Earnings Call: Q4 2019

Feb 14, 2020

Good to know. Okay. Good morning. Thank you for coming to this presentation, quarterly results for Wimbledon and Paulwick for the fourth quarter. There. I thought what I would do is to just share some, say, a few slides overall reflections, and then I'll hand it over to CFO, Christian Bourgitz, who will then repeat a little bit, say, more into details of the quarterly results. A bit of a backdrop on 2019, it's been an interesting year in many respects. Have said we are exposed to the global market and of course there's been some pretty hefty happenings during the year. You look at the geopolitical picture that we've been up against with trade wars, discussions between U. S. And China, of course that is if it's not impacting us, it's at least high on our radar because every measure that is taken will potentially have a significant impact on our business. But there's also been a few other things happening during the year. If you look at the general shipping markets, the currency index increased by somewhat by 24%. We don't have a lot of direct shipping exposure, but we have a lot of indirect exposure through our customers. And of course, it's pleasing for us when our customers' markets are moving in the right direction. And then climate related measures have really been coming in with strong force. I'll come back to that a little bit later. But of course, the IMO 2020 implementation and the lead up to that at the 2019 was, say, a very important period in terms of how were we able to adjust ourselves or particularly Valena Sveelamsen able to adjust themselves to be ready for, for the IMO 2020 rules. Looking at the financials, it's been in many ways okay. We've had a good net result, but we've had a mixed bag throughout the year when we look at the various businesses that we have. As I said, Christian will come back to the quarter in more detail. Some strong financial gains predominantly driven by changes in value of Hyundai Globus and in Cube, but landing at a net profit of US150 million dollars for the year. We've also had a share buyback during the year, which has been well received as far as we can understand. Overall, the return on our shares in terms of total capital appreciation and dividends has been 6%. I don't think that is fantastic. It's not a disaster, but it could and we would have hoped it to be more than what it has been. If you can allow me to talk a little bit about, say, the group and a few of the businesses that we do have, I would like to single out three of them. As you can see from this chart, we have a lot of very interesting businesses that we are extremely proud of, and they are all in various degrees very well positioned in the markets in which they operate. I thought I would single out three of them, the three in a way larger businesses that we have across the group being ship service starting with that company. We've had a pretty flat top line during the year, but at the same time we've had considerable improvements in our EBITDA. So we've had an EBITDA improvement in WSS, so we've just tried I believe about 20% during the year, which is quite good. Where do we take that from? Well, Marine Products, which is the largest part of the WSS group has performed well, but we've had a much more, call it, significant recovery within the agency sector. It's still far to go, so percentages are easier to manipulate when they come from a small number, but it's been quite a significant recovery within the agency sector, a sector which we will have continued focus on going forward and where we believe we have a strong position. WSS in many ways represents, say, a little bit of the backbone of our international platform. They have operations in close to 70 different countries. We have people. It's a company that we own 100%. This is where we use or the company we really use to develop the company culture and to pitch on, say, the overall goodwill marketing of the group around the world. So it's important in many aspects. 3,300 employees at the end of twenty nineteen, 200 people less than at the end of twenty eighteen. Why? Because we're just working on the efficiency, 365 days a year, twenty four seven. This is a business you just can't do a project, leave it for two years back and come back and see how it's, how it fares. You really just have to be on it every single day. But a very, very interesting business exposed to the global, merchant fleet. North Sea Group, moving on to then another company, not 100 old, but we have a 75% shareholding, a very interesting platform within offshore supply basis. Top line is a little bit down. Profitability is quite okay. But it's a profitability which is a little bit hard to measure from here. Well, it's not hard to measure the profitability in itself, but when you compare the profitability from year to year, it's a little bit more bumpy. One of the reasons is that this is a company who is much more, call it, project based. We have a lot of property. We buy properties. We sell properties. We have specific marine related or marine logistics related projects. So that goes up and down. If we look at 2018, that's when we had the majority of the military exercise, which of course inflated the top line and also part of the contribution. We are working very say, on positioning Nordsee Group to be, say, the greenest and the most emission free solution towards this industry, which we believe is important going forward and where we believe we have every possible tool there is to actually position this company to be by far the supplier of choice within its industry. Moving over to Valeder Sweden, They had a presentation yesterday. As you know, we are a 38% shareholder. I have to be somewhat careful about what I say. It's the company that should present their details. They have a leading position within their industry. It's a fantastic company. It's somewhat challenging market. There's been decline in volumes on the auto side. The top line or the volumes transported by Valenius Williamson last year is even further down than the reduction in the overall, say automotive segment. Why? Well, it's a combination of the decline in the market itself, but also commercial priorities where the company is focusing more on lifting what they believe is the right cargo to lift rather than just lift cargo for the sake of lifting it. The contract with Hyundai Motor Group was renewed as all of you probably have seen at the tail end of the year, which is good giving another period. I think we just have to keep in mind there's a lot of questions around Korea. We've been in Korea now for many years, seventeen years or whatever. Have been the And Hyundai Motor Group has been a fantastic customer providing us with a loyalty and call it a runway or visibility, which is second to none. The company is working on its performance improvement program and doing that well, which was presented again yesterday. This is an industry where the margins are different than what they used to be and hence the company needs to adjust accordingly. They've done, coming back to what I said on the first slide on IMO 2020, there's a lot of preparations that needs to be done in order to make a system like Valenes Wilhelmsen ready with a fleet of 125 to 30 ships ready for that transition. We've done that well in a lot of areas, both from a technical point of view, but also in terms of how they have interacted with their customers. There was a cost at the tail end of last year related to this, but the most important thing in my mind of course is that they are able to deliver a smooth service going into this. There's been a lot of ships in the industry in total who's been stuck, haven't been able to get the right fuel, etcetera. The company here has not really had that as an issue at all. So they've done a great job in that respect. And when we look at the overall markets for the car and railroad segment, There is definitely all capacity at this point in time, but there is a low order book. And at least in my mind, we can question ourselves or the industry can question themselves, why should we order new ships now given the low profitability but not the least the technology risk that is poses going into the future with new regulations in terms of sustainability and emissions. And on that note, I will segue a little bit into sustainability, because that's high on our radar. I'll just focus on a few, say, overriding areas where we are focusing as a group. Decarbonization of shipping is going to be and will be also for us a major, major focus area. I would not necessarily call it a challenge. I'm sure it will be a challenge as well. This is where a lot of us needs to keep our eye on the ball, and it's an area where we, who have a vision to be a shaper of the maritime industry, wants to be in the forefront. I'm sure there will be significant, technological opportunities, etcetera, representing themselves out there where the overall industry is slowly but surely, being able to move and comply to future regulations. And we, as Wielandsen, we are definitely going to be on that ball and hopefully well ahead of the pack. And we have a lot of projects. You know about the master project with autonomous ships. We're working on different hydrogen solutions. We're using, say, digital platforms or digital competence to see how we can use that in the future, but also how we can actually use it today to slowly but surely just do those initially incremental changes, which will hopefully lead to more substantial changes into the future. Responsible employer, there's no doubt that we want to be, we believe we are and it's a fundamental of what we've been doing for more than one hundred and fifty years. We are a competence based organization. So of course, we are focusing on the responsibility. What's happened? Responsibility for our employers. And, but it goes beyond, say, the internal. We need to look at who do we work with, how do they work, how do we interact, How can we make sure that the partners are actually also delivering up to the values that we would like to see? There will be and there are significant opportunities within the space of renewable energy. We have a lot of interesting, say, things going on. Whether they will mature or not remains to be seen, but we see that space as a very interesting space to be in from a Wilmsen Group perspective. And then last, as you can see on the right hand side there, marine, litter and pollution or ocean. We live in this environment. We need to do something in that space as well. The question is what can we do with our own organization and operation and what can we do with the force that we have with all the customers that we have to actually improve that space. And we believe there is a fair amount that we can do. Okay. And some working. There. Another part, I'll soon hand you over to Christian. But with this, say, space of range of businesses that we have, we also need to then look at constantly how can we develop, say, the products or services that we are offering to the industry. There's many of them. Here are just a few. I'll be quite quick. We've had three d printing up here several times. We're now in a situation where we have started to deliver certain products to the industry. We have six customers who have signed up to be called test beds, but early adopters, who are really keen to see this work in their operation. So that's pleasing to see. We've really taken a step from call it, ID to actually implementing this in the marketplace. There's a picture of this rope. This is what we call a snapback arrestor, a pretty fancy name. Mooring lines has been and is an issue for safety. When you're a vessel and the lines snap, then it's a tremendous force which are being released, which have caused a lot of deaths, but but also a lot of, of injuries. This solution takes away a lot of that tension. So, that's in the marketplace now and is very well received. And I would call it a pretty cool development and they have a pretty nice film that you can see on that one. We're working in the digital space to utilize most chips have a lot of sensors. There's been an issue with connectivity. Connectivity is slowly but surely improving and we are making solutions so that we can actually utilize that information to benchmark better, so that we can actually get all our customers, all the vessel owners can actually utilize that information in order to decrease the overall fuel consumption, which again is leading into sustainability, etcetera. I'll I'll probably leave it there if Kristian is going to get some time. I can't be here without talking a little bit about the coronavirus. Why? Because every person I meet, more or less, they ask me, how is that impacting you? This is another example. This is a, call it a site that we have made on our website. You can click in on every single port, see the status, what's happening, utilizing, say, proper information from local authorities. But what's happening? It's extremely hard to say what financial impact this will have, and I can't say much about the virus in itself, but the measures that are being taken have impact on our operation. So ports have been closed, People are asked to stay at home. If people have been in a Uber taxi with a Uber driver who's been, identified as the carrier of the coronavirus, that individual is asked to stay at home in in a form of a house arrest, etcetera. So so this has ramifications. You can read that from car plants being shut down, spare parts not being able to be produced in China, etcetera. So it will have an impact. We have 200 roughly employees in China. Of course, it's their welfare that is the priority number one. And then we need to just make sure that we can deliver our business in a proper way. So with that, I'm trying to get into the next slide. Press it. Now I can press it. There. Thank you. Which is the outlook. I will not read it. You can read it, by itself. But in general terms, it's little bit as the last time. We believe in stable development. There are certain uncertainties out there, but we believe we have a robust company. And so so we can weather many storms and also potentially take use of opportunities that might arise. And the coronavirus is a new uncertainty that we don't really know exactly what will what will lead to. So thank you very much. Sorry, Christian. If I took too much of your time. That's Ben. No problem. Okay. I'm on trial here. Thank you very much, Thomas. Good morning. We'll see. Oh, I made it. I will try to walk you through, the quarter, some of the things happening in the fourth quarter, some of the things for the full year, give a brief comment on some of the issues. And of course, you can see the full quarterly report and the annual statements in report released yesterday. Going through some of the points for the first quarter, top line basically flat, down 2%. EBITDA for the quarter, but still down from the previous quarter. But as of on an annual basis, okay, come back to the different issues. The performance online is good. We do have some adjustments for the quarter in the different areas, which I'll come back to. For the associates, Thomas has been through and walked you through the Valenius Williamson side. It was an increase in the fourth quarter from the previous quarters and even from the previous quarter last year. And we did have a reversal of a gain in first quarter gain in North Sea of US5 Billion Dollars It's an accounting issue. It's not a sort of cash issue. And for this quarter, we do have a decrease in the value of Hyundai Global shares and Cube shares of $25,000,000 giving us a net financial loss of $22,000,000 when taking into account the unrealized value, positive value of the FX hedges that we do have positive contribution from due to the appreciation of the U. S. Dollar. For the quarter itself, US dollar, 5¢ per share. We'll see. For the full year, total income is flattish, down 2% for the year. A margin improvement and underlying good operation from all businesses giving us an EBITDA of US149 million dollars and a contribution from associates basically being Valens Wilhelmsen of $49,000,000 From the full year, the Globus and cube value has increased by million dollars throughout the year. We do have a minus. That's the full write down we did on the shares in the holding in Servitech that we did, give or take, a year ago. And the value of Servitech after that is booked at zero. The full year EPS being US2.46 dollars Stepping into, Marine Services, and Thomas commenting on several of the drivers. Income over year is, up 7% over quarter, 1%. There has been a good quarterly sale of products, part of the IMO issue of products related to IMO. Both the third and fourth quarter had those impacts. Agency, as Thomas described, increasing their margins, running their business better than earlier. And ship management, second half, having quite an increase in the vessels on full technical management and increasing their wind and offshore activities. So activities under the Maritime Services basically having an okay path going forward. EBITDA for the quarter quarter on quarter, down 28%. That's mainly due to several non material and provisions being done in the fourth quarter. Bear in mind that the fourth quarter margin is 15% and comparing with the previous quarters similar in or around the same level. So kind of happy with the numbers being delivered on the underlying basis. Supply services income is up quarter on quarter, some down year over year. Thomas gave basically the big explanation being the military exercise last year. What we do quarter on quarter is basically a bit up. We do have some asset value adjustments in the quarter, we do have this million dollars that we had in the first quarter of this year. So for the year, okay, as Thomas also described, we will see and we will expect volatility in numbers, both top line and contribution from North Sea in particular, since we do have project based business running in North Sea. This is not sort of what you see in the accounts directly. What you see in the accounts directly compared to ValeniusWilliamson is the contribution that you see every quarter, so 17 this quarter and so on, the quarters going back. We just tried to make a picture showing the stock market values and the development of the stock market values of the shares in Valendus Williamson quarter wise at 26% increase. That's basically the number of shares that we do hold times the share price. And also, we have made this graph showing. This is what you see in the accounts of the holding and investments, showing the total value of the Hyundai Globus shares on the hand of Williamson, it's US412 million dollars On the hand of the minorities of Treasure, it's US148 million dollars contributed to the Australian engagement, basically the Cube shares, a liquidity portfolio of $102,000,000 and you might even see the last number there, the black the blue the blue being a cash at hand, 31,000,000. So this is the total market mark to market of the financial assets and value of the shares in Valenius Williamson by year end. Taking you through the year itself, the cash flow through the year, starting at 140,000,000 operating well in all areas, giving us positive contribution, of course, then mainly from the Maritime Services being the by far largest cash contributing unit. Also, we do have cash flow from investing activities, then that being dividend from Hyundai Globus, sell of some shares in Cube and also the sale of some assets in North Sea. So positive contribution on basically or actually all areas in the quarter. We did do a share buyback, and we did pay dividend. So dividend at million dollars and share buyback at US30 million dollars So that's the first step, reducing debt of $68,000,000 and currency and reducing debt sorry, interest rates of US41 million dollars ending up at 13,000,000 at the end of the year than the beginning. Balance sheet being in total billion dollars pretty flat development in equity. We'll know sort of flat and very solid, I will point. The debt maturity also including now the IFRS 16, showing a pretty healthy coming from the CFO status. Not too much to fight towards in the beginning of the next three years, and a long term debt portfolio mainly coming from the North Sea funding as we do have all the debt being funded in different areas and the different total companies. As you would have seen in the report released last night, the Board is proposing a dividend for the year, a first dividend of 3 per share and a potential second dividend of up to NOK 3. On level, that's basically in the higher end of where we have been the last four years. So in we have three, two point five, 3.5, three, so it's on average. And in total for the three four years that we have seen, And bear in mind that this is a conversion of NOK to U. S. Dollars, so it's a total amount. The payout in total dollars has been just shy of $30 just above $30 and then the 50 plus dollars if we include the buyback of shares. And the suggestion to the general assembly being that at two or at least at 3 kroner per share in the first dividend and a potential as you can see the potential box there, being a potential of NOK 3 more converted into dollars in this growth. So that's the financial status, for the fourth quarter and also, the financial status for the year. Larger report is in, you can have it either outside in paper. I think we still have a couple of paper stapled for you, but probably the best thing would be to download on the the on our website. So with those words, I'm happy to conclude and say thank you very much to the audience following us on the webcast. Thank you very much.