Welcome to the GTT First Quarter 2019 Activity Update Conference Call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question-and-answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you the conference is being recorded today, Tuesday the 16th of April 2019. I would now like to hand the conference over to your speaker today, Marc Haestier, Chief Financial Officer of GTT. Please go ahead.
Thank you, Laura, and good afternoon, everybody. I'm pleased to, once again, be there to give you some highlights on, in this case, our first quarter trading activity. The key highlights: first quarter consolidated revenues stand at just under EUR 59 million, EUR 58.9 million to be specific, and I'll give more details a bit further in this presentation. We've had a strong level of new orders in the first quarter, which I'm sure you have been following, with 14 LNG carriers and one bunker ship in the first quarter. The order book on core business, which stood at 97 units at the end of 2018, now stands at 101 units made of 88 LNG carriers, eight FSRUs, two FLNGs, and three on-store storages.
The movements in the first quarter were precisely what I mentioned: the new orders, the 14 new orders for LNGCs, and there were also 10 deliveries, nine LNG carriers, and one FSRU. On the LNG as a fuel business, new business, the order book now stands at 12 units at the end of the first quarter, with an additional order for one bunker ship in this quarter. Now, no doubt you will have seen the announcement we made yesterday, so this is post first quarter, but it's worth to mention that we've had a new success in the LNG fuel business with an order for a retrofit of a very large container ship, which will be converted to LNG. A brief update of the market, and since we discussed this at the end of February, nothing much new.
The trends are still very positive for LNG demand, which is expected to double between 2018 and 2035, with growth coming mainly from Asia and continuous growth expected over the year, so nothing new on this front. On the shipping market, we're seeing now charter rates stabilizing, whether we're talking of spot charter rates, which are now standing at around $60,000 per day, but also on the one-year charter rates, which are stabilizing around $90,000 per day. We also were talking earlier this year of liquefaction projects and FIDs, which were expected. In the first quarter, we had an FID for Golden Pass project, which is a 15.6 million tons per annum project that was in February, which means that in one year to date, we've had FIDs for a total of 36.5 million tons per annum.
You will remember that last year there were three projects which reached their FIDs, one in the U.S., one in Canada, and one smaller one in Africa. We are clearly expecting more FIDs in the next couple of years as various projects are working their way towards their investment decision. For example, the Mozambique LNG Area 1, where 9.5 million tons have been contracted out of a total of 12 million tons, and this project to be taken over by Chevron, so these are positive signs going ahead. The other one is, the second one is Arctic LNG 2, where some slots, 14 exactly slots, have been booked at the Zvezda shipyard for potential future ship orders, also showing signs of strong activity on this particular project. And finally, Qatar LNG expansion, where engineering contracts have been signed for the expansion of the North Field project.
A word on LNG as a fuel: we are pursuing our entrance or our entry in this new market with a new bunker ship ordered in March of this year, a 12,000-cubic-meter tank equipped with Mark III Flex technology and owned by MOL shipowner. And last but not least, in April, one very large container ship which will be converted for LNG, so we will be retrofitting a tank with 6,500 cubic meters capacity, also equipped with Mark III technology in this case. This is a ship which is owned by Hapag-Lloyd, so also it's an interesting diversification in terms of container ship owners. We had orders from CMA CGM, you will remember, for new LNG carriers, so now we have a new ship owner and a retrofit project which is also a first. Now, moving on to some numbers, I mentioned total revenues at EUR 58.9 million.
If you compare to the first quarter of last year, this is a decrease in total of 8.2%, but which really comes from the core business and is linked to the phasing effect of our revenues based on the order book. In 2018, we still had a lot of orders in our revenues which were linked to orders which dated prior to 2016, so 2015 and to some extent 2014, whereas in the first quarter of this year, we are beginning to build up the revenues based on the orders received in 2017 and in 2018. I will also remind you that our revenues in each quarter may vary, so I would not suggest that you multiply this number by four to get a view of our full year revenues. Revenues from services have been on the increase compared to the first quarter of last year.
This is notably due to the rise, the increase in maintenance services, and also to some extent to the contribution of Ascenz. All this places us in a position, not surprisingly, to confirm our outlook for 2019. For memory, in terms of revenue, we are looking at a range of EUR 255 million-EUR 270 million. For EBITDA, we are looking at a consolidated EBITDA in a range of EUR 150 million-EUR 160 million. And as far as dividends are concerned, we are looking at a payout of at least 80% of consolidated profits. So that is it for this brief introduction. I will now hand back to Laura for questions.
Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, that's star one if you wish to ask a question. Your first question comes from the line of Jean-Luc Romain. Please ask your question.
Good afternoon. Thank you for taking my question. I was wondering if you have an estimate of how large the LNG carrier, sorry, container carrier market, well, conversion market might be.
This is clearly a difficult one to answer. I mean, we know what the fleet of very large carriers is, and in fact, this was presented in our full year presentation. But clearly, the real question is not so much how many ships there are, but which are those which will be good candidates for retrofit. And this will very much depend on a number of factors, but in particular, the age of the ship. Because obviously, the younger the ship, the better it is suited for retrofitting. But it's difficult to give a number in that respect.
May I ask an additional question about the size of the tank? It's about three times smaller than the tanks that were ordered for the CGM container carriers.
That's correct.
How is that determined?
Well, it really depends on the actual size of the ship. I mean, the CMA CGM ships are really extremely the largest container vessels ever built. For this one, you are looking at a slightly smaller, even if the number of containers is still quite impressive. So it's really a question of size of ship.
Thank you.
Your next question comes from the line of Martin Burri. Please ask your question.
Yes, good evening, Martin from Exane. Two questions on my side. First, at the International LNG Conference in Shanghai in early April, Qatar said that it will invite very shortly shipyards to participate in a tender for the provision of LNG ship construction slots. Have you a view on when Qatar could effectively announce its big order and when shipyards could start the construction of these ships?
Well, again, difficult one to call. I think there was a lot of communication around the announcements made, in fact, at this trade conference. It was clearly a statement made to the market saying, "We are around and we will be hopefully ordering a large number of ships." But they haven't been that more specific about it. But clearly, this will contribute to, presumably contribute to our orders in the future. And you know what our estimates are over the next 10 years. Okay?
Okay. And my second question was on your favorite topic, Solidus. DSME received approval from Lloyd's Register for the new version of its Solidus membrane technology. Have you had the opportunity to look at the new characteristics of this new version? And do you usually talk with DSME on Solidus?
Yes. Well, we certainly seen the announcement on Solidus, and I suspect our technical people are looking at that fairly closely. Sorry, what was the second part of your question?
I was wondering if you talk of Solidus with DSME on a regular basis.
Whether we talk?
Yeah. Is it a subject you have with them?
As you know, DSME is one of our largest customers, so we talk with them a lot. And I'm sure in these conversations, the subject of Solidus must come into the conversation. Yeah. But I can't expand really that much on that because, I mean, clearly, they are not necessarily going to tell us very much about that system.
Okay. Thank you very much.
Once again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Your next question comes from the line of Guillaume Delaby. Please ask your question.
Yes. Good afternoon. A very small and very, very specific question. Regarding your services revenue, you mentioned an increase in maintenance operations. I may be wrong, but I think it is the first time you mentioned that. So does it mean that basically I think you have a thermal camera and a concept which is called balloon? Are those two products starting to find their market? Yes and no. And basically, if I'm right, should we expect basically those products to continue to increase?
Okay. When we are mentioning this increase, we're talking of maintenance mainly. So these are the current maintenance which are performed when the ship is docked. And the increase in this volume is really, in a way, a reflection of a better shipping market where, first of all, there are more ships around progressively, and the ship owners are, say, more keen to spend a bit of money on the maintenance of their ships. So we're not really talking about the two products you mentioned in this case, but certainly our inspection services with thermal cameras, which is called TAMI, is a product which has had, or service, if you like, which has had a lot of success in the past year. So it's not kind of a new product. The balloon is something perhaps more recent, and it's probably still fairly marginal.
Okay. Thank you.
Your next question comes from the line of Kevin Roger. Please ask your question.
Yes. Good evening, gentlemen. Two questions on my side, please. The first one is related to the current rate of the LNG cargo. We have seen a decline year to date. End of last year, when you were mentioning the basically big rise in the rate, you were mentioning the fact that there were no available vessels on the spot market. Can you tell us what's the situation currently? How many vessels are available on the spot market currently? And the second question is related to the phasing of the construction of the new cargoes. In the press release, you say that on the 48 cargoes that you have received, only 14 are already in construction. But if I'm not wrong, you have almost 30 units that are scheduled for delivery before end 2020. So basically, is there any sort of delays or things like that?
Because if I remember, you need at least something like two years, two years and a half for the construction of a cargo?
Yeah. Okay. First question, I don't have the exact number of available ships, and that can fluctuate quite a lot from one period to another. These are not huge numbers, of course. But I think really the stabilization is more due to the fact that there's not so much demand for chartering of ships. I guess this is more the reason. As far as the schedules, first of all, we are not seeing any specific delays in construction. It is more due to the phasing of the actual planning of the various ships. So nothing out of the usual here. And when we were mentioning the 14 ships out of 48 orders, we are talking of the 2018 orders.
There were orders in 2017, which obviously are under construction, and which are those which will be FSRUs, by the way, which are those which will be delivered first before the 2018 orders.
Yes. Yes. It's for sure that if I'm not wrong, I understood that the 14 that you were mentioning on the 48 are related to the unit secured in 2018. But when I look at the delivery dates that you mentioned in each press release for each one, I think you have almost 30 units that are scheduled for delivery by end 2020. So it's just that I'm a bit surprised to see that, let's say, half of those vessels are already in construction for delivery in 2020.
Yes. But these vessels are not necessarily ships which were ordered in 2018. They could have been ordered earlier than that.
No, no. It's okay.
You are looking at the 20 on average, you are looking maybe at 18 months for the construction of a ship. So it's not inconsistent as far as I can see.
Okay. 18 months for the construction. Okay. Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Your next question comes from the line of Jean-Pierre Dmirdjian. Please ask your question.
Yes. Good evening, Mark. A quick question to be sure about your guidance because I think there is a disclaimer that was not formally there the previous quarter. You're saying that in the absence of significant cancellations or delays, I believe that you said that the sequential decline we've seen in revenues in Q1 for LNG carriers is just due to phasing and not to any potential construction delays. I just wanted to be sure that whether you may have detected any potential signs at the moment of future risks of construction delays, such as protest strikes at the shipyards or anything else. Do you have any signs that there could be tangible signs that such risks could materialize in the next quarters?
Yeah. Thank you, Jean-Pierre. First of all, as of today, we are not seeing any such signs. But I should point out that this little sentence, you will find in all our quarterly press releases going back to it was in the full year, but if you go back even last year or the year before, you will find that sentence, which is always a general protection we take, precaution we take in terms of our guidance. So nothing to read in that little piece of sentence. And so far, no signs of potential delays. But of course, the future will let us know if such a situation does occur. But at this stage, no signs.
Okay. That's very clear. Thanks, Marc.
A pleasure.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, that's star one if you wish to ask a question. Your next question comes from the line of Kevin Roger. Please ask your question.
Yes. Thanks for taking me again. One follow-up, please. Any update on the potential impact for you from the merger between Hyundai and DSME in terms of commercial discussion, etc.? Any update on that side?
Nothing particularly new from what we said at your end. I mean, again, it's still fairly early stages in this merger. I think we mentioned at the time potential or, yeah, potential views on that, but nothing new from what we said at your end.
Okay. Thanks.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Your next question comes from the line of Martin Burri. Please ask your question.
Yes. Just a follow-up question on Q1 2019 orders. Do you confirm that these orders will not contribute to fiscal year 2019 revenue? Thank you. Or would we have a slight effect on revenue?
If there is, it will be very marginal. It very much depends on the beginning of construction, as you know, because you start recognizing revenues from the steel cutting point. So clearly, the bulk of the revenues on these orders will not be in 2019.
Okay. Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, that's star one if you wish to ask a question.
Okay. It seems there are no further questions.
We have no further questions at this time.
All right. Thank you, Laura. Well, all it remains for me is to say thank you for attending this call and goodbye. No doubt we will be talking again soon. Thanks. Bye.
That does conclude the conference for today. Thank you for participating. You may all disconnect.