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Edited Transcript of WWI.OL earnings conference call or presentation 23-Aug-19 6:30am GMT

Q2 2019 Wilh Wilhelmsen Holding ASA Earnings Call

LYSAKER Sep 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Wilh Wilhelmsen Holding ASA earnings conference call or presentation Friday, August 23, 2019 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Thomas Wilhelmsen

Wilh. Wilhelmsen Holding ASA - Group CEO

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Presentation

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Thomas Wilhelmsen, Wilh. Wilhelmsen Holding ASA - Group CEO [1]

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Good morning. Welcome to the second quarter results for Wilh. Wilhelmsen Holding. A quarter with some positive undertones, which we are pleased to see.

Starting with the net results of $89 million for the group, but the more important part of it is probably the underlying positive development in most of the operating entities that we do have. The quarter is very much colored by a strong increase in value of the Hyundai and Glovis shares. We've had a write-down of our Survitec investment, which is quite substantial. I'll come back to that a little bit later. And we have a small gain within maritime services related to sale of a property in Asia. All in all, then resulting in the USD 89 million net profit for the quarter.

Looking into the P&L, a relatively flat quarter in terms of top line, 5% up landing at $208 million, resulting in an EBITDA of $42 million, which is then also somewhat inflected by the gain on property sale, which is $6 million. And for those who are comparing numbers with last year, the IFRS element is approximately $9 million positive. Share of profits from associates is relatively small landing at $3 million, but then the net financial gain is really contributing positively with a net of $92 million when you combine the $99 million and the minus $7 million. And of course, that is very much covered again by Hyundai Glovis and the write-down in Survitec, landing at $89 million for the quarter and an earnings per share of USD 1.92.

Moving over to maritime services. Flat top line, landing at $146 million and EBITDA of $29 million, also then including the gain on property. Positive -- the positive things here is improved results in ship management, improved contribution from agency, then giving us a improved EBITDA quarter-on-quarter of 13%.

So then I will talk a little bit about Survitec. The write-down of Survitec is $27 million. So I think it warrants a little bit of a backdrop of the history. In 2015, we had an internal review related to the service -- safety service segment of maritime services. It was an area which we found interesting, an area where we have been involved for many, many years, but we have struggled with the underlying performance. So we were, in many ways -- our conclusion was that we were left with 3 options: either to close down the overall service infrastructure that we had which would be quite costly; try to sell what we have; or invest quite heavily to get the necessary scale and also the spread in the portfolio of offerings to the markets.

As you know, we then ended up in a situation where we sold the business to Survitec. We got a consideration in shares and in cash. It was a transaction which we were very pleased with for several reasons. One, because the cash consideration was acceptable, and we got the 20% shareholding in a company which ended up with a portfolio of offerings, which we felt were extremely strong given the segment we were operating in. Unfortunately, the financial side of it or the leveraging side of the business was relatively high, and the company is now in a difficult situation leading us to write-down our shareholding to nil. So what we have now is [more of the] 20% ownership. This, of course, is unfortunate, but when we look at the totality for us, the decision that we made for the strategic change in 2015 resulting in the sale of the business has overall been acceptable, but we would have, of course, hoped that it would have been better with a stronger representation in value of the 20% shareholding, and we do wish that the company can get back on its feet and represent value for us in the future.

Then a quick trip to supply services. It's a summer season, it's a good season for -- especially for NorSea Group. So we see an increase in top line. We see an underlying quite strong increase quarter-on-quarter when it comes to the EBITDA margin. It's a business which is quite difficult to dissect if you only want to look at the underlying operating performance because there are always a lot of projects and also, call it, sales or transactions related to properties. So -- but all in all, the way we look at it, it's been a good quarter and a good development predominantly, when it comes to the Norwegian operation. The operation in Denmark and U.K. is still struggling as we have spoken about earlier.

Wallenius Wilhelmsen, an important part of our portfolio. They had a presentation yesterday, and some of you in the audience were here. So I will not, say, steal the thunder or it's not my job to present in details what's happening there. But the quarter had a improvement in EBITDA landing at $211 million. Improved performance in ocean due to several factors, with increased net freight and net drawn bunker, et cetera. The efficiency program is trickling in. Volume quarter-on-quarter is down 8%, which of course, is a significant percentage. Part of this is related to the market, in general, being softer, but approximately half of it is related to, call it, voluntarily reduction in terms of focusing on the customers and the volumes which are positively contributing to the business rather than just lifting volume for the sake of lifting it.

Land-based business is moving on and delivering on a pretty stable pace which is good to see. Of course, both ocean and land-based are influenced by the general turn in the markets, and the market, in terms of volume, is a little bit softer now than previously. The performance improvement program, which has created a lot of focus, has delivered $65 million so far, which is good, out of a target for reaching $100 million in due time.

So all in all, we feel that there is a lot of positive -- say, positive initiatives and focus on efficient operation within Wallenius Wilhelmsen, but the results are still to come in order to be satisfactory.

This slide can be a little bit, call it, misleading or difficult to read, but what we have tried to do is to consolidate the financial assets of holding and investments. So if I can draw your attention to the right-hand bar chart, we've had an increase of $151 million from previous quarter. If you look at the top 2 gray parts, that's related to our Glovis investment. But the absolute top of $167 million is related to the outstanding or the outside shareholders in Treasure. So it's not really our relative percentage of the ownership in Glovis. That's the $462 million. But all in all, we've had a significant value increase, also represented by the 3 bottom parts of the bar chart here, which is the result of predominantly cash upstreaming and increase in value. So this is a positive development that we have seen.

All in all, the results have contributed to a 1% increase in the overall equity ratio for the group, so we are standing pretty strong with a conservative financial platform, especially considering that we are operating Wilh. Wilhelmsen Holding with no -- or we have a positive net debt situation and no cross collaterals. So a strong basis to work from.

And if you're looking at the maturity profile, we believe this is very sound. We don't have any significant maturities coming in the next short-term period. We have strong liquidity, and we have good relationships with the lending banks that we are using throughout the portfolio.

On this slide when it came to the financial assets, I refer to increase in upstream, and I believe it's very pleasing to see here that we are now having several sources for cash upstream for the group. If we go way back in the past, the vast majority of cash upstream came from the car and ro-ro business or Wilh. Wilhelmsen ASA as you can see from 2015 in the slide. And then it was, say, greatly reliant on maritime services and some part of investments, and now we are trickling in both from supply services, but also dividend distribution coming from Wallenius Wilhelmsen and that's a trend that we would like to see continuing.

Dividend of NOK 2.50 was paid in May, and we have -- or the Board have a mandate from the general assembly for another dividend up to NOK 2.50 towards the end of the year.

So then talking about prospects. We still -- or the Board still believe that there will be stable underlying development for the operating entities, but we are, of course, very much reliant on and exposed to global trade, which is introducing certain uncertainties for us as a group.

So that's in very brief the second quarter. Thank you very much for coming, and of course, for listening in. And we might have some questions or we might have some questions here.

Okay. Thank you. Short and brief.