Gaztransport&Tecnigaz Adr

Good afternoon. This is the conference operator. Welcome and thank you for joining the GTT Third 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 zero on their telephone. At this time, I would like to turn the conference over to Mr. Jean-Baptiste Chouamé, CEO of GCT. Please go ahead, sir.

Thank you. Good evening, everyone. Thank you for joining us this Friday afternoon for our Q3 activity update. I am pleased to have Thierry Ochoa, our CFO, here with me today. Without further delay, let's dive into the key highlights. So let's start with the key figures on the right part of the slide. In the third quarter, we maintained strong order momentum, bringing the total to 68 new LNG careers orders since the start of the year. We also secured 12 ETHAN carriers, including 8 ultra-large ETHAN carriers, or ULEC, which will be the largest ETHAN carriers in the world. I will provide more details on these later in the presentation. Finally, we received an order for 12 LNG-powered container vessels, which will feature our one-bar gauge tank design. we also received an order for one bunker vessel. For the first nine months, revenues stand at €465 million, marking a 55% increase compared to last year. Thierry will dive deeper into the numbers shortly. As for our guidance, I am pleased to report that, in the absence of any significant delays at the shipyards, and thanks to improved feasibility for year-end, we are now expecting to reach the top of the ranges for revenue and EBITDA. Now turning to the other key highlights. In services, we have partnered with Nikiso to equip tail LNG-fueled container ships with GTT's recycled reliquefaction system. In smart shipping, Assens Marocca solution has been selected to equip GazOcean's entire LNG carrier fleet. As you know, innovation is in our DNA. This quarter, We received several approvals in principle, including one for our three-tank 200,000 cubic meters concept. I will provide more details on this later. Lastly, GTD Strategic Ventures has made an investment in Bluefins to support the development of more sustainable naval propulsion technologies. This marks the fourth investment from our fund since the beginning of 2024. Now moving to our order book. With a total of 82 orders in our core business and 43 deliveries to date, our order book stands at an all-time high. It's worth noting that ETH and careers represent a significant portion of the orders for the first nine months. Now, moving to the next slide, which you are all familiar with, our estimate of the LNG careers required for the liquefaction facilities currently under construction. To transport the additional 175 million tons per annum that these projects currently under construction will add to the LNG market by 2029, approximately 285 LNG carriers will be needed. Following Q3 orders, around 200 ships have already been secured, leaving up to 85 more ships required in the near future. Now, let's touch on shipyard capacity. The energy careers market is demand-driven, and we've observed that shipyards have been increasing their available slots to meet ship owners' needs. Back in 2020, we estimated the capacity to be around 55 slots compared to approximately 70 slots today. We anticipate this rising to around 85 slots by early 2026, mainly due to the ramping up of Chinese shipyards. We believe that the number of slots could keep rising. An additional benefit of this increased capacity is the potential expansion of the replacement market, as any available slots could be used for this purpose. One factor that would limit shipyard capacity is if the supply chain fails to keep pace. We remain vigilant about ensuring the quality and capacity of our approved suppliers to deliver the essential components for membrane systems. On LNG as a fuel, we have observed that the market is gaining momentum. As mentioned earlier, We received 13 orders in Q3, and we are seeing early methanol adopters shifting back to LNG as their fuel of choice. However, as we have shared in previous quarters, the limited availability of shipyard slots poses a challenge for membrane technology, while Type B and Type C tanks are being aggressively promoted. We continue to innovate, as demonstrated by the recent Juan Bargoge tank design pressure order. This innovation will allow LNG-powered ships equipped with GTT's membrane technology to comply with upcoming regulations requiring cold ironing in poles. As I mentioned earlier, innovation is deeply embedded in GTT's DNA. Our 200,000 cubic meter three tank concept stems from the need to reduce CO2 emissions in line with upcoming regulations. By optimizing the ship's average speed, emissions can be reduced by approximately 20%. The increased capacity of 200,000 cubic meters compared to today's standard of 174,000 cubic meters allows charterers to maintain the same shipping intensity, transporting equivalent volumes of LNG per year. This performance is made possible by larger capacity and an innovative three-tank design versus the standard four-tank design, which improves the boil of freight due to a more favorable surface-to-volume ratio. Continuing with innovation, as I mentioned at the start of the presentation, we've received eight orders of what will be the world's largest E10 careers. After pioneering the VLEC, the very large E10 careers, we are once again leading the way with the ULEC, the ultra-large E10 careers. These carriers with a capacity of 150,000 cubic meters are made possible by GTT's Mark III membrane technology, which enables a lighter overall ship weight. This results in a design draft allowing the ship access to most ports. I will now hand over to Thierry, who will share more about GTT Strategic Ventures and provide further details on the financials. Thierry, the floor is yours. Thank you, Jean-Baptiste. Good evening, everyone. So, let me go over GTT Strategic Ventures. As you know, GTT Strategic Ventures is our investment vehicle to take minority stakes in innovative startups that have the potential to contribute to the group's strategic roadmap of building a sustainable world. Our latest investment is in Bluefins, a French company founded in 2021. They have developed a technology inspired by the tail fins of whales, which converts vertical pitching motion into forward propulsion. This solution is designed to optimize energy efficiency, reducing both fuel consumption and harmful emissions. Additionally, it improves vessel stability, contributing to safer navigation. With Bluefins, we are making our fourth investment this year by our fund and the seventh since its launch in 2022. Now, page 11, now regarding our financials for the first nine months of 2024. Revenues at 4075 million euros are up plus 55%, a very strong increase compared to 300 million euros for the first nine months of 2023. Four drivers to explain our strong revenue performance. The first driver is revenue from UBIS, standing at 429 million euros, was up plus 57%, benefiting from a higher number of LNG cars under construction. The second one is revenues of LNG as fuel are up plus 22%, benefiting from the numerous orders received in 2021 and 2022. The third one, is electrolyzers revenue through our Elogen affiliate are slightly down at minus 1% and standards at 60.6 million euros for the first nine months of 2024. Finally, we observed very good momentum in services. at 29 million euros, up plus 40% compared to the last year, thanks to services to vessels in operations, including the digital services, and also thanks to good level of pre-engine studies. I will now hand back to Jean-Baptiste for the conclusion on our guidance. Thank you Thierry. As mentioned at the beginning of the presentation, In the absence of any significant delays at the shipyards and with improved visibility for the year-end, we are now expecting to reach the top of the ranges for revenue and EBITDA. Regarding the dividend payments, we remain committed to our pledge of distributing at least 80% of consolidated net income to our shareholders. That concludes our presentation. Thierry and I are now ready to take 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 one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Richard Dawson of Birnberg. Please go ahead.

Good evening, and thank you for taking my questions. First question is on ethane. Does the recent momentum in ethane orders suggest your long-term order intake for ethane carriers may be somewhat conservative? I believe you're expecting between 25 to 40 over the next decade, but we've already had quite a few this year. Then the second question is on allergen, clearly a tougher environment for hydrogens. Does this weakness impact your current strategy in electrolyzers at all? And has the guidance of breakeven EBITDA by mid-decade been pushed to the right by a bit? And then finally, maybe just a quick clarification. Great to see guidance narrowed to the top end of the ranges. Have there been any delays in the shipyard schedules this year or any cancellations of orders? Thank you.

Um, so your first question was on the, uh, you think you can order intake, right? Um, uh, yeah. Um, well, uh, Indeed, the new and very innovative development that we have made is, I think, enabling the industry a lot as ship owners can now move a larger quantity of E10 in a ship with no additional drafts. So, at this stage, we maintain our ambition for the next decade, but we believe that thanks to our innovative ULEC design, we will trigger interest from ship owners. Now, as regards the question for Helogen, So, you know, when GTT made the acquisition of hydrogen four years ago, we were not part of those who expected the industry, the hydrogen industry to bloom very quickly. We were always expecting it to take some years. So this is why, since the beginning, we've been closely monitoring our costs and focusing on, like we usually say, making Helogen a beautiful company before making it big. So we remain committed to this discipline, while indeed we see that the hydrogen market is taking a bit longer to take off as any of us could have expected some while ago. Now, regarding your last question, indeed, the activity in shipyards is extremely important at the moment, as you know, because our order book is at a record high. In particular, the Chinese shipyards are picking up with an historically high number of orders of LNG carriers. However, so far, all the CPRs have been performing well, so this is why, indeed, we are in a position now to confirm that we expect to reach the top of the ranges for our guidance. Thank you for the color.

And could I just confirm, then, that EBITDA break-even by mid-decade for Eligen is still valid?

Oh, yes, yes, we still are targeting this, yes.

Excellent.

Thank you very much. You're welcome.

The next question is from Jean-Luc Romain of CIC Market Solutions. Please go ahead.

Thank you for taking my question. I have two, actually. We have seen some orders around future fruiting LNG projects, Do you still believe it might be a 2024 FID? That's my first question. Second question, some large container carrier companies, Chinese like CISPAN, have placed big orders this summer to Chinese shipyards. Would those shipyards typically use Type B and Type C containers? tanks instead of prismatic, or is there still a willingness of those large ship owners like CISPAN and CMA, CGM to have maybe a better quality or better capacity box ships?

Okay, thank you for your questions regarding the first one. Well, you know, I guess for project developers, taking a commitment as an FID can sometimes be a long process as it covers a very large investment. So, we believe this FID could happen in the near term. Now, whether it's 2024 or not is not something on which we can comment. However, just to link this to our order book and upcoming order, The projects that are still under construction, in our view, are still missing up to 85 ships. So there's still quite a lot of activity that we expect to come from projects ongoing. Now, regarding your question on C-SPAN, like I briefly explained during the presentation, It is true that we face a very strong competition, in particular in China, where Chinese shipyards are pushing Type B or Type C technologies, which they can outsource from their shipyards. And this can be a bit helpful for them in a context where they are extremely busy with a few slots available. However, we keep working with them to ease the erection process of the cargo containment system, and we keep working as well closely with the ship owners to explain to them the advantages of our technology, a lighter weight, a tank that takes less space in the hull, and a smaller... heat inertia, which makes the operation of the tank more flexible. And also, this is why we keep innovating on our technologies, in particular, the one-bar gauge design, because indeed, the regulation that will impose ship operators to do cold air running at quayside is a concern for them. And I believe that kind of innovation can be a relief for them when operating their membrane tanks.

Thank you very much.

Welcome.

The next question is from Kevin Roger of Kepler-Chevreux. Please go ahead.

Yes, good evening. Thanks for taking the time. Maybe one question you just mentioned in the presentation that you consider that the capacity at the yachts could increase a bit again. So can you give a bit of color around the timing? Do you think that it would be for 26 or after? And also on the magnitudes, would you say that the yards can maybe add five or ten slots or even more? So that would be the first question. Some comments, granularity around the capacity of the yards. And then the second question is regarding the services business unit. So still quite a lot of growth in this division. Is it possible for you to facilitate split, in a sense, the growth that you see in the historical business linked to the LNG membrane stuff, and on the other side, the growth that you have seen on the new businesses, such as the smart shipping solution, etc., to try to understand the dynamics between the historical business and the new ones inside this business unit, please. Yes. Okay. So regarding your next question, so we gave a number for 2026, so we don't expect the number of slots to further increase during that year. But we expect that, for instance, by 2028, the number of slots could be higher. I guess an increase of 10 to 15 slots looks like a reasonable number. So I guess this answers your first question. Now, regarding the second one, indeed, so far our services include, like you said, the historical services as well as our digital offering through Ascent Marocca. And at this stage, indeed, we report them all together because some of those services are intertwined with each other as we provide services from ship owners, in particular, energy carriers, ship owners, from a physical nature but also digital nature. And also, we share some resources between our Ascent Morocco activities and our GTT historical activities. So, hence, this overall reporting as one whole. But is it possible to, in a way, split a bit the two dynamics, or not at all, inside the revenue growth? You know that we have a volatility regarding these work news because sometimes one year you can have some pre-engineering studies for some ship owners and the year after it will be not the same business. So it's very difficult to provide guidance on this topic due to the fact that we receive different studies for a year and another year it will be totally different. Okay, understood. Thanks.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. The next question is from Daniel Thompson of BNP Paribas. Please go ahead.

Hi, good evening. Two questions, if I may. The first one is on some of the recent announcements, some of the recent approvals and principal you announced at the gas tech conference. So on the LNG's fuel side, I understand you've now received approval for the Mark III system to be used both for ammonia and methanol in the future. So I would assume that that kind of bridges a key concern for the industry around the future fuel mix. So I was wondering, from what you've seen so far, how much is this approval a differentiator versus those type B fuel tanks that you see in the Chinese markets? And secondly, competition within the Ascends Morocco business. I mean, I was wondering sort of how aggressive you're finding the competition to offer smart shipping services given the degree of fragmentation in that market and sort of how it's progressing versus your original expectations. Thank you.

All right. Thank you. Thank you for your question. Indeed, we pushed quite a lot of energy in obtaining the approval in principle for ammonia and also methanol readiness of our Mach 3 technology for energy as a fuel vessels. and indeed this triggers a strong interest from ship owners because thanks to this progress in our technological development it means that in the future if they want to switch their lng fuel vessels to ammonia fuel vessels or methanol fuel vessels they will be able to do so without significant structural changes. And I believe this is a strong differentiator for our technology. As far as Ascent Maroc is concerned, we are working indeed with a growing number of ship owners in particular, offering them a range of products for performance monitoring, but also weather routing. I see, I hear positive feedback from them, from those who have already decided to use those tools, and that's why we are confident that we will manage to attract more ship owners, more users. Thank you.

Thanks. If I could just clarify on the first part of that question, first of all my question, to your knowledge, Can these, the Chinese LNG fuel tank solutions, do they not have this designation to be sort of multi-fuel ready in future to your knowledge? Just wondering on that one, thank you.

It is possible with a high manganese Type B vessel to have this readiness. However, the shipowner is still left with the drawbacks of Type B technology, heavier weight in particular, but also the use of high manganese steel It leads to particular difficulties, in particular during the construction of the tank, as it releases toxic vapors during the welding process.

Okay, understood. Thank you. You're welcome.

Mr. Chouamé, this was the last question from the phone. Back to you for any other questions from the web.

Yes, there are two questions on the web regarding Helogen. The first is what you expect for full year 24 and 25 regarding the hydrogen market, and the second is more or less the same, talking about our confidence in the future of this activity.

Okay. Thank you, Jean-Baptiste. So, like I said earlier, GDT was never part of those who believed, who listened to the promises, the other promises that were made in 2020, 2021, that the hydrogen market would boom immediately. It takes some time, it takes some work to put together a new industry. However, we remain convinced that there is a potential for hydrogen applications, in particular in the industry, in particular in the industry where today hydrogen is already used, but it's gray hydrogen responsible for 3% of the world's CO2 emissions. I'm talking about refining, ammonia synthesis, methanol synthesis. However, we all can see it. We all can read it in the news. The market is taking a bit longer to take off. And this is the reason for our very low level of order intake so far this year. So we remain committed to working on developing our products, our electrolyzers, to make them as efficient as possible while closely monitoring our costs until market takeoff happens. So I guess if there is no more questions, I would like to wish you all a very good weekend and thank you for being with us tonight. Bye-bye.

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