Gaztransport&Tecnigaz Adr

and thank you for standing by. Welcome to today's GTG First Quarter 2020 Activity Update Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. I would like now to hand the conference over to your speaker today, Mr. Mark Astier, Chief Financial Officer. Please go ahead.

Thank you, Carol, and good evening to all of you. I hope you are all safe and in good health. We are pleased to host this call in our new configuration, which is everybody at home, but I hope technically everything will be okay and you can hear me properly. So I'll start off with the key highlights for this first quarter on page four of the presentation. So first of all, the consolidated revenues are at 102.5 million, which is an increase of 74% compared to the first quarter of last year, which is obviously a consequence of the buildup of our order book in the last couple of years. We received in the first three months four orders for LNG carriers and we have signed two new service contracts, services contracts. One with CMA CGM for in relation to the large, the ultra large container ships which are on order for LNG as a fuel. So we will be providing a full range of services to CMA, CGM for these ships. We've also signed a five-year service agreement with Accelerate Energy, a ship owner, for the maintenance and operation of nine FSRUs equipped with our NO96 technology. And this will include on-site technical assistance, inspection, maintenance, repairs, et cetera. As a reminder, we announced that already for our full year announcement, we acquired Marocca, a company in Iceland, which is an expert in smart shipping. Turning to page five, let's take a look at the order book at the end of March, which is still quite strong. It is now composed of 130 units for the core business. There have been four new orders which have been added to the order book, the four LNG carriers I just mentioned, and there have been seven deliveries in the quarter, five LNG carriers, one FLNG, and one FSRU. So the order book now is composed principally, of course, of LNG carriers, 112, six e-sane carriers, eight FSRUs, one FLNG, three onshore storage tanks, and three gravity-based systems, GBS. On the LNG as a fuel front, there has been no change in the order book, still 19 units with no new orders in the first quarter nor any deliveries. Now, perhaps I'll give you an update on the situation in relation with the epidemic, the coronavirus epidemic, which, as you know, started first in Asia, where GTT generates most of its revenues with the shipyards in Korea, principally, but also in China. And then the epidemic propagated in Western countries. the state of pandemic was announced on the 12th of March 2020. And clearly the risk, the main risk here is potential delays to the timetable or the milestones for the construction of vessels, which could lead to a shift of revenues from one period to the next, as we had already explained on the occasion of our four-year results. I guess, as of today, we have seen absolutely no delays in construction milestones. And clearly, the strengths of our revenues for the first quarter are also a reflection of that. Now, if you take a slightly kind of a longer-term view, of course, it's still a bit early to have a full view on the extent of the risks of this epidemic on the global economy. But there are pluses and minuses, I guess. Of course, there could be an impact on the overall demand for LNG, for liquefaction projects, and also for ship owners. And this could potentially result in delay, cancellation, or suspension of orders although again, as of today, we are not seeing any of that. I guess mitigating factors here are the fact that the energy market is mainly based on long-term prospects, long-term financing, long-term contracts. And the other, I guess, positive is that the situation is already improving in the Asian countries, which represent more than 60% of the imports of energy In particular, China has resumed now LNG imports. As far as the GTT is concerned, the company, we have 456 people, 60 of whom are based at the shipyards in South Korea and in China. And 39 employees are in our subsidiaries in Asia, Athens principally, and our sales office in Singapore and China. Of course, priority, it goes to the health and safety of our people and their families. And we have obviously followed this very closely from the beginning. We have made recommendations to employees abroad and also at head office, of course, in close correlation with the guidelines given by the French and local authorities. Currently, a large proportion of our workforce is working from home, as I indicated. This has been quite a success. Our emergency plan has operated very well. We have been able to move projects pretty much everybody within 24 to 48 hours, and everybody is working now from home, and the business is operating normally. Now, a look at the revenue numbers on page seven. So, as I mentioned, In my opening comments, revenues stand now at 102.5 million for the first quarter, up 74% from 58.9%. Now, if we look at the new bills, core business, you see that a lot of the growth, of course, the growth comes from this part of the business, in particular LNG carriers and ethane carriers with an increase of 88%. FSRUs, 80%. FLNG, these are one single, I'd say, single project, so they're coming towards the end. And you will recall we had the delivery this quarter. The rest is relatively less significant, although we can see that we are already beginning to accrue some revenues from the GBS, Gravity-Based Systems, which were ordered Last year, services on the other side, I suppose, makes not as good a performance. Of course, services are more impacted by short-term issues and in particular the epidemic. And what has been one part of the business in services which has suffered a bit is the inspection of tanks on ships in operation. And this is clearly linked to, of course, the difficulty for people to travel and to get to the ships. So that is the main reason for the decrease in services activities. Having said that, and as a conclusion, on page eight, we are confirming our 2020 outlook for revenues. so with a range between 375 and 405 million euros. On EBITDA, with a range between 235 million to 255 million, and also we are confirming our dividend policy, and we will be paying as expected, of course subject to the approval by the AGM, the balance of our dividend in June. So that's it for the formal presentation. I'll be, of course, happy to answer your questions. And I hand over to Carol for the modus operandi.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Once again, it's star one to ask a question. And the first question comes from the line of Jean-Luc Romain from CIC Market. Please ask your question.

Good afternoon and thank you for confirming your 2020 guidance. I read this morning that drilling has started on the North Dome to prepare the extension of the LNG production capacity of Qatar. Do you have any news regarding tendering process either of the LNG plants or more importantly for you, for the LNG carriers which will be associated to this very large capacity expansion?

Yes, thank you, Jean-Luc. Well, you know, Qatar has been a long-going story. In fact, fairly independently from the current situation with big announcements and then, you know, not so much happening. Yes, we have seen that the drilling has started, which is a positive factor. It shows that this is, you know, this is a serious project. So it's rather good news. And clearly, if, you know, this FID takes place, it's going to be also a source of potential orders over and above the orders we are already expecting on those projects which have received their FID in the last year or so.

If I may ask a follow-up, back in 2005, 2006, 2007, I don't remember exactly, your competitor almost received orders from Qatar for a part of its energy fleet. Do you expect competition from them this time?

I mean, we can't exclude, you can't exclude it, but I mean, considering the dynamic of the market and the situation of our technologies, I would have thought it would be rather unlikely that most could make a strong comeback on this occasion.

Okay, thank you.

Thank you. And the next question comes from the line of Kevin Rogers from Kepler Chevrolet. Please ask your question.

Yes, good afternoon. Thanks for taking the question. I hope that everyone is safe and going well. Just one question, please, because you confirmed the 2020 guidance, so that we're showing in the short term. I was just wondering what has been the impact on the commercial activities, meaning what's your, let's say, visibility and discussion with your clients for future order intake? in the coming months, what has been the impact of the current environment up to now, please, and what's your maybe expectation in terms of new contracts in the coming months, please?

Well, Kevin... Hi, Kevin. Well, first of all, you know we do not comment on short-term orders, but, I mean, obviously, I mean, commercial activity is continuing, even if people are not... you know, in a situation to travel as much as they would wish, but still commercial activity is still ongoing. There are a number of projects which are currently in discussion. I mean, Jean-Luc earlier on was mentioning Qatar, but there are others. And, yeah, things are progressing. I mean, of course, in the current environment, it's very difficult to say at which point and to what extent these projects these discussions will come to fruition. But again, for us, as we see it today, it's more a question of timing than anything else, of when rather than if.

Okay, thanks. And maybe one follow-up, which is also in the short term. Clearly, we have a significant impact from the COVID-19 situation on the demand. We have seen some cuts from OPEC in terms of production. We have also heard that there could be some LNG plants that could be stopped in the short term. So if that's the case, what would be the impact for you in terms of, especially on the cargo market, what would be the impact if some LNG capacities are stopped

Well, the impact on our core business should be negligible, I would have thought. There can be some impact on perhaps on LNG, on the uptake of LNG as a fuel because, as you rightly point out, you know, the price of oil has gone down dramatically and the products which are derived from oil like low sulfur, heavy fuel, et cetera, are obviously cheaper and the spread between that and the price of LNG is much reduced. Again, this is again more for us, as we see it, a question of timing. We believe strongly that despite this situation, the environmental considerations will remain and perhaps will be even stronger. And that will certainly be a support to this business. But, of course, we have to remain cautious in the current situation. I mean, it's something which is very new and affects everybody. So, you know, let's remain cautious.

Okay. Thanks a lot. Thanks a lot.

Thank you. And the next question comes from the line of from Anaconda.

Please ask your question. Hello. Good afternoon. How are you? Just one quick one. On the French employees, have you been putting anybody on furlough or are you still employing all of the team?

We are employing the whole team. We have nobody in partial unemployment. We are not making use of any state aid of any kind, which is also one of the reasons why we are to maintain our dividends.

Okay, great. And no plan to change this in the near future?

No, because, I mean, we have quite a big order book to attend to, so no specific plans at this stage.

Okay. And looking forward to be a bit constructive about As things evolve today, the bigger casualty will probably be shale oil and maybe the overproduction of shale gas, which might have a good impact on the increase of gas price next year. Would be. Do you see this as changing the environment for LNG with LNG price going up, having a more favorable trend? opportunity next year in terms of orders?

Well, we've always discussed that. I mean, usually we discuss this the other way around, you know, when LNG prices are very low, is there an impact? I mean, when you look at it from the point of view of GTT and chips, et cetera, I think the price of LNG is perhaps of a second order. Obviously, anything which helps sustain demand for LNG is good news, but there are arguments for that when the price is low, because, for example, it increases, it improves the spread between coal and LNG. So this is very good for conversion or switch from coal to gas, in particular in Asia. Of course, when prices are a bit more sustained, then, of course, it's more favorable for production and producers and, you know, helps sustain supply. So there are arguments in both ways, really. Okay.

Thank you. Thank you. And the next question comes from the line of Jean-Francois Grandjean from Odo. Please ask your question.

Yes, good afternoon. Jean-François Vallon speaking from OWHF. One question regarding the future FIDs. I recently read that some company, Exxon, shall postpone some LNG projects. So do you expect a lower FIDs announcement this year? So probably lower FIDs? new orders in the coming months. The second question, could you come back on the LNG as a fuel? Do you see any risk to see some advancement to the ramp-up of the development of this new market due to the strong drop of the price for the barrel and for the gas prices? And my last question, could you come back on the new illumination of Eric Perruch, the new manager in the company? Could you explain why there is a new manager and give us more color about that? Thank you.

Okay. Jean-Francois, as far as your two first questions are concerned, I mean, I'm back to my issue of timing. I mean, it is clear that it's obviously much more difficult for sponsors of a new project to make an investment decision and to reach an FID. So there probably will be some delay in getting new FIDs through. But new FIDs are not the orders of tomorrow or next week. They are the orders of in one or two years' time at the minimum. because it takes, say, five years to construct one of these facilities. And if you work it backwards, three years from ship order to ship delivery. So you're talking two years from now. So basically, I mean, if you consider the strength of the order book today, the fact that for those projects which are already in construction, there's still a requirement for a number of ships to be ordered. then you can see that over the medium term, the situation should not be too bad. Again, question of timing. Yes, we could have a dip in orders, but overall, we will see how things pan out. As far as the nomination of Eric de Hoek is concerned, well, I mean, basically... We did have a deputy CEO, call it that way, in the past. Clearly, you know, the decision was made to reappoint somebody in this position to reinforce globally the management team. So there's nothing much more to say than that. I mean, obviously, I don't know if your question has a particular spin to it, but it's something which is quite normal, I guess, for GTT.

Okay, the question is, why a DITAN? This is the successor of Fibatorti in the future. Why not?

You can never exclude that sort of thing. Yes. It's always a possibility. Okay. And for energy as a fuel? But for energy as a fuel, yes. I mean, again, question of timing. I mean, the elements here, I think, is that the environmental considerations, as I was saying just earlier on, are going to stay. And if anything might be even reinforced after this situation, I mean, clearly today for the shipping market, the situation is not good. There are not very many orders for new ships. You know, ship owners have to sit tight for a while. So, clearly, when I was saying perhaps that, you know, we expect this market to take off within 6, 12, 18 months, well, perhaps we have to move that by a few months.

Okay. Thank you.

Thank you. And the next question comes from Jean-Luc Roman from CRC Markets. Please ask your question.

It's also a question on the LNG as a fuel. I was wondering what your progress has been with the LNG brick technology, and if you are getting closer to trying to commercialize it, as we still see a few orders of tankers, for instance, which are using LNG, but maybe not GDT's technology.

Yes, I mean, the energy at the brick is still under development, and our main focus, I mean, today is clearly on the larger shift. So it's going to remain that way. I mean, again, the second phase of testing is underway, but it will be still quite a few months before this is on the market.

Thank you.

Thank you. And the next question comes from Jan Richard from Berenberg. Please ask your question.

Yes. Good evening, everyone. I had just one follow-up question on your supply chain and how strong your suppliers are. I mean, COVID is disrupting supply chains globally. There have been no delays to your construction schedule, so this is obviously positive for your suppliers, but I don't know if I wouldn't say they probably only work with you. So how strong are they? Have you any discussions with them? And should activity ramp up again, how quickly do you think they could ramp up their output on their side as well?

Well, first of all, I have to perhaps just remind that these people are not our suppliers. They are the suppliers of the shipyards. And these suppliers are usually based close to the shipyard. So a lot, for example, in Korea. And, you know, the Korean shipyards have full order books, again, for the foreseeable future or the short-term future. And their suppliers must be doing quite well at the moment. So in my view, not an issue.

Thank you. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone. And the next question comes from . Please ask your question.

Yes, good evening everybody. Just a quick one regarding your revenue. So you've confirmed the full year guidance. We already delivered one quarter of your full year expectation. I wonder whether you could give us some color on revenues for the remainder of the year. I suspect you have a pretty good visibility at this stage on your future revenue stream assuming there's no further delay of course. Should we expect a plateau from here or do you see revenue growing further and hitting a peak maybe Q2 or Q3? It would be great to have some color on that if possible.

Thank you. Jean-Pierre, all I can say is we've given a guidance for 2020. Of course, if you take just an arithmetic view, the first quarter, if it repeats itself, would mean that we would rather be at the top of the range for the full year, but this is just an arithmetic calculation. Of course, things can vary from one quarter to another depending on the pattern of the older book. The guidance we have given, the range, is also a way to take into account, if necessary, some potential delays. And again, we have to watch this situation on a day-by-day or week-by-week basis to see how things will evolve. But we are confirming our guidance is the key message here. Very nice.

Thank you, Marc.

Thank you. Once again, if you wish to ask a question, press star 1 on your telephone. We have no further questions. I will now hand over to Mark Astier.

Thank you. Well, if there are no further questions, we can bring this call to its end. Thank you very much for attending. And, you know, stay safe. And no doubt I will be talking to some of you in the coming weeks. And we're always happy, of course, to answer any additional questions you may have, you know, going forward. Thank you very much and have a good weekend.