Earnings Call: Q2 2020

Aug 20, 2020

Okay? Good morning. Welcome to the second quarter results for the Willem Wilhelmsen Group. Pleased that you are listening in. It's a quarter which is, say, highly affected by the COVID situation. It's a quarter with, I would say, a pretty good result under the circumstances, but probably far from good going into the future or from a long term sustainability perspective. I think we need to take into account that this is a global operation, with operations in more than 70 different countries. And we've been able to keep the wheels turning and the operation going under very, very trying circumstances. Overall, from an operating perspective, the revenue has been pretty stable. We've had a net profit of 57,000,000, very much driven by valuation or increase in valuation of financial assets. And we've had a loss from associated companies. We are as we have been for a long, long time driving towards shaping the maritime industry and towards sustainable trade and I'll come back a little bit towards the end with regards to this matter. Looking at Willemsen Maritime Services, there has been due to the COVID situation, call it a disruption in overall shipping activities. It's been pretty trying in many ways. But as I said initially, operation has been ticking along. Pockets of the shipping industry has been hit harder than others, for example, the cruise industry being a very important customer to our portfolio. We've had reduced sales in marine products and in ships agencies. We've had as a result of some of the COVID situation a very trying times when it comes to crew change. Crew change is important for ship agencies, but it's also of course a very vital part of keeping vessels under management for ship management. We are working constantly on adjusting our capacity costs and of course that's happening now as well. And I must say, I am extremely pleased with the way the organization have been able to handle the situation that we've been through during this last quarter. We've also had an interesting development in Ship Management. I'll come back towards that a little bit later. But we have done an acquisition, which we believe is very interesting going into the future and strengthening the position of Ship Management long term. Then moving into Supply Services, probably the area of most surprise. There's been pressure at least initially on oil prices and especially towards the service sector within oil and gas. When we look at the revenues for last quarter, we are actually up when it comes to the revenues and activity in Nordsee Group. The stimulus packages, no doubt have had a positive effect on this industry, which I think is extremely pleasing to see. All bases have been operational during the period, which I would also say is a pretty good effort all in all. We strongly believe in the infrastructure that we have within this segment, not just for the oil and gas industry, but also how we can leverage this going forward into new areas, new segments, be it seabed mining, everything which has I think when you look at the ocean space and how we can utilize land infrastructure towards ocean space. So, a good business, all in all. Holding and investments, Valenos Videosund, they presented their results yesterday, beating consensus from the analysts, but still it's a very, very trying market. They are working hard again on their capacity costs, especially when it comes to tonnage, taking out a significant part of their capacity either through redelivery, cold layup or even recycling. Looking at financial assets, there's been a significant, say, revaluation during the quarter, very much reflected in our net results, driven by increases in value for Hyundai, Glowies, Cube, but also our own financial portfolio. So all in all, as I said, the quarter was not too bad from an operational perspective and also from a financial perspective. I mentioned that we've done an acquisition within Ship Management. It's an acquisition in Germany through the MPC Group and Aerenkiel, where we have bought 50% of Aerenkiel steamship. We've tried for a long period of time to enter the German market, but also the container segments, which has been or proven to be quite difficult. We believe this is a unique stepping stone with a very reputable partner, but also with a significant platform. It's 72 ships under management as of today, smaller container vessels typically 1,000 to 3,000 TEUs and with a very wide customer group. So this is exciting, it's a venture for us within Ship Management and we believe this is an interesting platform to grow further, not just within the German markets and the container segment, but it adds a lot of competence within an important segment for us. So we're not expecting significant contribution in the, say, term, because we need an integration period. We need to see how we can utilize the best of both companies, but I'm certain that this will prove to be a good acquisition for us. Just quickly towards the end, we are as I said initially working towards shaping the maritime industry towards sustainable global trade. There's a lot of interesting opportunities, and things happening out there. We are there. We are engaged in a lot of different projects, whether it's within the wind segment, whether it's within hydrogen, whether it's within autonomy. We presented before some of these projects that we are embarking on, typically at Masterly. Masterly has just won a contract proving to be then the first, say, solution here within Norway. So this is moving along. It's not going to, say, change the world in the short term, but we believe it definitely will change the world going into the future and we will be there to take part in that journey. So not too much about numbers, I'll leave that to you, Christian. So I'll leave the floor to you. Thank you very much for listening in. Christian? Thank you. Thank you very much, Thomas. As Thomas introduced, the year of the second quarter stable on operating activities a part recovery in the financial assets. What we see from the top line is that we have just short of 10% down for the group, coming down to US197 million dollars second quarter, while EBITDA being basically on par with the same quarter last year. So underlying operations, pretty stable, pretty good, but not as Thomas said, at level which we should aim for going forward. So we are positively surprised from our own operations that we are able to deliver in a very tough environment for the total business. We do have in second quarter a goodwill impairment of US11 million dollars being negative. And we have a loss of US21 million net from associates basically or more or less only coming from our ownership in Valenswilliamson. We did their presentations yesterday. So we can dig more into the numbers of Valenius Williamson there. Coming back to the financial value of Valenius Williamson in the second quarter, which have increased during the quarter, underlying operations giving us a negative $21,000,000 as a source of the company. Thomas introduced the $87,000,000 in the net financial values changes, come back to the different split of that, giving us net profit of $57,000,000 for the quarter. Coming into Marine Services, top line coming down as introduced, being able to also then maintain the operational margin give or take for the quarter as we have seen the same quarters earlier. So again, positively impact positively, it's not surprising, but at least it's a positive thing that we have been able to run our operations pretty stable through a very tough period. Also, you can say that we have had good product development, being able to deliver on all the products, non marine products like product there, the sanitizing products, been a good quarter for selling sanitizing products. We are saying that that might be a temporary boost as we have seen a sort of buildup in inventory, of course, during the quarter, but we still see demand for sanitizing products all over. Ship management income lifted a bit by more vessels on the full technical management, but give or take stable during the quarter. So EBITDA down 11% year over year, but again on positive delivery during a tough quarter. So what we have seen is that the quarter has given us challenges, but we have been able to respond both through cost adjustments, but we have also seen that the positive development during the quarter of dollar specifically, but currency overall towards Norwegian kroner has been also positively helping us during the quarter on Marine Services. Again, Supply Services, we have seen a very high activity level. We have seen an increase during the quarter. So all activity levels in the North Sea structure specifically has been positively run during the quarter. And it's also good for us to see that it's kind of a high higher visibility during the next quarter to see that the activity level are on the sort of on the higher note than you could expect going into the second quarter in March. So of course, that is what we think is coming both from the support from the stimulus package given to the oil industry, but also from sort of good underlying operations, good operations from people working in the typically, specifically the North Sea structure, being able to adjust to the environment that they are in. So very happy to see that, that's been sort of a positive outcome also in the financial numbers. So EBITDA, 16,000,000, up 8% year over year and a margin of 22%, if you are excluding the sale of assets. US2 million dollars share of profit from associates, that being basically then cost center based ECB and the KaMarikspark Invest. Coming the cash flow sorry, coming to the financial asset values in the first from the first quarter, as we have seen I can see from the graph, positive development. Underlying, we have a negative share profit from Valens Williams of million dollars negative. And as I said, some positive from CCB and Weacon Neringspan. But underlying negative share price wise, value wise, we've seen an increase in and around 20% for Valens and Williamson during the quarter. The biggest value impact comes from Hyundai Glovis shares moving positively US47 million dollars for the quarter. And for those of you who have seen the development after the quarter, have seen still a positive development from end of second quarter and into third quarter. There has been a buyback in the quarter by Treasure. They've bought back 2,500,000.0 shares. They've had this program and they've had a good positive response from the market when doing those transactions. We did participate in an offer an entitlement offer in Cube during the period, an offer where we invested around US11 million dollars The total value of our Cube holding have increased with US44 million dollars during the quarter, of which 23,000,000 is value increase of the underlying shares. And as Thomas mentioned, the value of the portfolio that we are sitting on, financial assets, had a gain during the period of US11 million dollars or being even positive or even beating them the relevant indexes that we are measuring that portfolio towards. On the cash flow side for the half first half year, starting off with US153 million dollars ending basically at the same with US149 being for the period, which is a challenging period for basically all companies, kind of okay, but not sort of the best one for the long term, but okay for a challenging period. Seeing cash coming in from operations, mainly then Maritime Services and being able to pay back debt in the period and also seeing us being able, of course, then to serve our debt and financial activities being then interest payments and derivatives collateral, which we have sort of seen a bit bounce back from into the third quarter. So okay cash flow for the period. But as I think Thomas said, going forward for further sort of sustainable growth and underlying delivery from the company, we need to see a bit more sort of even more positive from this side going forward as well. And as for the quarter, balance sheet basically increasing with just short of US100 million dollars in both assets and equity, giving us the number which we more or less have seen for lots of quarter back being around 60% of equity. So very solid balance sheet. Debt maturity profile, healthy being that we are not in any discussions with anyone to sort of see if we need to refinance or anything in a challenging environment. So we are happy with the profile that we do have. Of course, working to find good opportunities, but still as we see it in the second quarter, a very healthy and okay maturity profile of the debt. And again, as I have stated earlier, very good discussions on with both existing lenders and potentially new lenders, seeing if there are possibilities to do even more and more interesting financing structures going forward. As for the outlook, it's written on the screen for the group as such, we have said that the spread of COVID-nineteen and the measures undertaken to contain it will continue to impact global economic activity. The extent of its future impact on operating income and result and on asset prices remain uncertain. And we, as the previous picture described, retain our robustness and capacity to meet this uncertainty. And I could add on my personal note to see if there are opportunities in this environment. So with that, I invite Thomas back again to see if there are any questions on screen. And there are no questions. None none? None? None?