Earnings Call: Q2 2021

Aug 19, 2021

Good morning and welcome to the second quarter results for Wilwell Ensson. It's been a quarter where things have been moving in the right direction. We've had a profit of $89,000,000 driven by increased revenue of around 40% and close to the same for the underlying EBITDA for our operations. Significant changes in fair value during the quarter, which I'll come back to later and also good profitability from joint venture and associates. It's also been a period where we've been settling the segments into operations with the smaller adjustments within the organizations. World Trade and Currency Index has been moving in the right direction, which is very positive for our maritime services segment. We've seen good growth, not enormous growth, but good growth in top lines around 6%, But especially underlying operations have been okay in more or less all areas. Marine products have been increasing and we see a good development within our marine product portfolio. We have increases also within ships agency and also within our ship management segment. There are of course certain challenges as well. There is a certain inflationary pressure within this portfolio. The good thing when our customers are enjoying higher freight rates, That's positive for our performance, but at the same time, our underlying costs are then increasing such as freight for our products. So moving then into new energy, there's been a lot of activity during the quarter. Profitability has been good, especially driven from North Sea Group. It's a strong quarter from a seasonality perspective. But regardless, I think we are pretty happy with the performance that we have seen. Within Edavine, things are moving in the right direction. Eight ships in the total fleet including newbuilds, five of them on contract. And we also announced a joint venture with Park Quinn during the quarter. This is something which is, let's say, far in front of the development, but the idea is to align ourselves towards the offshore wind segment and especially now with this joint venture towards Utsira and Surly Norsa. So we will see how that goes going forward, but there's a lot of interesting opportunities within this portfolio, which we like to develop. Then on strategic holding and investments, there's been significant changes and developments within ValenusWilliamsson. They announced their results yesterday and with an adjusted EBITDA of million, which is significantly up from previous periods. Volumes for both cars and high and heavy is up and the supply demand balance on capacity is coming into a much tighter position. Of course, costs will increase there as well, but overall the underlying fundamentals are much stronger. Hyundai Glovis has had a fantastic increase in value during the quarter, which we of course see in the results for the group. So looking into the coming period, I think we are still there that the underlying activities will remain to be solid. As I mentioned initially, the Clarksi index has been on the rise significantly actually. And of course, that's positive, especially for the maritime service segment. The cruise industry has still not fired up on all cylinders. That's an important customer group for us, and we do not see crews coming back to pre pandemic levels at least for the shorter in the shorter term. But it's slowly but surely coming into play. And as I mentioned, inflationary pressure is creeping into the maritime services segment, is something we have to tackle on a daily basis. And I think we have proven in the past that we are pretty good on the overall cost control and able to match both revenue and costs. New Energy, North Sea Group seasonality, the third and fourth quarter is normally lower activity than the second quarter. So that will probably happen this year as well. But regardless, I think there is a high activity level overall throughout the segment. And we do foresee that to happen also going into the next quarters. We will work on the partnerships and the business opportunities that we have both that we see and also that we have actually acquired or that we have in process. And when it comes to strategic holding and investments, we do see that the underlying fundamental continues to be strong into the at least near to medium term future. So that's just some overall comments as to the activities and occurrences during the quarter. Christian Berg will now come and do the numbers in more detail, and then we will open up for some questions afterwards. So thank you, Christian. Digging in a bit more to the numbers, as Thomas gave you a short note on, good numbers in all segments, strong EBITDA development from previous quarter up 29%, of which Maritime Services contributed with million and Rue Energy with SEK18 million. Also, as explained, JVs and associates giving better numbers, specifically from Alenes Willemsen, contributing with SEK 5,000,000 and New Energy with just about SEK 3,000,000 for the quarter. And the biggest number in the period, giving the change in the fair value coming from specifically Jundai Globus, a change of $77,000,000 but for the quarter then giving a pretty strong earnings per share at close to $2 per share. Going a bit further into the numbers of Maritime Services, 135,000,000 top line for the quarter, 6% up year over year. As Thomas alluded to, maritime products continued its recovery from pre pandemic, but due to the cruise industry, not sort of back where we belong in a way. Agency was also up for the quarter as also explained, but non marine products is down due to the seasonality. And you could also say that some of the products are not that much in favor as they used to be one year ago, typically the sanitizing products. Ship management also up. Of the $135,000,000 ship management accounts for around $12,000,000 but up 9% year over year for the period. EBITDA of US23 million dollars and as you can see at the graph, pretty much picking up pre pandemic, but not all the way up there, but getting close both on margin and absolute level to come. And with an outlook pretty much in the more positive area, we foresee even further growth coming forward for the next quarters. On the new energy side, top line of million dollars up 14%, a very strong growth. And also, as Thomas alluded to, we see a pretty good backlog going forward into the next quarters and into next year. So we foresee a good development also in the new energy area, specifically in the North Sea Group. We also have seen a quarter which is pretty good on the North Sea wind. So of that $85,000,000 top line, 12,000,000 or $10,000,000 comes from North Sea wind in the period. A strong EBITDA of US18 million dollars and as again seen on the graph, that's basically in the area of pre pandemic, so being back in the same kind of level and pretty healthy margins of 22% for the period. Even also coming from their JVs and associates, 3,000,000, specifically from Edda giving SEK 1,000,000 and cost center base giving close to 1,000,000 as well. So again, as earlier indicated or as earlier alluded to, strong quarter for 2020. On the strategic holding and investments, very good quarter when it comes to development of asset values. Of the 81,000,000 changes in fair value, the SEK 77,000,000 comes from the change in the Vibra Glovish share. And the remaining 5,000,000 comes from the Cube Australian engagement that we do have. Strong development on the associates side, 5,000,000 from the numbers of Valenius Williamson given out yesterday. And even also the asset management giving 9,000,000 in other financial income for the period. As you can see on the graph on the right side, pretty much doubling the values from the sort of start of the pandemic until the period we're now. So very good development the last year or so in this area. Coming to the cash flow from the first half year, if you sort of dig into some of the boxes, both operating from Maritime Services and New Energy, good cash flow. What we will see in the period to come and also have seen is that sort of growth in revenue will also pick up growth in working capital. For the moment, we don't see that we are picking up as much as we took it down during the pandemic. So we will, of course, try to work out in the future to maintain as efficient level as possible. And we foresee that we are able to actually be more efficient than we were pre pandemic on the working capital on our operating areas, specifically in maritime services and new energy. On the investing activities, basically the main investing activities and the main investments we've made in making in the first half year is the investment in Edvard Grieg and some smaller other investments as well. During the period, we have paid $26,000,000 in dividend and reduced debt and also paid the dividend to all the shareholders in pressure during the period. So a strong cash flow period as well, tying up a bit more in the working capital and reducing debt through the period is sort of headliners for the first half year. And not that much movements in balance sheet, but as previous periods, a very strong balance sheet. We do see on the right side that we do have loans that are due to be refinanced, during a couple of years. And you could expect us for the next year to work on that graph to make sure that we have longer tender on the sort of first couple of years tenders that we do see in the graph on the maturity side. So that's something we will work on in the period sort of a year to come to prolong that tender. As mentioned earlier, we did pay a dividend in the first half year of NOK 5 per share. That was sort of a NOK 3 plus NOK 2 in extraordinary dividend due to the reduced dividend in 2020, which was caused by the potential sort of effects of the COVID at that time. So we try to compensate for that in the first dividend period. Also bearing in mind that we have an authorization to the Board to distribute up to additional three per share during 2021. I guess that's basically the sort of highlights of for for the for the quarter and some for the first half year. So if there are any We do not have any questions from the online audience right now? No. So if there are not that many questions? Okay. Then thank you very much, and looking forward to next quarter. Thanks, Tristan. Thank you.