Koninklijke Vopak Uns/Adr

Hello and welcome to the Royal WAPAC full year 2023 update. Throughout the call, all participants will be in a listen-only mode. And afterward, there will be a Q&A session. This call is being recorded. I'm pleased to present Patjona Topciu, Head of Investor Relations. Please go ahead with your meeting.

Good morning, everyone, and welcome to our full year 2023 results call. My name is Patjona Topciu, Head of IAC. Today, our CEO, Dick Richelle, and CFO, Mikhail Yeltsin, will guide you through our latest results. Our CEO, Fritz Eldring, is here as well and will be available for questions during the Q&A session. We will refer to the full year 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 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 uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to the question during the Q&A. With that, I would like to turn over the call to Dick.

Thank you very much, Fatjana, and a very good morning to all of you joining us in the call. First of all, I'd like to share a few words on Frits, Frits Ullering. Frits has been a familiar face for many of you in the call, and therefore I'd like to take a moment to share our utmost appreciation for his valuable and significant contributions in the many areas of OPAC in the past 14 years. As announced in late December, Frits will step down as ED member per April of this year, and we will miss Frits as a colleague, but most of all as a friend of OPAC. Now moving on to slide number four and the key highlights for 23. Throughout the year, the need for our services was strong across the portfolio, and we continued to serve our customers well. We 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. We reported improved financial results by growing our EBITDA by 77 million to 964 million, which is a record result for VOPAC. Also, our operating cash return improved significantly, from 11.4% last year to 14% at the end of 2023. Next to financial improvements, also on sustainability, we reported strong performance. On safety, our first priority, we continued to further improve our performance on personal and process safety. In 2023, we executed some key divestments in line with our strategy to rationalize the portfolio. The three chemical terminals in the Netherlands and the Savannah terminal in the U.S. were successfully divested. Our strong business performance and divestment proceeds led us to increase our shareholder return with a share buyback program of up to €300 million and a proposed dividend of €1.50 per share, a 15% increase compared to last year. Now let's take a look at growth. We're solidifying a leading position with investments in Singapore, China and the US, while at the same time expanding our footprint in gas with LPG and LNG. In the Netherlands, we've acquired 50% of the shares in Eames Energy Terminal, the north of the Netherlands. Also, Gate in Rotterdam keeps fulfilling an important role in the energy security of Northwest Europe and started construction of the fourth tank in 2023. Now let's move to accelerating towards new energies and sustainable feedstocks. We've commissioned repurposed infrastructure in the Port of LA related to low-carbon transportation fuels. Also in Singapore, infrastructure was repurposed for blending biofuels into marine fuels. In Brazil, a market with strong growth in low-carbon fuels, we are repurposing capacity for feedstock for low-carbon transportation fuels. And lastly, we entered the electricity storage sector in the U.S. We will own and operate two standalone battery energy storage systems close to Houston, which I will explain more later. Moving on to some of the dynamics in the key markets in which we operate and how they impact the demand for our infrastructure services. Starting with gas, mild winter and high storage inventories has led to lower LNG demand in Europe and Asia. However, long-term impact for us is limited due to the take-or-pay contract structure. While LPG markets were positive as residential and petrochemical demand continues to increase in the main end markets, the other LNG and LPG terminals showed a stable performance. Now move on to new energies and sustainable feedstocks. Increasing demand for low-carbon fuels and feedstock solutions is seen as companies strive to lower their emissions. We see growing momentum for low-carbon hydrogen, CCS, and renewables, driven by government policies. We will continue to invest in repurposing our infrastructure to cater for low-carbon fuels and feedstock, as we did in the US, the Netherlands, and Singapore last year. Move on to the energy markets. We served through oil terminals. The fundamentals of the market remain healthy, with high demand for oil products driven mainly by non-OECD demand, while geopolitical tension drove price volatility. These market dynamics support favorable demand for our storage services. All distribution terminals serving local growing markets had a stable performance. Looking at the manufacturing markets, we served through our industrial and chemical terminals. Chemical production continued to be weak in 2023, as soft demand and elevated interest rates prompted destocking. This is expected to lead to some pressure on occupancy in distribution terminals in China, Singapore and Belgium. On the industrial side, we see lower activity levels. However, it has limited impact due to the long-term stable nature of our contracts. Let me take you through the different elements of our business performance in more detail. Full year 2022 with an EBITDA of €887 million as a starting point. We experienced a negative currency translation effect compared to last year of €23 million. The divestment of a Savannah terminal and the three chemical terminals in Rotterdam had a positive EBITDA impact of 6 million euros. That's mainly as a result of the relatively strong performance of the three chemical terminals in Rotterdam compared to 22. The oil markets have been favorable in 23. High occupancy rates and contract renewals drove growth in EBITDA from an oil portfolio across the globe, especially in Rotterdam and Singapore. In regards to chemical markets, during 2023, we have seen an overall growing storage demand across the portfolio. Next to the increased need for import of chemicals, mainly in Europe, indexation of contracts is partially compensating the rising cost and has supported the revenue increase. In gas markets, we see the LNG market is back to normalized levels, as the available capacity is meeting the market demand and our LNG and LPG terminals are performing their role in local energy systems. So positive market trends led to a solid proportional occupancy of 91%, mainly due to the positive demand in the business units Asia and Middle East, Singapore and the Netherlands. When comparing our cost base to last year, we see an increase of 50 million, mainly driven by high personnel costs and other operating expenses. Finally, we've delivered on our growth investments, Both projects and acquisitions have contributed €11 million in 2023. This all results in a 9% EBITDA growth to €964 million year over year, supported by, as I said, high occupancy rates and good commercial capabilities to pass on indexation. As mentioned before, next to improving our financial portfolio, we kept focus on improving our sustainability performance in 2023. Our sustainability ambitions are translated into several KPIs that track our progress on environmental, social, and governance topics. The record-best personal safety performance and consistently good process safety performance are something which makes me proud, and this will remain our first priority. With regards to our emissions, we were able to further decrease our scope 1 and 2 CO2 emissions. Compared to 22, with 16%, compared to our baseline year 21, even with 25%. In Colombia, our LNG terminal spec will invest around 20 million euro to reduce the terminal CO2 emissions by around 50%. The number of women in senior management roles was stable in 23 compared to 22, and we keep our target of 25% women in senior positions by 2025. We drive value through attractive growth investments and rationalizing the existing portfolio. In 23, we executed some strategic divestments in mature and declining markets, mainly chemicals. This led to overall cash proceeds of more than 500 million for relatively low cash-generating assets. This will be allocated to our strategic ambition to invest 1 billion in growth of gas and industrial terminals and 1 billion euro in accelerating towards new energies and sustainable feedstocks by 2030. Since June 22, when we announced the strategic priorities, we have invested 480 million euro in gas and industrial and new energy infrastructure. These investments supported by a strong balance sheet, can be done at attractive multiples of anywhere between 4 to 8 times invested capital to EBITDA. Now let's move on to how we are delivering in China. Over the last 15 years, we built a strong footprint in China, a journey where we have reduced exposure to chemical and oil distribution terminals and have grown our core in industrial terminals, backed by long-term contracts. Today, almost 10% of our proportional EBITDA comes from China and North Asia, and 70% of the business unit's revenues come from contracts longer than 10 years, with mainly guaranteed revenues. Over the years, some strategic divestments were done, mainly in the oil and chemical distribution terminals, as you can see here. We started with this already years ago, and today's announcement of Lanshan is part of this portfolio transformation journey. At the same time, We invested heavily in industrial and gas terminal infrastructure, for example in Haiteng, Qingzhou and Chaojing, all industrial terminals. A total of 690,000 cubic meters of industrial storage capacity is currently under construction, planned to be commissioned later this year and early 2025. The main project in Weizhou for ExxonMobil's new chemical complex is expected to be commissioned later this year. This portfolio of terminals in China protects us relatively well against weak local chemical markets the region is facing at the moment. Next to China, we also strongly believe in India as a fast-growing market. Together with Aegis, our joint venture partner, we are growing rapidly here. Our joint venture, which was established in 22, with a capacity of 1.3 million cubic meters in five strategic locations. storing many liquid products and LPG, supporting the economic growth and making alternative, lower carbon fuels available throughout the country. Today, we announce an expansion in Mumbai, a new strategic location on the West Coast, and well connected to the hinterland. We're going to invest around 10 million euro in a 100,000 cubic meter storage, newly built facility, which is planned to come live in the fourth quarter of 2024. Together with our previously announced expansion projects in Pipavav, Mangalore and Haldia, our footprint will grow to 1.8 million cubic meters by 2025, an almost 40% increase compared to 2022. We deliver on our strategic commitment to grow our base in industrial and gas terminals in the U.S., Our joint venture with BlackRock in Freeport will invest a total amount of approximately 37 million euro to repurpose and build new capacity. This is underpinned by a long-term agreement and plan to become operational in the second half of 2025. Also on the west coast of Canada, we have a highly strategic opportunity for VOPAC, which would enhance Canada and Asian market connectivity and link LPG oversupply in Western Canada to increasing Asian demand. Site-clearing work has started, and a final investment decision is expected within the first six months of 2024. With regards to LNG, we've successfully expanded in the Netherlands by completing the acquisition of Eames Energy Terminal in the north, and we started the construction of the fourth tank at gate. These developments are supporting energy security in Northwest Europe. With regards to our third strategic pillar, accelerate towards new energy and sustainable feedstocks, we see more and more momentum. After repurposing capacity in the US, the Netherlands, and Singapore, we also announced today a project in Brazil. 30,000 cubic meters will be repurposed to support the production of renewable road and jet fuel. The capacity is underpinned by long-term commercial agreement with attractive cash return, and we are committed well positioned to be the market leader in the Brazilian renewable feedstock market. In Vlaardingen, the Netherlands, we announced today another investment of 10 million euro to repurpose an additional 30,000 cube for sustainable biofuel feedstock. Not only in the sustainable fuels and feedstock, but also in our other areas of focus of hydrogen, CO2 and long duration energy storage, we see momentum building. In Antwerp, we're making good progress in cleaning up our new strategic plot of land, to redevelop the site to support new energy infrastructure investments. And in the field of electricity storage, today we announced an investment of around 9 million euro in two battery systems, close to Houston, with a capacity of 10 and 20 MWh, which will become operational already in Q1 and Q4 of this year. This is a development we are very excited about. It fits well in our strategy to accelerate the investment for infrastructure in new energies and sustainable feedstocks. We improved our financial performance over the last two years by rationalizing our portfolio and investing in growth projects. Our focus on a healthy cash return increased our earnings per share by approximately 40% compared to last year. Furthermore, our balance sheet was robust at a net debt to EBITDA ratio of 1.99 times, while our management range is 2.5 to 3 times net debt to EBITDA. In addition to creating value through growth investments, which is our priority, we are returning meaningful value to our shareholders. Successful execution of our strategy has led to a robust financial position, which allows us to raise the dividend to €1.50 per share, a 50% increase compared to 22, and the start of a share buyback program of up to €300 million. To summarize, we delivered with a proven track record of execution. We reported strong full year 23 financial results, and actively managed our portfolio. We continue to create connections through our well-diversified global portfolio by growing our base in industrial and gas terminals with expansions in China, US, India and the Netherlands. Our well-diversified terminal portfolio is supporting energy security and energy transition. We drive progress as we capture the opportunities of the energy transition. As a result of all of the above, we create and return value to our shareholders. With that, I want to hand it over to our CFO, Michiel, who will give you more insights on the financial aspects of the year.