d'Amico International Shipping S.A.

Good afternoon. This is the CORFCO conference operator. Welcome and thank you for joining the D'Amico International Shipping first quarter 2020 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Paolo D'Amico, CEO of D'Amico International Shipping. Please go ahead, sir.

Hello to everybody. Good afternoon. Thank you for being with us. Let's go straight to the executive summary. Net result, DAS posted a profit of $1.5 million on Q1 of 2020 versus a loss of $5.5 last year. As an adjusted net result, so excluding non-recurring and non-cash items from both periods, the today result for Q1 2020 is $6.3 million against $4.4 of last year. Therefore, excluding such non-recurring effect, this result on Q1 2020 would have been $10.7 million higher than the same quarter of last year. And I would like to remember that this represents for DIS the second consecutive profitable quarter. On time charter equivalent, DIS daily spot rate was 17,354. in Q1 2020 against $13,583 in Q1 2019. This is equivalent of a 27.8%, or if you prefer, $3,700 improvement one year over the other one. If we blend it with the coverage of the time charter contracts, This achieved a total daily average rate of $16,391 in Q1-20 against $14,057 in Q1-19. On leverage reduction, the net financial position, excluding IFRS-16 to fleet market value ratio, was 63.3% at the end of March 2020, versus 64% at the end of 2019, and compared to 72.9% at the end of 2018. As far as the market, at the beginning of the year, the general outlook was rather positive, as we All expected. I mean, we had strong fundamentals with the implementation of IMO 2020. We had a very limited supply growth. And so we had the sanction element, which was still on. The scrubber installation, keeping ship in shipyards. So all this was providing a very good support to the market. But unfortunately, coronavirus, as you prefer, started in China, and we had a very strong destruction, let's say, of demand and refining production in that who is still today the largest crude importing nation. So, the product tanker the rates suffered out of that. What really made change? The old scenario has been in early March, the struggle between, let's call it the war between Saudi Arabia and Russia on the price. And Saudi Arabia, as you know very well, flooded the market and put both crude oil and products in a very steep contangle, which has been pushing a lot of traders basically to heavily charter in ships for storage. And this, of course, clearly has been beneficial to the market. By the end of the second quarter, as much as 21% of the tanker fleet will be tied up in floating storage today. So this is just a few, say, starting shots. I leave the word now to Carlos for the financials and then I will be back on the market in a more detailed way.

Yes, hello to everyone. Good afternoon. So we start, as usual, with a quick look at our fleet, which hasn't changed that much from 31st of December. One last vessel, it was a PC in short term that we delivered to owners. We now have 45 and a half vessels, of which just over 50% own. And we are an MR player, 32.5 MRs, with an almost equal number of LL1s and HENDIs, so six LL1s and seven HENDIs controlled. As you all know well, we have implemented an important new building program. We started ordering vessels in 2012 and started taking delivery in 2014 for 22 new buildings, of which 10 MRs and 6 LL1s. This program has terminated when we move on to the following page. We see here that we invested overall $755 million in direct payments to yards, plus new building supervision costs, cost of first supply, extras. The overall investment figure was actually much higher than that to take delivery of these 22 new buildings. And from 2020, we are much lighter in terms of CapEx commitments. We have another 10 million this year only related to maintenance of vessels, in particular dry docks and installation of water ballast tank systems. And this figure drops further in 2021 and 22 to around $4 million each year. We are not only lighter in terms of CAPEX, we are also lighter in terms of depth repayments. We finished reimbursing this facility we had within TESA, which was in addition to the traditional bank financing, and which started off at $75 million. We finished reimbursing it in December last year. And therefore, from 2020, our repayments on our loans, excluding balloons, falls from $52.5 million to $35.5 million. We have some balloons to refinance in 2020. They are around $22 million and they are linked to the vessels we own in JV with Glencore to Glenda International Shipping. And so we are working on that. One balloon has to be refinanced in September and three in December. Next year, we also have some refinancing commitments on balloons, on facilities which mature in the beginning of the year. And we will also soon be starting to look at that with $21 million to be refinanced next year. So it's not a big number this year or next year. 2022 is more important in terms of refinancing for us. Going on to the following page, our purchase options, we have now, out of the nine, say, in these five years that we closed, six are already exercisable by May this year, so now, and all of them are in the money or theoretically in the money. So this is a situation we are closely monitoring because this could be a potential use of funds for us to leverage our balance sheet to reap and lower costs of financing at the right moment. So depending also, of course, on the market developments and on the cash generation over the course of the next few months. Going on to the next page, we see that our coverage, we have a closer look at our coverage, and on a quarterly basis, we see how we actually have been quite covered in Q1 this year at 65%, at an average of around 59%. Coverage falls throughout the year, but we are still quite covered also in Q2. at an average rate of around 16.2. And for Q3, we are just over 50% covered at an average rate of 16.4. And then that drops further to 42% at an average rate of 16.6 in Q4 2020. But I think we are quite happy with this coverage, although the market is extremely strong right now, as you will see later in the presentation. There is also a lot of uncertainty regarding how long these very strong markets can last. And so if we were to experience a softening, we will be able to rely on this coverage to to protect our cash flow. Also a positive is that the percentage of ecovessels in our fleet increases over the next few years as we dispose of some of the vessels that we intend to sell and that we have classified as health for sale, some of our older vessels. Going on to the following page, we look at the fleet evolution. The fleet decreases slightly over the next few years as we deliver some of our shorter term PCN vessels and as we sell some of these older vessels that we already have declared we intend to sell. Our post-exposure nonetheless increases over the forecast period because as per previous slide, our coverage falls quite sharply in 2021 and in 2022. We know we have the sensitivity for every $1,000 per day change and $3,000 per day change to receive relevant earnings. For 2020, the $1,000 per day sensitivity is $5 million, which rises to around $10 million in 2021. A closer look at the costs, we have also worked on the costs, not only on the top line, and we achieved some savings last year relative to Q118 Q-120 is even lower than Q-119 in terms of daily operating costs for our own vessels. And they're both vessels on the GNA front. We also achieved some savings. The savings have been driven on the operating costs front, have been linked to technological development, the use of condition-based maintenance, which allows us to better assess when to replace spare parts, reducing downtime of hires but also increasing the average lifespan of spare parts. It has been linked also to the strong dollar since we also have, although most of our operating costs are in dollar, we do also have costs which are in other currencies. and therefore we have benefited in this respect from the stronger dollar. And even more so applies to the GNA where 75% of our costs are in currencies which are different from the U.S. dollar. So the strong U.S. dollar there definitely helped us as well as the reorganization of some of our activities which allowed us to obtain some savings. Of course, in Q1 2020, there are some additional savings which are linked to the COVID outbreak, which we didn't plan on, but it did affect, of course, our traveling and entertainment budgets with some significant savings in that respect. Going on to the next page. Net financial position to feed market value improved from 64% to 63%, so it's a marginal improvement since December 19, but if we look at the ratio at December 18, it was at around 73%, so we're talking about a 10% improvement in the ratio, and that is quite significant. It is the result of the stronger markets which helped us to generate cash in the last two quarters. It is the result of the increase in the vessel values and of course it is also the result of the capital increase that we pursued last year. Also important to note that we have now one vessel which is completely debt-free, the Cerro de Guanzú. We paid the balloon on this vessel in March, just at the end of the month, and now the vessel is completely debt-free. That's an older handy-sized vessel in our fleet, which is classified as health for sale. We also have another vessel in our feed, which is debt-free, and which we just announced the sale of, which is the Glenda Meredith, which we sold for around $19 million. And so the JV is on 50% by us, so generating around $9 million in cash for us. Going on to the following page. the financial results. Q1 2020, bottom line, $1.5 million, but excluding non-recurring items, it is $6.3 million, so that's a much better figure. There were a number of non-recurring items in Q1 2020. mostly linked to market-to-market of interest rate swaps, which are not deemed hedges, which had a negative effect of around $2 million in our results, but also asset impairments and results on disposal of assets, which had an impact of around another $2.2 million, and also the impact of IFRS 16, which was negative by around $0.4 million. Overall, if we look, therefore, at the non-recurring results of 2020 and 2019, we see an improvement of $10.7 million, which is quite significant, and also a very significant improvement in terms of EBITDA, which rose by 47% relative to the first quarter of last year, to $33 million. Going on to the following page, we have a closer look at the daily average results of our vessels, and we see that the spot PC equivalent rate was of 17.3, which is good, and by historical standards is in line more or less with the results we achieved in 2419. We had a quarter which was quite a lot of volatility within Q1. We had a very strong start to the quarter, but we also had some weakness around mid-February, and then rates recovered in the last part of the quarter as the Chinese economy started coming out from the coronavirus lockdown. And the big surge in rates that we have seen has actually occurred only in April. So that didn't impact the Q1 results. Also important to note that the Q1 result was impacted by a non-recurring adjustment of 0.9 million. related to voyages performed last year. So if we exclude that and we look only at the results of the voyages performed this year, we are closer to 18,000 because it had an impact of $600 per day on the spot voyages. Overall, the blended results, including the DC coverage, had an average rate of around 59, was of around 16,400. which is also a good result and higher than Q419. I leave it to Paolo now for the market section.