayment schedule is towards principal payments only. 4. Excludes working capital revolver loan facility

FAVOURABLE LONG TERM DEBT REPAYMENTS

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Market review and outlook

AVERAGE FREIGHT RATES COMPARISON

Per day USD rate in thousands

The freight have fallen down considerably over the past 3 years

Source: RS Platou

13

33.7

26.6

23.1

16.9

13.4 14.5 14.5

7.9 8.7 8.4 9.8

6.9

0

5

10

15

20

25

30

35

40

Capesize Panamax Supramax Handysize

YTD CY 2010

YTD CY 2011

YTD CY 2012

Note : CY /Calendar Year refers to the period from Jan 1st to Dec 31st

DRY BULK SHIPS - INVESTMENT ANALYSIS

14 Note : CY /Calendar Year refers to the period from Jan 1st to Dec 31st

Current 1 yr T/C USD/Day

Required T/C USD/Day

Actual in % of req. T/C rate

PROMPT RESALE

Capesize 170,000 13,750 19,000 72%

Panamax 75,000 7,800 14,000 56%

Supramax 53,000 8,500 13,000 65%

5 YEARS SECOND-HAND

Capesize 170,000 13,750 17,000 81%

Panamax 75,000 7,800 12,000 65%

Supramax 53,000 8,500 12,000 71%

Assumptions: 25 years lifetime. Interest: 10 % on total investment, and normal operating/docking expenses. Based on end of Oct 12 values and demoliton prices. Operating days: 355

Source: Fearnleys

Majority of the delivery expected in CY 2012 and CY 2013. The orderbook remains substantially high which will keep the freight rates low in the coming years.

Source: Clarksons

Type of vessel Order book ( million DWT)

% of fleet Delivery expected in CY 2012 (million DWT)

Delivery expected in CY 2013 (million DWT)

Delivery expected in CY 2014 and beyond (million DWT)

Capesize 58.0 21.2% 22.4 24.6 11.0

Panamax 55.8 32.6% 21.4 24.4 10.1

Handymax 26.1 19.1% 11.5 11.3 3.3

Handysize 14.6 17.0% 5.6 6.5 2.5

Total Fleet 154.5 23.1% 60.9 66.8 26.8

DRY BULK ORDERBOOK AND DELIVERY SCHEDULE

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DRY BULK DEMOLITION ACTIVITY

High demolition activity seen in CY 2011 and YTD CY 2012

Source: Clarksons

10.6

6.4

23.1 25

0

5

10

15

20

25

30

CY 2009 CY 2010 CY 2011 YTD Sep 2012

million dwt

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WORLD ECONOMY

Global Economy expected to grow at a lower rate in CY 2012

1.8 1.5

-0.7

9.3

7.1

3.8

2.1

-0.5

2.3

7.8

5.8

3.3

2.0

0.2

1.3

8.4

6.7

3.6

-2

0

2

4

6

8

10

USA Euro Zone Japan China India World

CY 2011

CY 2012 (f)

CY 2013 (f)

% change

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Source: RS Platou, IMF

INDUSTRIA L PRODUCTION & DRY BULK GROWTH

Growth rate in percentage

Source: RS Platou

Industrial production growth expected reduce even for China in the coming years which will also impact the dry bulk trade

Dry Bulk Trade Growth correlated with GDP Growth

Industrial production growth rate estimates

-5

0

5

10

15

USA Euro Area Japan China Other Asia

CY 2011

CY 2012 (f)

CY 2013 (f)

18

-4

-2

0

2

4

6

8

10

12

14

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (est)

2012 (f)

Dry Bulk Trade

World Output

Source: IMF, Clarksons

The overall outlook for the dry bulk shipping market seems to be negative mainly due to oversupply of vessels

MARKET OUTLOOK

POSITIVE NEGATIVE

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Company overview

COMPANY HIGHLIGHTS

History of repeat contracts from major customers

Blue Chip customer base including Tata Power, Arcelor Mittal Group, Cosco

Group, Cargill, Bunge Group and Noble Group

The Board and Key Management Personnel have collective industry

experience of close to 200 years.

Having an experienced in-house technical management company ensures

delivery of high quality service to our customers together with minimising

operating expenses and maximising operational efficiencies

Management

Customer base

Fleet Young modern fleet with average age much below the industry average.

Largest fleet owner of geared Panamaxes amongst Indian-Owned

Shipping Companies.

Providing customized logistics solutions from the load port to the point of

usage to its customers in India.

The Company has won high revenue generating contracts due to this

unique advantage

Logistics solutions

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OUR STRATEGY

We specialize in transportation of commodities such as coal and iron ore to and from countries like India,

Indonesia, China, Brazil and Australia.

Ship voyage

Barges

Trucks/ Rail

Trucks/ Rail

Port loading with geared vessels

Port unloading with geared vessels

Jetty Stock Yard User Site

Mercator Singapore Mercator India

Coal

Together with Mercator India, we provide logistics solutions from load port to point of usage to customers.

Deploy substantial portion of fleet capacity on long term contracts to hedge against freight volatility

Focus on high growth markets in dry bulk trade from China and India

To provide customized end-to-end logistics solutions

Leverage strong and continued relationships with existing customers

Coal

Coal

Iron Ore Iron Ore

Iron Ore

Brazil

Australia

South Korea China

India

Iron Ore

VLOC routes

Indonesia

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Emerging India Awards 2010

Singapore Corporate Awards

Winning awards for consecutive four years in a row in the Singapore Corporate Awards emphasizes our drive towards better corporate governance and Investor Relations


Mercator Lines (Singapore) Limited

Global Entrepreneur of the Year 2010

Best Annual Report in 2009 (Silver) and 2010 (Bronze) amongst Singapore listed

companies

Ranked 20th by NUS and Business Times amongst the public listed companies in

Governance and Transparency Index

(GTI)

Ranked 16th in overall performance amongst

listed shipping companies in the world – Marine Money June/July

2012

Best Investor Relations 2011

(Silver)

DEMONSTRATING STRONG CORPORATE GOVERNANCE

TRACKRECORD

AWARDS & RECOGNITION

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Best Investor Relations 2012

(Gold)

RELATIONSHIPS

One of the largest iron ore companies in the world

The largest steel manufacturing company of the world

One of the largest power companies in India. Owned by one of the most reputed business groups in the world.

One of the largest commodity trading companies

OUR KEY RELATIONSHIPS

OUR OTHER RELATIONSHIPS

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http://www.tnb.com.my/

S. No Owned Vessels Type Capacity (DWT)

Year Built Shipyard

1 Sri Prem Aparna

Geared Panamax 73,461 2001 Tsuneishi Corp, Japan

2 Sri Prem Varsha Geared Kamsarmax 82,379 2006 Tsuneishi Corp, Japan

3 Sri Prem Veena Gearless Kamsarmax 82,459 2007 Tsuneishi Corp, Japan

4 Gaurav Prem Gearless Panamax 73,901 2005 Jiangnan, China

5 Garv Prem Gearless Panamax 74,444 2006 Hudong, China

6 Sri Prem Vidya Geared Kamsarmax 82,273 2006 Tsuneishi Corp, Japan

7 Garima Prem Gearless Panamax 74,456 2007 Hudong, China

8 Kesari Prem Geared Panamax 69,186 1997 Tsuneishi Corp, Japan

9 Kanak Prem Geared Panamax 69,221 1997 Hashihama, Japan

10 Sri Prem Putli Very Large Ore Carrier (VLOC) 279,022 1993* Yiulian Yard, China

11 Kalpana Prem Geared Panamax 73,652 2000 Imabari Shipyard, Japan

12 Gauri Prem Gearless Panamax 74,405 2007 Hudong, China

13 Aarti prem Gearless Panamax 69,087 1994 Imabari Shipyard, Japan

14 Chitra Prem Gearless Post Panamax 93,270 2010 New Yangzijiang, China

S. No

Chartered vessels Type Capacity (DWT)

Year Built Country Built

1 Chaitali Prem Gearless Post Panamax 93,312 2009 China

2 Chanchal Prem Gearless Post Panamax 93,259 2009 China

3 Maria Laura Prem Gearless Post Panamax 91,945 2010 South Korea

Panamax Fleet Average Age: 8 years

FLEET PROFILE

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Converted from VLCC to VLOC in 2009 in Yiulian

FLEET DIVERSIFICATION

PANAMAXES

(GEARLESS)

POST PANAMAXES

KAMSARMAXES KAMSARMAXES VLOC PANAMAXES

(GEARED)

• Gaurav Prem

• Garv Prem

• Aarti Prem

• Chitra Prem

• Chaitali Prem

• Chanchal Prem

• Maria Laura Prem

• Sri Prem Veena

• Sri Prem Varsha (Geared)

• Sri Prem Vidya (Geared)

• Sri Prem Aparna

• Kesari Prem

• Kanak Prem

• Kalpana Prem

• Sri Prem Putli

CONTRACT OF AFFREIGHTMENT

Geared Panamaxes/Geared

Kamsarmaxes

CONSECUTIVE VOYAGE CONTRACT

VLOC

TIME CHARTER

Geared and Gearless Panamaxes/Geared

Kamsarmax/Post Panamaxes

BAREBOAT CHARTER

Gearless Panamax

DIVERSIFICATION BY TYPE

DIVERSIFICATION BY DEPLOYMENT DIVERSIFICATION BY CARGO

37%

8%

45%

4%

Iron ore

Others

Coal

Grain

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RISK MANAGEMENT

FREIGHT VOLATILITY

- Long term contracts

- Forward Freight Agreements (FFAs)

BUNKER FUEL COSTS

- Appropriate Bunker adjustment factor in all long term voyage charter contracts

-Bunker cost borne by Charterer in Time Charter Contracts

CURRENCY RISKS

- Income, expenses and reporting in USD

ACCIDENT RISKS

- Insured all vessels adequately

- Successful implementation of safety management practices

Multifaceted risk management

strategy attuned to market volatility

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MOVING FORWARD

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Reduction in liabilities by engaging the owners of long term chartered in

vessels

Sale of one of its Vessel

Achieving increased operational efficiency by closely monitoring

operating costs

• The Company expects the next 12-18 months to remain challenging for drybulk shipping industry.

• The Company is exploring various options to shore up its liquidity to overcome the current downfall in the industry which are as under:

Better positioned to overcome the current industry challenges

GLOSSARY

•Under a COA, the ship owner provides capacity to transport a certain amount of cargo within a specified period from one place to a destination designated by the customer. Typically all of the ship`s operating, voyage**and capital expenses are borne by the ship owner. Freight rate normally is agreed on a per cargo ton basis.

Contract of Affreightment (COA)

•Under a CV, the ship owner provides capacity to transport a certain amount of cargo on a consecutive voyage basis over the contract period. Similar to a COA, all of the ship`s operating, voyage**and capital expenses are borne by the ship owner and freight rate is agreed on a per cargo ton basis.

Consecutive Voyage Contract (CV)

•A charter under which a vessel is chartered to a customer for a fixed period of time at a rate that is typically fixed. The charterer pays all voyage costs. The owner of the vessel receives monthly or semi monthly charter payments on a per day basis and is typically responsible for providing the crew and paying all vessel operating expenses(including maintenance, repair and docking) and capital costs of the vessel.

Time Charter (TC)

•A standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company`s performance despite changes in the mix of chartered types.

Time Charter Equivalent (TCE)

**Voyage Expenses - Expenses incurred due to a Vessel`s travelling from a loading port to a discharging port, such as fuel(bunker) costs, port expenses, agents` fees, canal dues, extra war risk insurance and commissions.

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Thank You

Investor Relations Contact: Ms. Cindy Vaithilingam

Tel: +65 6220 9320 Email : [email protected]