Koninklijke Vopak Uns/Adr

Good day and welcome to today's Volpac Q3 2023 results conference call. This meeting is being recorded. At this time, I'd like to hand the call over to Fationa Topcu, Head of Investor Relations. Please go ahead, ma'am.

Good morning, everyone, and welcome to our third quarter 2023 results. My name is Fationa Topcu, Head of IR, our CEO. Dick Rischel, COO Chris Eldring, and CFO Mihail Hilsing will guide you through our latest results. We will refer you to the third quarter 23 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 involves certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided during the questions, during the Q&A part. With that, I would like to turn over the call to our CEO, Dick Rochelle.

Thank you very much, Facciona, and a very good morning to all of you joining us in the call this morning. Let's move to the key highlights. In the third quarter, the need for our services was strong across the portfolio. We continued to serve our customers well across products and the different regions. We also delivered on a 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. Key highlights of our three strategic pillars. First, let's take a look at improve. We reported improved financial results with an EBITDA of 735 million, an increase of 12% compared to the same period last year. And occupancy levels remained high with a proportional occupancy at 92% year to date. We continued to actively manage our portfolio by divesting our chemical distribution terminals in Rotterdam after the strategic review we announced earlier this year. Besides financial improvements, I want to emphasize the focus on improving our sustainability performance. We maintained a good performance on personal and process safety and continued the trend of reducing our CO2 emissions also this quarter. Looking ahead, we're pleased to increase our 2023 outlook to an EBITDA of around 970 million euro, up from around 950 million euro we communicated earlier. Michiel will discuss our increased outlook in more detail later in the call. Let's take a look at growth. We are solidifying our leading industrial position in China and Singapore, while at the same time expanding our footprint in gas with LPG and LNG. We're working towards the completion of the acquisition of 50% of the shares in Ames Energy Terminal in the north of the Netherlands. We expect to close this deal before the end of the year. Gate Terminal in Rotterdam, fulfilling an important role in the gas market in northwest Europe, started construction for its fourth tank this quarter. Now to continue with our strategic goal of accelerating towards new energies and sustainable feedstocks. We've commissioned repurposed infrastructure in the port of LA related to low carbon fuels being sustainable aviation fuel and renewable diesel. Also, we announced this quarter that we started to collaborate for the development of a large scale, low ammonia production and export project along the use and ship channel. We believe that this will be an attractive opportunity to accelerate towards new energies in the US Gulf Coast. Moving on. to the market demand to share some of the key market dynamics and how they impact the demand for our infrastructure services. I'd like to give you some details on how the markets in which we operate developed and the impact on VOPAC. To start with gas, the developments in energy markets continue to support the healthy demand for energy infrastructure. Throughput levels are stable, backed by long-term contracts. SPEC terminal handled a high throughput because of low hydro levels in Colombia. The other LNG and LPG terminals show a stable performance as per the role in the local energy systems. An increased demand for low carbon fuels and feedstock solutions is seen as companies strive to achieve lower emissions. We will continue to invest in repurposing our infrastructure to cater for low carbon fuels and feedstocks, as we did in Los Angeles this quarter. Now moving on to the energy markets we serve through oil products. A growing demand on the one hand side versus production cuts announced by OPEC Plus and geopolitical tensions is causing volatility in this market. These market dynamics support favorable demand for our storage services, mainly at the HUB locations. Oil distribution terminals serving local growing markets have a stable performance. Looking at the manufacturing markets, we serve through our industrial and chemical terminals. The chemical markets are still oversupplied, causing declining margins and lower operating rates for the chemical producers. Supply continues to come from feedstock and energy-advantaged areas, like the Middle East and the United States. Less production in Europe is leading to higher import volumes. This leads to favorable demands for our infrastructure services serving the chemical markets. Throughput flows in our industrial terminals remain stable, but seeing some lower activity levels specifically in Asia and China. The relative impact is limited since the majority of our revenue on these terminals come from take-or-pay contracts. Now let's move to the next slide. Let me take you through the different elements of our business performance in more detail. The starting point is the Q3 year-to-date EBITDA of 2022, €659 million. We experienced a negative currency translation effect compared to last year of around €15 million. And also the divestment of our Savannah terminal had a negative EBITDA impact of €3 million. The oil markets have been favorable year-to-date. High occupancy rates, and contract renewals drive growth in EBITDA from our oil portfolio across the globe. With regards to the chemical markets, we've seen an overall growing storage demand across the portfolio compared to the same period last year. Next to the increased need for imports of chemicals in mainly Europe, indexation of contracts is partially compensating the rising cost and has supported the revenue increase. In the gas market, we see the LNG market is back to normalised levels. as the available capacity is meeting the market demand and our LNG and LPG terminals are performing their role in the local energy systems. When comparing our cost base for the first half year of last year, we see an increase of 37 million euro, mainly driven by higher personnel costs and other operating costs, offset by cost control measures. Finally, we have delivered on our growth projects which have contributed €6 million year-to-date. This all results in 12% EBITDA growth to €735 million year-over-year. Moving on to our second strategic pillar, to grow our base in industrial and gas terminals. As mentioned with the key highlights earlier, we are expanding LNG capacity and presence in the Netherlands. The construction of the fourth tank at gate terminal has started. and is expected to be commissioned in the second half of 2026. It will grow the terminal capacity with around 40% backed by long-term contracts. We're proud to see the momentum for expansion for the terminal completed in 2011 and fulfilling an important role in energy security in Northwest Europe. Also in the north of the Netherlands, we are taking the last steps to finalize the acquisition of part of the Ames Energy Terminal, which is operational for a little over a year now. These LNG terminals have potential for the long term, not only in gas, but also for new energy products. For example, in Ames Energy Terminal, we have the option to explore capacity increase and develop the site to facilitate the import of green hydrogen and CO2 infrastructure. We also keep investing in our industrial terminals, characterized by their industrial integrations with our customers. In Banyan, Singapore, we repurpose an existing pipeline and create a new pipeline connection with an existing customer. The expected commissioning is in the first half of 2025. We're also delivering on the third and last strategic pillar to accelerate towards new energies. As you know, we're focused here on four areas, hydrogen, CO2 infrastructure, low carbon fuels and feedstocks, and long duration energy storage. We see momentum continue to build around these four areas by increasing interest from our customers and new regulations worldwide. Two proof points mentioned here. First, in Antwerp, we have access now to a prime location in Europe's leading petrochemical cluster, which will be redeveloped with the primary aim to make a positive contribution to the decarbonization of the industrial cluster. And in Los Angeles, more than 20 tanks were repurposed for sustainable aviation fuel and renewable diesel and commissioned in September of this year. We see the interest and the need for low carbon fuels and feedstock storage picking up, also in other locations. Another example is in Singapore, where we repurpose some infrastructure to biofuel capacity for an existing customer at our Sabaro terminal. This will become operational soon. To summarize the key highlights, we improved results and made good progress on our strategic goals for the first three quarters of this year. The need for our services remained strong across most of our business units and along all lines of products we store and handle. We benefited from VoPak'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 Q3 results and continued our efforts in further improving our sustainability performance. We made good progress in growing our base in industrial and gas terminals around the globe. And a healthy interest is shown in accelerating towards new energy and sustainable feedstocks. Supporting these three priorities, we are pleased that our simplified organization structure is in place and will enhance the execution capabilities mainly at the country level and improve therewith the efficiency. With that, I want to hand it over to our CFO, Michiel Gilzing, who will give you more insights on the financial aspects of the quarter and the year so far.