Koninklijke Vopak Uns/Adr

Hello and welcome to the Quarter 1, 2023 Interim Update Conference Call. My name is Priscilla and I'll be your coordinator for today's event. Please note this call is being recorded and your lines will be on listen only. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Factrona, to begin today's conference. Please go ahead.

Hi, hello everyone, and welcome to our first quarter 2023 READ results. My name is Tatyana Topcu, Head of IR. Our CEO, Siddique Rees-Brichel, and CFO, Mihail Hilsing, will guide you through our latest results. We will refer to the Q1 2023 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for the Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer you to the disclaimer content of the forward-looking statement, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and asserts on this. Accordingly, this is applicable to the entire call, including the answers provided during the Q&A part. With that, I would like to turn the call over to Dick.

Thank you very much, Facona, and a very good morning to all of you joining us in the call this morning. Let's go to the first slide, and the first quarter of this year shows strong performance. The need for our services was healthy across the different products and regions, and we continued to serve our customers well. We continue to deliver on our strategy to improve our financial and sustainability performance, to grow our base in industrial and gas terminals, and to accelerate towards new energies and sustainable feedstocks. We reported improved financial results. with an EBITDA of €249 million, which is a 70% increase compared to the same quarter last year. Besides financial improvements, I want to emphasize the focus on improving our sustainability performance, and we continued the trend of reducing our CO2 emissions in the first quarter. Looking ahead, I'm pleased to increase our 2023 outlook to above €950 million for EBITDA and above 12% operating cash return supported by favorable storage demand and cost management. Also, we improved our financial headroom and issued new debt as announced this week. This positions as well for future growth. Talking about growth, we signed an agreement with AltaGas for a 50-50 joint venture to develop a large-scale LPG export facility in West Canada, close to our RIPIT facility. In India, we announced to proceed with four expansion projects together with our joint venture partner, Aegis, in existing locations, strengthening our leading position in this fast-developing country. And recently, we updated you on our LEG projects in the Netherlands to further enhance the energy security and supply of Northwest Europe. To continue with our strategic goal of accelerating towards new energies and sustainable feedstocks, we are progressing well towards closing the acquisition of the prime location in the port of Antwerp. At this site, we will develop projects for new energies and sustainable feedstocks at the heart of a leading industrial cluster. We invested in the first quarter in a joint venture with Hydrogenius to further develop a hydrogen supply chain in Europe. Moving to share some of the key market dynamics and how they impacted demand for our infrastructure. I'd like to give you some details on how the markets in which we operate developed and their impact on VOPAC. Starting with gas, demand for LNG infrastructure remains in high demand for VOPAC, We see our gate terminal operating well in a normalized market. The other terminals in Mexico, Colombia, and Pakistan show a stable performance as per their role in their local energy systems. The momentum for hydrogen and ammonia continues to accelerate, which is also driven by governmental policies. We see an increasing interest in infrastructure to store and handle ammonia in different regions. The trend of a growing demand of sustainable fuels also continues to be there. And we are progressing well on our projects in Vlaardingen and Los Angeles to commission capacity for sustainable fuels and feedstocks. Moving on to the energy markets, which we serve through oil products. The oil flows are still rebalancing, following the international sanctions regime. This leads to changing flows, being more long-haul, generally spoken. A growing demand at one side versus production cuts announced by OPEC Plus are causing volatility in the market. These market dynamics cause favorable demand for our storage services. Oil distribution terminals serving local growing markets have a stable performance. Now let's take a look at the manufacturing markets where we serve through our industrial terminals and chemical terminals. The global manufacturing market sees margins under pressure due to oversupply and higher production costs. The US and Middle East are most competitive to produce petrochemicals, while Europe and Asia are facing challenges. Higher import volumes to make up for less local production are causing favorable demand for our infrastructure services. How this will develop in the remainder of the year needs to be seen. Our well-diversified portfolio leads to overall stable demand for chemical storage. Let's continue to the next slide. Let me take you through the different elements of our business performance in more detail. The starting point is last year's Q1 EBITDA of 213 million euros. Divestments we did last year had an impact of 2 million euros on the EBITDA when we compare it to this year. On the other hand, we experienced some positive currency translation effects of 4 million euros. The oil markets have been favorable since the second half of last year and showed steady improvements in the first quarter of this year. High occupant rates and contract renewals drive growth in EBITDA from our oil portfolio. With regards to the chemical markets, we have overall stable demand across the portfolio. Indexation of contracts is partially compensating the rising cost that has helped the revenue increase. The energy market is back to a normalized level as the available capacity is meeting the market demand with no need for additional sent out capacity. When comparing our cost base to Q1 of last year, we see an increase of 16 million, and that's mainly driven by inflation and higher energy and personnel costs. Finally, we've delivered on our growth projects, which have contributed 5 million euro in the first quarter. Moving on with gas. In West Canada, we formed a 50-50 joint venture with Altagas for a large-scale LPG and bulk liquids export facility. Next to our current facility, Ripet, a 77-hectare greenfield site with existing rail track will be further developed, including a new jetty. This location, which stays ice-free year-round, has significant logistical advantages towards Asia. From West Canada, it's only 10 to 11 days sailing to Asia, compared to 25 plus days from the U.S. Gulf Coast, and more than 18 days from the Arabian Gulf. As has been demonstrated by RIPIT, this makes it a strategic, attractive location. For the first phase of the terminal, which consists of approximately 98,000 cubic meters, we have signed a long-term commercial agreement with AltaGas. The location, as said, is strategically located and well connected to rail, and the new jetty will offer the capability to handle the largest gas-carrying vessels. The key permits to start construction are approved by both the federal and provincial governments. Beyond the first phase, this site offers a lot of opportunity to further develop for other bulk liquids like, for example, methanol. Our goal is to create, together with Helter Gas, high quality critical infrastructure for vital products, which fits well in our growth strategy. Also in India, we will expand. Together with our partner Aegis, we have a leading position in India as an independent storage provider. We operate 11 terminals across the country with a total capacity of just above 1.3 million cubic meters. These terminals mainly fulfill a distribution function in LPG, chemicals, oils and vegetables in this fast-growing economy. We announced and closed the joint venture with Aegis last year, and are pleased to present today four growth projects in three of these existing locations. We will add approximately 349 cubic meters of additional storage capacity, mainly for LPG, and to a lesser extent, also extra storage facilities for liquid products, such as vegetables, will be developed. will be approximately 95 million euros, and the capacity is expected to be commissioned by 2025. With this expansion, we strengthen our leading position in India and deliver on our strategic ambition to grow our base in gas terminals. In line with our market update two weeks ago on our LNG project portfolio, we see opportunities to grow our LNG footprint. We have the intention to acquire 50% of the shares of Ames Energy Terminal in the north of the Netherlands. The terminal is already operational and will contribute to our financial results upon completion of the deal expected by October this year. At Gate Terminal, we successfully closed the open season for a fourth LNG tank, which is expected to grow the recast capacity by 25%. A final investment decision is expected by September this year. GATE, as well as Ames Energy Terminal, fulfill an important role in the energy security of Northwest Europe. Both terminals are strategically located and offer opportunities to further develop for new energies. In Hong Kong, due to delays partially resulting in decreased attractiveness, we decided not to proceed with the project. All in all, our energy footprint continues to grow and offers opportunities to accelerate towards new energies. With regards to our strategic ambition to invest $1 billion to accelerate in new energies and sustainable feedstocks towards 2030, we see the momentum continuing. and that mainly centers around the infrastructure required for energy products of the future. You will see it active in four main areas, hydrogen and its carriers, low-carbon fuels and feedstocks, CO2 infrastructure, and long-duration energy storage. Hydrogen, and more specifically ammonia and LOHC, offer opportunities for VOPAG. We have a healthy pipeline of ammonia projects in the different regions, driven by an increasing demand for infrastructure to store and handle ammonia in a safe way, which is something we already have experience with, by storing and handling ammonia in six locations around the globe. The ACE terminal here in Rotterdam is a good example of a greenfield project to develop infrastructure for the storage and handling of green ammonia as a hydrogen carrier. Also with regards to LOHC, we have a joint venture with Hydrogenius, to further develop the supply chain of hydrogen between Germany and the Netherlands. With regards to low carbon fuels and feedstocks, we will soon commission a project in Vlaardingen to store waste-based feedstocks. I'm happy to see the progress on this strategic ambition to accelerate towards new energies and feedstocks. To summarize, we started the year with improved results and good progress on our strategic goals. The need for our services was healthy across all divisions and along all lines of products we store and handle. We benefited from VOPAC's well-diversified infrastructure portfolio, serving both the manufacturing markets as well as the energy markets around the globe. We improved our financial performance with strong Q1 results and continued our efforts in further reducing our CO2 emissions. We made good progress in growing our base in industrial and mainly gas terminals in the Netherlands for LNG and in Canada and India for LPG. A healthy interest is seen in infrastructure for new energies and sustainable feedstocks in mainly ammonia. Both our financial performance and favorable storage demand are driving the increased full year, the increased outlook for the full year of 2023. With that, I want to hand it over to our CFO, Michiel Helsing.