Odfjell Se B

Good morning to all of you and welcome to Odfjell's presentation of our second quarter results. We will follow an agenda which should be well known to all of you. I will take you through the highlights and then my colleague Terje Iversen will present our financial performance. And finally, I will conclude this presentation with an operational review, market update and the prospects going forward. So if we then turn to the highlights, we start with safety. We have seen a very volatile environment this quarter, but I'm still very satisfied to report that our strong safety performance continued throughout the quarter. I'm equally happy to say that our four Odfjell vessels that were trapped inside the Middle East Gulf have all safely left the region. And this is due to a fantastic cooperation between the people on board our ships and also on shore on different locations. We are presently not considering to send vessels through the Strait of Hormuz. If we then turn to our financial performance, we delivered time charter earnings of 195 million US dollars. This is up from 167 million US dollars in the previous quarter. Our average time charter earnings per day was 29,486. This is also up from 27,232 in the first quarter. And this reflects the stronger spot market that we observed during the quarter. Our EBIT was 69 million. This compares to 46 million. The net result contribution from Odfjell Terminals was 1.8, which compares to 2.3 in the previous quarter. And summarized, this concludes a net result of 54 million US dollars in the second quarter compared to 32 million in the previous quarter. If we adjust for one of items, the net result was 56 million compared to 26 million in the first quarter. Other important items are carbon intensity, the so-called AER, was 6.9 in the second quarter, and this is down from 7.0 in the previous quarter. We delivered this result despite the obvious inefficiencies that we observed in the Middle East region. We also took delivery of two new buildings on long-term charter during the quarter, and at the same time we sold one vessel for sustainable recycling. On top of that, we signed an agreement to purchase four super-segregators to be constructed at the Kita Nihon shipyard in Japan. And finally, yesterday the board approved a dividend of 52 cents per share based on our adjusted first half results. And by that, I give the word to Terje Iversen who will take you through our financial performance. Thank you.

Thank you, Harald, and good morning to all of you. I will, as usual, start with the income statement for this quarter. As mentioned from Harald, time shutter earnings this quarter ended at 195 million U.S. dollars, a significant increase from the first quarter with 167. Looking behind the figures, of course, we were helped by higher spot rates, especially in the start of the quarter. We also had an increase in commercial revenue days with 6,409 days, an increase of 295 days, primarily due to delivery of two new vessels this quarter and also three vessels that were delivered through the first quarter. We also had a slight decline in offer days, also then increasing available days this quarter. Included in the net time shutter earnings, we have also included 5.3 million USD, which is a customer settlement following a favorable outcome of a recent arbitration, that of course then helped the total time shutter earnings this quarter. Timeshot expenses ended at 14.4 million USD compared to 15.2 in the first quarter Operating expenses we saw a slight increase to 54.6 mainly due to new vessels joining the fleet this quarter While we saw the G&A reduce this quarter from 20.3 to 18.2 million USD, mainly due to seasonal effects in the second quarter. After operating income not shown at this table at 1.4 million USD, we delivered an EBITDA of 111.3 million compared to 81 million USD in the first quarter. That also includes net results from our jump ventures with 2.2 compared to 2.8. Including that figure is net result from our terminals with 1.8 million compared to 2.3 in the first quarter. Decline is related to a small impairment being done at one of the terminals in this quarter. Deportation and arbitration increased somewhat to 41.7 million USD, mostly related to more vessels on our balance sheet. Now after a small capital loss this quarter related to a resale of a new building contract for vessels being built in China of 0.9 million USD, we delivered a bit of 869 million USD compared to 46 million USD in the first quarter. Net interest expenses declined somewhat to 13.8 million USD compared to 14.3 in the first quarter. Also helped by net interest income this quarter related to the customer settlement that I mentioned in the time chart earnings with 1.4 million USD then contributing to net interest expenses going down this quarter. After other financial items and taxes, we then delivered a net result of 53.5 million USD compared to 32.1 in the first quarter, leading to earnings per share of 68 cent compared to 41 cent in the first quarter. If you adjust for non-recurring items, we delivered a result of 56 million USD That is then related to the impairment I mentioned and also the capital loss and other finance improving the results to 56 million USD compared to adjusted results of 26 million USD in the first quarter. Timeshot earnings per day strengthened this quarter at the same time we saw a lower cash break even. Our timeshot earnings per day ended at 29,486 compared to 27,232 in the previous quarter. Main driver, of course, the stronger spot markets, especially as we saw in the start of the quarter. And this is also worth mentioning that this timeshot earnings per day excludes the customer settlement that I mentioned on the previous slide. Kasper Geven declined to 21,804 compared to 22,984 in the first quarter, bringing the 12-month rolling average to 22,165. Decreases were driven by added revenue days from the five new billings that were delivered during the first half, and also less off-hire days in the second quarter. Going forward, we expect the average cashback even for this year to be around US$22,000 per day. And also worth mentioning, our P&L breakeven was around US$22,288 compared to very much the same figure in the previous quarter. Looking at the balance sheet, we saw some changes on the ships and new building contracts. As mentioned, we sold one new building under construction. We also sold one vessel for recycling. On the other hand, we also paid pre-delivery installments for the four new buildings, 40,000 dead by ton vessels being built of 35 million US dollars in April. We also took delivery of the two vessels on long-term time charters, then increasing the total value of ships and New Berlin contracts this quarter. The right of use assets then also increased from 285.7 to 321 million USD this quarter. While we saw investments in associated joint ventures decline somewhat from 182.8 to 180.9 million US dollar this quarter, main effect was related to that we took out dividend from the terminals of 3 million US dollar this quarter. Cash equivalents ended at 165 million USD while including available drawing facilities we had 385 million USD in available liquidity end of second quarter. Also worth mentioning that we paid the new building of Pluto that we took delivery of in July with cash and that will later be included in an existing loan facility. On equity, we saw that equity increased by 46 million USD in line with the comprehensive income we booked this quarter, leading to an equity percentage end of second quarter of 46%, very much in line with previous quarter. On the depth side we saw that other current assets increased and that was primarily due to the fact that we have more expensive bunker on our vessels and also increase in other inventories during this quarter being also impacted by new vessels being added to our fleet. Cashflow this quarter, we ended with a very strong operating cashflow of 81 million USD, increase of 30.9 compared to first quarter, and of course that is mainly related to higher earnings this quarter. On the investment side, we sold the new building under construction in China, and we also sold one vessel for recycling, in total that gave us cash of 23.2 million USD. On the other hand, we invested in the four new building vessels with $35 million and also had some expenses to dry docking and other projects. So in total, we are then left with net cash flow for investing activities of 19.5 this quarter compared to 21.7 in the first quarter. Not much going on on the debt side when it comes to refinancing on new facilities, only ordinary repayments, leading to a net cash flow from refinancing activities of negative 27.2, and in total we then saw an increase in net cash and cash equivalents this quarter of 33.9 million USD. Looking at the last 10-11 quarters, we see that we are delivering a quite strong quarter with $80.6 million in operating cash flow, up from $49.7 million in the previous quarter. Relates to higher term short earnings, as mentioned. Net cash flow from investment was negative 20 due to the installments in the new buildings. Primarily, and on the other hand, we also had the proceeds from the sale of ships during this quarter. In net cash flow, free cash flow, down under that 80 minus 20 is 61 million US dollars a quarter, up from 28 million in the previous quarter. Looking at the 12 months rolling free cash flow, we are at 49.7 million US dollar. And if we adjust that for repayments related to right of use assets, we reach 37 million US dollar compared to 35 million in the previous quarter. On the debt side, not that much going on when it comes to maturing facilities the next quarters, not before in the fourth quarter of 2017. Looking at the total debts end of second quarter, we have around 738 million USD in interest-bearing debts. We expect a slight increase year-end due to the labour of Bo Pluto that will be financed by the new tranche that will be drawn upon in these days. And then we expect a small decline going forward based on existing profiles and a maturing loan going forward. Not included in this slide is the financing of the four new buildings, the 40,000 new dead by tons vessels being delivered from first quarter 27 until second quarter 2029. So that will increase these estimated numbers. On the projected debt, right of use assets, that is 321 million US dollar end of second quarter. That will increase end of this year around 400 million US dollar, mainly due to delivery of three, four new buildings that we deliver on time charter throughout the second half. And then we also will see an increase in right of use asset debts in 27 and 28 due to the new buildings being delivered on long-term time charters to Odfjell. When it comes to the new buildings, the four new buildings, we are in process and we are evaluating alternative stage days and we expect that financing to be finalized within end of this year. Capex and time charter commitments. In total we have time charter or Capex commitments at 289 million US dollar end of for the total for the four new buildings and including both Pluto. which then was paid in July with $35.4 million. So then we are left with 40,000 new buildings being scheduled to be delivered from first quarter 27 to second quarter 29. On long-term time charters, we are signalizing that we are having a lot of commitments when it comes to new buildings being delivered from second half 26 until 2029. If we summarize a total time charter higher for all these vessels, we are close to 970 million US dollar. On our balance sheet, that means that we will add around 500 million US dollar in new assets from second half 26 to end of 2029. Harald will come further into that, but these vessels that we have on time charter that are going to be built and our own new buildings accounts for around 13% of the current order book in our core segment. Then I will leave the floor to you again, Harald.

Thank you very much, Terje. And by that, I will continue with an operational review. We start with the volumes. And as you can see on the left-hand side of this slide, we have relatively stable volumes quarter on quarter. We lifted 3.2 million tons of cargo during the second quarter, which is the same as we did in the first quarter.