Gaztransport&Tecnigaz Adr

Operator, welcome and thank you for joining the GTT First Quarter 2024 Activity Update Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. Should anyone need assistance during the conference call, they may signal an operator by pressing star and 0 on their telephone. At this time, I would like to turn the conference over to Mr. Philippe Berthoud, here, CEO. Please go ahead, sir.

Good evening, everybody. I'm very pleased to be with you tonight. I am with Thierry Autorat, who is the CFO of GTT, and also Jean-Baptiste Garnier, who is the investor relations. So we are going to talk about the first quarter 2024 activity update. Some key highlights. First, in the core business, during the first three months of the year, we received 29 new orders. Since we received an additional order for eight energy carriers. In the first quarter, our revenues have amounted to 144.8 million euros, which represents an increase of 81% compared to the first quarter of 2023. Some other key elements, I would like to mention the Corporate Social Responsibility Roadmap that we published in February. and which is really showing the very strong commitment we have on this matter, which is at the basis of our vision and of our strategy. If we look at the commercial momentum, we can see that it's continuing and abetted, and we are wishing a recalled level with 310 energy carriers in our order book, eight ethene carriers, which is really something that we've never approached. So it's something which is definitely very remarkable which is giving a long-term visibility for the activities of GTT. We look at the LNG demand goals. Of course, this demand for LNG carriers is sustained, supported by long-term LNG demand. which is fairly positive. And we can see on the right-hand side part of the slide the expectations of what should be the demand by the end of the next decade. We consider that by that time, we should add 150 to 250 million tons per annum in terms of energy production. which is going to require significant investments and which is going to require many, many ships to build. So all that is supported by elements that we are talking regularly and mainly by the need to reduce the reliance of the world in terms of energy, the reliance on coal of the world. Now, I will hand over the floor to Thierry Autrein in order to present to you our contributed revenues for the first quarter.

Thank you, Philippe. I suggest you look in more detail at the revenue per main activities at the end of Q1 2024. Total revenue amounts to 145 million euros, up 81% compared to Q1 2023, driven by the by new builds and higher number of energy carriers and the constructions in Q1 2024, generating additional revenues. Driven by revenues from energy as fuel, up 98% compared to Q1 2023, thanks to 2021 and 2022 strong order flows. Driven by electrolyzers as well, double EloGence revenues to 3 million euros compared to 1.5 million euros in Q1 2023. Driven by services as well, the revenue increased by 74% thanks to pre-engineering studies, development of our digital activities and services to vessels in operations. This is where we are, Philippe, in terms of revenue details.

Thank you very much, Thierry. Now, looking at our outlook for 2024, I would like to say that we are confirming our consolidated revenue estimation in the range of 600 to 640 million euros. For the EBITDA, we confirm that we should be in a range between 345 and 385 million euros. And we confirm that our payout should be at least 80% of our consolidated net income. Now, I would like to say that the Board of Directors, which has taken place today, has taken the decision to appoint Jean-Baptiste Chouamé as chief executive officer starting from the next AGM on 12th of June. Jean-Baptiste Chouamé is currently the managing director of Ellogen, the electrolyzer company of the GTT Group. He's working in the group since 2020. He's been appointed at the head of El Ocean in November 2020. And before he spent his career in LNG in various positions with EDF working on the LNG terminal of Dunkirk in Societe Generale at the LNG trading desk, in fact, reading these energy trading desk and in technique where he worked on large energy projects and including larger F-energy projects. So he has an extensive experience in the energy industry. He has, you know, obviously very well Elo Gem, And he has convinced the board of his skills and capabilities for ensuring this function on top of its very relevant experience for future. So now I will answer to your questions.

This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Jean-Luc Romain with CLC Market Solutions.

Please go ahead. Good afternoon. Thank you for taking my question. And congratulations from the turnover and to Jean-Baptiste Romain. My question relates to LNG as a fuel. How do you see the adoption of LNG as a fuel going forward and the technologies? There are quite a few providers of LNG, types of LNG tanks for LNG as a fuel vessels. Do you see, and do you have a strong... market share in container carriers. How do you see market share going forward in other kinds of ocean-going vessels?

Well, thank you, Jean-Luc, and thank you for your question. First of all, we think that energy is currently the only solution available for reducing the CO2 emissions. All the other solutions are not available and are not affordable. So we think that LNG is not only available, but also is very affordable, as you can amortize the cost of LNG tank, LNG equipment, in something like four to five years, and then you are more competitive than marine diesel oil-fueled ships. So we think that this will prevail. And in addition to that, once the bio LNG will exist, or the e-LNG will exist, it will be dropping fuels, which will not require any modifications on the ship. So ordering a LNG-fueled ship, you're ready for the future, and you can be carbon neutral whenever these new fuels, bioenergy or e-energy are going to exist. So there were some illusions about methanol or about ammonia, but we think that they are less appropriate. So we keep on promoting energy. It's true, as you said, that we've encountered a lot of success in container ships for the time being this sector is not ordering ships, so we don't have any orders coming from this sector. We are keeping on promoting our solutions on other sectors, on tankers, on bulkers, on cruise ships. We think that finally the advantages, our arguments, will prevail in this context. for the promotion of our energy as a solution.

Thank you.

Thank you. The next question is from Rita Closen with Berenberg. Please go ahead.

Hi, good afternoon. Hi. Thank you for taking my questions. I just wanted to pick up just on the hydrogen electrolysis subsidiary. The industry is starting to see larger megawatt-sized awards coming to market. Is this something that's starting to see in elegym? I know initially we're sort of still at the pilot station, some of those orders. And then secondly, just following up on that question on LNGs and fuel vessels, are you starting to see any improvement in that outlook? I know you talked about sort of focusing on different segments of the marine market, so cruise ships, for example. But are you starting to see ship owners sort of engage in discussions on ordering new vessels that are fueled by LNG? Thank you.

Thank you, Richard. I have to say that on your question on the electrolyzers, I did not get it perfectly. Could you repeat it, please?

Yeah, no problem. It's more a question about the market in hydrogen with electrolyzers. You're starting to see sort of larger megawatt scale projects coming to market, so beyond the single digit size. Is this something that Eligen's starting to have discussions with, with customers? Are you starting to see sort of bigger projects coming down the pipeline?

Yes, yes, yes, yes, yes, definitely. Definitely, sorry, sorry. Definitely, we are seeing that. We are always seeing these double-digit megawatt projects. We are delivering large stacks and people can see what we are delivering, can see how it works. So we can address these 20, 30, 50 megawatts projects now. We have the industrial setup for that. And I can see in the discussions we are having with customers on these projects, we can see that they consider us as fully credible in this arena. not only in terms of production of the stack of the electrolyzers, but also in the way we are performing the engineering, in the way we are studying the project, in the way we are dealing with the after sales services, and in the way we are treating the customers. You can see that Elogem is a serious company And it's exactly what we were aiming at. We were aiming not at looking at large contracts if we were not able to work on them seriously, to deliver them. We were really concentrating on getting ready before looking at these solutions. So at this market. So it was a matter of gathering the right people, of having the right processes, the right technical solutions before addressing that. And now we are in this arena. On the energy as a fuel, other segments, yes, we are promoting our solutions for tankers. Yes, we are promoting our solutions for cruise vessels. We build tanks on one cruise vessel now. which she's operating very well. They are very satisfied. We are working with others. We have solutions. We are keeping on trying to convince these players.

That's very helpful. Thank you.

The next question is from Kevin Roger with Kepler Fibre. Please go ahead.

Yes, thank you for taking my question and congratulations to Jean-Baptiste for the nomination and congratulations to you for all the jobs you have done as a CEO, even if you will remain around as chairman. Congrats for all that. Two questions on my side, please. The first one is related to the order intake on the LNGC, so the traditional business. I was wondering if you were able to comment a bit on the dynamic replacement market versus for the new demand because there are probably a number of units that are dedicated to the replacement market this quarter. So is it possible to quantify the mix on the 20 plus units that you have secured? How many are related to replacement and how many are related to demand for new supply? and as a kind of follow-up still on this LNGC thematic, the average price per unit has been very strong over the past quarter. Would you say that we are currently following the same dynamic? Thanks a lot.

Thank you very much, Kevin. Thank you very much for your nice comments about myself and about alternatives. on the order intake, I would say that we are not so capable of distinguishing exactly what are the orders for replacement market. And in these circumstances, I have to say that I consider that this quarter there were no order for replacement. As you may have seen, there were orders for Qatar and they are not for replacement. And we are considering that all these new orders are for the projects which have been launched and which have to secure their tonnage and not for replacement. So it's still a market to come. And as far as prices are concerned, prices for Qatar has been determined a while ago. And I would say that I don't see any changes in the prices. You have a certain price in Korea, which is, let's say, around 165 million euros, and between 160, 270, depending on the spec, depending on the customer. And you have orders in China, which are between 235 and 245 million euros. And I don't see any changes in these price levels.

Sorry, Philippe, I was mentioning the average price per unit on your site, you know, the price for the technology that when you were looking at the average price per unit was increasing over the past quarter and well above all in anticipation, basically. And just if I may also as a kind of follow-up, you just stated that even the very large order that you get, the 270 hundred K, not for the replacement that's related to the New Zealand?

Yes. Yes, it's not for replacement. It's really for transporting the new capacity of energy that has been decided. And it's really, you know, programs which is continuing. About prices for us, you know that we have a fixed price which is determined in our contract and The price is inflated according to the inflation in the French engineering industry. So we do so. And I would say that in your assessment on the turnover of the company, you can take into account, as a rule of thumb, the figure of 7.5 million euros per ship.

Okay. Thanks a lot. Have a nice evening and a good weekend.

Thanks. Thank you, Kevin.

The next question is from Daniel Thompson with BNP Paribas. Exan, please go ahead.

Hi. Good evening. Thanks for taking my questions. I had two, please. The first is related to how the ramp-up in shipyard capacity or how the ramp-up in the shipyard execution is going. As we take more vessels under construction, have you seen any signs of strain so far? I mean, obviously, Q1 suggests things are going quite well, but just if you could comment on any signs of strain you're seeing there. And then also, in terms of shipyard capacity, Have you had any sort of new conversations with existing or new shipyards around opening more slots for LNG carriers, perhaps any regions outside of South Korea and China? And then the second question is related to Assens, Morocco. I was wondering how commercial momentum has evolved in that business. And I know you've previously spoken about wanting to grow that business more. through potentially M&A. So have you come across any targets that you think could fit into the business over the next year or so? Thank you. Okay.

Thank you very much, Daniel, for your question. Well, the shipyard capacity, we are discussing with other shipyards which they are assessing, you know, the potential of the market. So we are sharing our analysis of the market. We are sharing also what it means in terms of efforts, in terms of investments to enter into this activity, what it means in order to be credible in this arena. We are sharing also with them all the assistance we are going to provide if they decide to do so, all that we can do for them to accompany them in this process. But beyond those who signed with us, I cannot tell you who is going to join us in the construction of new energy cars. So I see that we signed recently with a shipyard in China. We're very interested by energy cars, but also by other energy structures like FLNG and so on. So there is definitely an interest, and we are working on the project with these shipyards. We are working on the difficulties and all that we can do for these shipyards to soften these difficulties. On Ascent Morocco, while the commercial momentum is there, you can see Thierry has detailed the growth of services, including digital services during the first quarter. So the growth definitely is there. We are growing there. Our conditions and our solutions are convincing customers You saw that we performed an acquisition in the first quarter, so it's not very long term, but in a certain way we are people with a label or selecting targets, targets which have a very clear sense for us. and that we can integrate easily. And that's what we do with GPS that we bought something like one month and a half ago. So it goes fairly easy. We know exactly what we buy. We know how we are going to integrate them, what are the synergies we are going to develop. So... we may have other targets in mind. We are constantly reviewing possibilities. Sometimes we say no. Sometimes we propose a price which is not corresponding to the expectations of the company. So I cannot tell you that we are going to have other acquisitions soon. But just to make a long story short, keep in mind that our services have increased by 74% during the first quarter of 2024 compared to the first quarter of 2023.

Okay, thanks, Philippe. That's helpful.

The next question is from Guillaume Delaby with Bernstein. Please go ahead.

Yes. Good afternoon. Congratulations to Jean-Baptiste. Congratulations for this process, which has been well prepared. Jean-Baptiste was the best candidate, so congratulations again. My question is, during this process, Of course, Jean-Baptiste has probably come with some ideas, new ideas regarding strategy, regarding day-to-day implementation of what to do or what should be improved within the company. Could you maybe share one, two, or three ideas? I would say new ideas in qualitative terms, of course, of what Jean-Baptiste would like to implement within GTT. Thank you.

Well, I would say that it has been a competitive process, so there were external candidates. and internal candidate. And Jean-Baptiste came with a knowledge of the sector, a knowledge of the energy sector, a knowledge of hydrogen, and a knowledge of the company that nobody could match, obviously. And I would say that probably it was not that which was particularly distinctive, as the board knew that he was anyway the best in terms of knowledge of the company. I would say that his vision of the sector, the energy sector, the vision of the LNG sector, of the shipping, of the hydrogen, and of the new energies has particularly impressed the board. And that, plus the achievements that... He has demonstrated to the board in turning around, it's not fully accomplished yet, but turning around a very small company into a company which is now competing in an arena with the largest electrolyzer company of the world in a matter of three years. That has particularly impressed the company. Now for any specific ideas on what Jean-Baptiste has in mind, I suggest you wait a little bit and you will have the possibility to ask him directly. I cannot tell you more and I could I could betray what he has in mind. So, yes, the best is to be a little bit patient. Pio.

Okay. Thank you, Philippe.

The next question is from Jean-Francois Gragnon with OdoBHF. Please go ahead.

Yes, speaking from BHS. Two questions, please. The first one concerns the percentage on the backlog for the replacement LNGCs. What is the proportion for the replacement market expected for all of your full backlog currently? And the second question concerns the mix for the backlog. Could you give us some color about the evolution of the mix of the backlog between the short or long series and the impact for sure on the pricing and the margin? Thank you.

On the replacement, I would say that most of the vessels in our backlog are for new projects. And I wasn't saying previously about the orders during the first quarter, where for us they are for new projects. So the replacement market has not yet really materialized. On the mix, about short or long series, I would say that we answer to this question. It's something that you can do if you have the name of the ship owners, but we are not particularly or systematically allowed to disclose the name of the ship owners. But using the rule of thumb of 7.5 million euros, it's a good proxy for assessing whether we are talking of long or short series.

Okay. Thank you, Philippe.

So I think we have a couple of questions coming from the web as well. So the first question from Chris Lazar. So good evening, Monsieur. Due to your excellent Q1 2024 results, why don't you revise annual sales upwards instead of confirming only your 2024 forecast? Many thank you.

Thank you for your question. You know that we are very cautious regarding our approach of our forecast and the guidance. because you have a ramp-up regarding the Chinese yards, and we need to take into account the different elements regarding delays, regarding the production. So that's why today we cannot revise and just confirm just that because we need to be very cautious regarding this aspect of the production and the delivery of yards today.

And we have a second question from the web from . What is the potential for ammonia and hydrogen membranes?

A lot of people are looking at ammonia and hydrogen and especially green ammonia and green hydrogen and to transport that. We are developing the solutions. uh we uh we are expecting uh that uh it's going to represent uh significant volumes in the next decade probably for ammonia we are going to we may have some business before the the next decades the the there are um Estimate from that, you know, it depends very much on the capability to produce green hydrogen in places where you have a lot of sun, a lot of wind, and to transform that, thanks to electrolyzers, into green hydrogen, then to liquefy for hydrogen. So there are very significant investments. But if... you have really the pressure to reduce the CO2 emissions linked to gray hydrogen. Today, gray hydrogen represents 3% of the CO2 emissions of the planet, so it's absolutely huge. Then it may be something very successful. Well, we are working on that. We are working on that with major partners, Total and Shell, who are very interested by these solutions. We are benchmarking these solutions with other supply chains. We are also benchmarking hydrogen against ammonia. And we are on the two possibilities. we are exactly at the heart of the transition and of the technological solutions which have to be developed in order to allow this transition to happen. And there is something which is, in a certain way, may I risk the word, touching. you know, very large iron gas companies looking at us and asking us, what can you do in terms of technological development in order to make that possible at a minimum cost? And we are coming with solutions, with solutions which are, in our opinion, affordable, which are possible, affordable. And in doing so, we can help them to develop these green molecules and to transport them. But I know it's for the next decade.

We have no further questions. Okay.

I would like to thank you very much for your attendance and I will be very pleased to meet with you in the next couple of months. And then I will dedicate my energy to work with gendered yeast for writing some new and wide pitches of the GTT book. Thank you very much. Good evening.

Ladies and gentlemen, thank you for joining the conference is now over. You may disconnect your telephones.