PRESENTATION OF FY 2018 AND Q4 RESULTS - VILHELM THORSTEINSSON CEO 1 March 2019 - Eimskip.com
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PRESENTATION OF FY 2018 AND Q4 RESULTS VILHELM THORSTEINSSON CEO 1 March 2019
KEY HIGHLIGHTS FOR THE YEAR 2018
RESULTS REASONS ACTIONS
Reefer liner services in Norway
A reduction of two vessels in
substantially under performing
Norway and continued focus on
improving operations
Lower margin in forwarding
services in Europe
Volume & revenues in both liner Reduction of FTE’s and
and forwarding services grew realignment of Org. structure
Increased cost in Trans-Atlantic
with third vessel – volume
but Continued streamlining of the
picked up late last year
container liner system and
EBITDA and profitability levels increased focus on operating
Positive second half of the year
are disappointing expenses
in container liner services
More focus on synergies
Good performance in Iceland
between different units and on
domestic operation & the
processes automation
Faroes operation
2
OPERATING ACTIVITIES
LINER SERVICES VOLUME IN 2018
Container Liner volume up 7.0% but Reefer Liner services down 13.6%
VOLUME DEVELOPMENT GEOGRAPHICAL SPLIT
10% 145
9%
140
8% 6% 5%
7% 135 11% 15%
6%
130
12%
5% 2018 12% 2017
125
4%
71% 68%
3% 120
2%
115
1%
7,9% 4,2% 5,9% 3,6% 4,2% Iceland Faroe Islands Norway Trans-Atlantic Iceland Faroe Islands Norway Trans-Atlantic
0% 110
2014 2015 2016 2017 2018
Volume index: 2010 volume at 100
4
FORWARDING SERVICES VOLUME IN 2018
Growth driven by dry cargo up 23.7% | Reefer forwarding volume down 1.9%
VOLUME DEVELOPMENT REEFER VS DRY
45% 250
40%
35% 200
30% 24%
29%
25% 150
20% 2018 2017
15% 100
71%
10% 76%
5% 50
15,6% 5,1% 4,8% 41,2% 4,3%
0%
Reefer Dry Reefer Dry
-5% 0
2014 2015 2016 2017 2018
Volume index: 2010 volume at 100
5
VOLUME IN Q4 2018
Strong volume growth in Container Liner up 10% | Dry Forwarding volume down 17% due to discontinued low margin service
LINER SERVICES FORWARDING SERVICES
12% 160 50% 250
140
10% 40%
200
120
8% 30%
100 150
6% 80 20%
60 100
4% 10%
40
7,3% 8,8% 9,3% 44,0% 50
2% 0%
20 -5,9%
6,5% 10,2% 0,1% 4,5% 5,9%
0% 0 -10% 0
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Volume index: 2010 volume at 100
6
FINANCIAL RESULTS
INCOME STATEMENT 2018
Continued revenue and volume growth year-on-year but disappointing operating result and profitability
Revenue Expenses EBITDA
EUR 689.2 m EUR 639.9 m EUR 49.2 m
up 3.8% up 5.5% down 13.1%
Depreciation and
Net finance expense Net earnings
amortization
EUR 4.9 m EUR 7.4 m
EUR 32.5 m
down 32.0% down 56.0%
up 8.0%
8
SEGMENT PERFORMANCE
Liner affected by Norway reefer liner & cost of capacity increase in TA | Forwarding affected by challenging market conditions
LINER
Revenue Expenses EBITDA
EUR 449.2 m EUR 399.1 m 35.0 m
up EUR 10.8 m up 13.6 m down 4.5 m
FORWARDING
Revenue Expenses EBITDA
EUR 239.9 m EUR 240.8 m 14.2 m
up EUR 14.4 m up 19.6 m down 3.4 m
9GEOGRAPHICAL SPLIT OF REVENUE
Minor changes in geographical split of revenue | Norway and Europe decreasing
5% 4%
7% 7%
25% 48% 24% 48%
2018 2017
7% 9%
8% 8%
Iceland Faroe Islands Iceland Faroe Islands
Norway Europe Norway Europe
Asia Other Asia Other
10EBITDA BRIDGE
Container liner system rebounded in Q4
EUR million
12M EUR million Q4
70
14
65
60 12
(1.2)
55 (1.4) 10 (3.5)
(4.2) 1.6 (0.9)
50 (3.4) (0.7) 1.1
2.3 8
45
40 6 11.9
57.2
35 49.2 9.4
4
30
25
2
20 0
11CAPEX 2014 - 2019
Considerable investments forecasted in 2019 │ Driven by long term investments in vessels and port facilities
80
70
Infrastructure and vessel investment amounting to
60 EUR 57.5m
50 Majority in the new vessels, Sundahöfn Terminal and a
new gantry crane
40
Disposal of current Dettifoss & Godafoss will have
some offsetting effects
30
20
10
0
2014 2015 2016 2017 2018 2019B
Operation Vessel dockings Investments
12CASH FLOW BRIDGE
Investments have led to increase in borrowings
60
50
(19,0)
40
29,0
30
(11,0)
20 1,0
(32,9) 31,6
10 23,2 21,9
0
13FINANCIAL RATIOS 2014 - 2018
Increased leverage but strong financial position | Equity ratio 49.1% at year-end
NET DEBT / EBITDA NET DEBT AND EQUITY RATIO
EUR million
2.2 120 100%
Net debt
2.0 110 90%
Equity ratio
1.8 100
80%
1.6 90
70%
1.4 80
70 60%
1.2
60 50%
1.0
50 40%
0.8
40
0.6 30%
30
0.4 20%
20
0.2 10 10%
0.65 0.78 0.78 1.80 2.80 24.9 35.4 41.6 102.8 137.7
0.0 0 0%
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
14DIVIDEND PROPOSAL
Proposed total payment of EUR 4.8 million
DIVIDEND POLICY DIVIDEND PROPOSAL 2019
The policy of Eimskipafélag Íslands hf. is ISK 3.50 per share
to pay annual dividend that equals an
amount in the range of 10-65% of net
profit after taxes.
ISK 653.2 million total dividend payment
Decisions on dividend payment, and the Equal to about EUR 4.8 million
exact amount, are subject to the Approximately 64.8% of net
company’s future investment plans, earnings for the year 2018
market outlook and satisfactory capital
structure at any given time.
15GUIDANCE AND THE WAY FORWARD
THIS IS EIMSKIP
Customer
Requirements
Inventory
Distribution Management/
Domestic Distribution
LINER CUSTOMERS Transport FORWARDING
Inventory and Documentation
Material
Management
Niche operator in the North Global reach in forwarding
Atlantic market through own offices and
partnerships
Airport Handling
Transportation
and Intermediate
Road, Rail,
Storage
Sea, Air
Port Handling
17 and Intermediate
StorageNEW ORGANIZATIONAL STRUCTURE
More holistic view and accountability of individual business divisions & Operations
Affected by
CEO structural
Vilhelm Már Þorsteinsson changes in January
Business Process General councel and
Management & IT compliance officer
Hilmar Karlsson Davíð Ingi Jónsson
Finance
Iceland Domestic International
Egill Orn Petersen
Sales and Operations and Operations and
Operations
Hilmar P. Valgarðsson marketing Logistics logistics
Matthías Matthíasson Guðmundur Nikulásson Bragi Þór Marinósson
Human Resources
Elín Hjálmsdóttir
18STRATEGIC LONG TERM INVESTMENTS
Long term financing secured
Two new container vessels Sundahöfn Terminal and New Liebherr gantry crane
Newbuilding of two 2.150 teus The Red Line planned to be extended All necessary construction work at Replacing 36 year old Jakinn which
container vessels in China with to Greenland with the planned co- the new key area is executed by has made above 2 million moves
estimated delivery during 2H 2019 operation with Royal Arctic Line Faxaflóahafnir during that time
Subject to approval from Planned to be finalized in phases in
Vessels will be named Brúarfoss and
Icelandic Competition the period from July to September
Dettifoss
Authorities (SKE)
Key investment to service larger
Eimskip has already paid 40% of the vessels – an investment for next
Current 1.450 teus Dettifoss and
purchase price and secured long term decades
Godafoss will be sold later this year
financing of 80% - cash will be
released upon funding
Operating savings through fuel
efficiency and lower unit cost per teus
19ESTIMATED EFFECT OF IFRS16
Eimskip will implement IFRS16 financial reporting standard on operational lease agreements at the start of 2019
10%
Asset and liability increase: EUR 35 - 40 million
40%
EBITDA effect EUR 18 million
31%
Equity ratio decrease 49.1% -> 45.1%
19%
Leverage ratio decrease 2.80 -> 2.09
Buildings Land Vessels Equipment
20EBITDA GUIDANCE FOR 2019
EBITDA in the range of EUR 49 - 57 million*
2019 Guidance General operating activities
Million EUR 2017 2018 Lower Upper Increased focus on operating cost and improving current business platform
57-63 Revenue & cost synergies between different Eimskip’s offices and subsidiaries
EBITDA 57,2 49,2 49,0 57,0
Liner services
Working capital changes & other (13,2) (13,5) Expecting continued growth in Trans-Atlantic services
Taxes (2,6) (1,7) Challenging operating environment in reefer liner in Norway
Maintenance CAPEX net sale (20,4) (25,8)
Increased focus on improving operation
Cash flow before debt service 21,0 8,3
A decrease of two vessels since middle of last year
Debt repayment and interests (19,0) (14,0) Export expected to be stable but uncertainty regarding outcome of capelin
Cash flow before Investments 2,0 (5,7) fisheries
Import in Iceland under pressure, mainly due to cool down of Icelandic
Net investments (54,7) (26,1) economy and arising uncertainty
Debt funding 49,4 40,7
Forwarding services
Cash flow available to shareholders (3,2) 8,8
Volume expected to grow in reefer but go down in dry forwarding
Margins expected to improve from last year
External factors and general reservations
Uncertainty what effect the cool-down of the Icelandic economy will have,
especially on import
Tension in the Icelandic labor market and uncertain development
General reservations such as geopolitical risk (Brexit), trade tension & global
economic conditions, import, export & forwarding volumes, development of
freight rates & bunker prices, interest- & currency exchange rates and
competition
21
* Excluding IFRS16 effectQUESTIONS
DISCLAIMER Information contained in this presentation is based on sources that Eimskipafélag Íslands hf. (“Eimskip“ or the ”Company“) considers reliable at each time. Its accuracy or completeness can however not be guaranteed. Copyright of information contained in this presentation is owned by Eimskip. This presentation, including information contained therein, may not be copied, reproduced or distributed in any manner, neither wholly nor partly. This presentation is solely for information purposes and is not intended to form part of or be the basis of any decision making by its recipients. Nothing in this presentation should be construed as a promise or recommendation. Eimskip is not obliged to provide recipients of this presentation any further information on the Company or to make amendments or changes to this publication should inaccuracies or errors be discovered or opinions or information change. Statements contained in this presentation that refer to the Company’s estimated or anticipated future results or future activities are forward-looking statements which reflect the Company’s current analysis of existing trends, information and plans. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially depending on factors such as the availability of resources, the timing and effect of regulatory actions and other factors. Eimskip undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this presentation. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. All forward-looking statements are qualified in their entirety by this cautionary statement. By the receipt of this presentation the recipient acknowledges and accepts the aforesaid disclaimer and restrictions. 23
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