Company Overview. Fleet Profile. Key Facts

Transcription

1 STIFEL Conference Presentation February 12, 2019

2 Company Overview Scorpio Bulkers Inc. ( Scorpio or the Company ) owns or finance leases 56 mid-size dry bulk Eco vessels with an average age of 3.0 years and time charters in one vessel The Company is headquartered in Monaco, and incorporated in the Marshall Islands, making it exempt from U.S. income tax. It has NYSE-compliant governance and transparency for foreign private issuers and is listed under the ticker SALT Scorpio s strategy is to: Key Facts Capture rising freight rates by employing vessels in the spot market through the Scorpio Ultramax and Scorpio Kamsarmax pools Operate vessels efficiently and minimize costs Maintain a strong balance sheet through conservative leverage Take advantage of market dislocation to opportunistically grow fleet Fleet Profile Owned TC/BB Chartered-In Ultramax Kamsarmax Low Average Age vs. Worldwide Fleet Scorpio Bulkers Active Fleet Handymax/Ultramax Panamax/Kamsarmax 2

3 Corporate and Financial Highlights Q Financial Results TCE GAAP Net Loss of $7.4 million / Loss per Share of $0.11 includes $7.2 million or $0.10 net loss on the investment in Scorpio Tankers Inc. and $1.7 million or $0.03 write off of deferred financing costs EBITDA of $23.3 million and cash flow from operations of $20.2 million Ultramax TCE of $12,213 per day in Q Ultramax TCE of $11,072 per day booked to date in Q (1) Kamsarmax TCE of $13,148 per day in Q Kamsarmax TCE of $12,913 per day booked to date in Q (1) Liquidity Liquidity position as of January 25, 2019 is $74.3 million in cash Investment in Scorpio Tankers Inc. IMO 2020 Dividend Stock Buyback Program (1) As of January 25, 2019 As of January 25, 2019, the 5.4 million shares owned by the Company have a fair value of $110.4 million Company plans to install exhaust gas cleaning systems ( scrubbers ) in 2019 and 2020 on all of its vessel at an estimated total cost of $127.1 million Entered into an estimated $41.9 million agreement to purchase scrubbers for 18 and 10 of our vessels in 2019 and 2020, respectively Scrubbers to be financed through secured asset financing expected to be agreed during Q The Company s Board of Directors declared a dividend of $0.02 per share on January 25, 2019 During Q4 2018, approximately 4.5 million shares were purchased by the Company under its then existing share repurchase programs at an aggregate cost of approximately $27.0 or $6.05 per share The Board of Directors approved a new share repurchase plan for the repurchase of up to $50.0 million of our common stock, replacing the existing authorization 3

4 Company Highlights Youngest ECO dry bulk fleet High specification best-in-class fleet built at top tier yards with an average age of 3.0 years, youngest fleet among publicly listed peers Attractive Mid Size Segment Mid size cargo segment provides access to all types of dry cargo commodities and is strongly correlated to global GDP growth Positive & Increasing EBITDA $23.3 million in EBITDA in Q4-18, the ninth consecutive quarter of positive EBITDA Significant trading liquidity and inside ownership One of the most liquid dry bulk stocks with around $2.1 million in trading liquidity per day (1) and insider ownership of 25.6% Well prepared for BWT system & IMO 2020 Fleet is already fully fitted with BWT systems, no capex required Scrubbers manage the downside risk of rising fuel prices and provide regulation upside potential through fuel savings (1) Fearnleys, February 4 th,

5 Youngest & Largest Fleet in Mid Size Segment # of Owned Handymax/Panamax Vessels Average Age Scorpio Bulkers Star Bulk Eagle Bulk Navios MH Safe Bulkers Diana Genco Golden Ocean Source: Clarksons Research Services, February

6 Long Term Rate Outlook Remains Positive $16,000 $14,000 $12,000 February 10, 2016 BDI hits 40 year low $10,886 $12,605 $13,649 $13,148 $12,881 $12,823 $12,913 $12,213 $11,569 $11,342 $11,072 $10,000 $9,164 $9,273 $9,211 $8,949 $8,230 $8,360 $9,757 $8,000 $7,083 $7,401 $7,238 $6,349 $6,000 $5,335 $5,263 $4,000 $3,462 $3,331 $2,000 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19* Ultramax Kamsarmax * Projections based on 56% and 60% of the days for the Ultramax fleet and Kamsarmax fleet, respectively as of January 23,

7 Financial Performance Summary Revenue EBITDA $70 $60 $50 $40 $30 $20 $10 $0 $65.2 $60.6 $62.5 $51.1 $54.3 $34.7 $37.7 $38.6 $23.9 $26.8 $17.4 $10.2 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 $40 $30 $20 $10 $0 -$10 -$20 -$30 $28.1 $28.8 $22.9 $23.3 $20.4 $10.8 $12.4 $7.3 $0.9 -$1.3 -$5.8 -$17.0 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Operating Cash Flow Net Debt (Debt less Cash) (1) $25 $15 $5 -$5 -$15 -$25 -$35 $21.1 $18.6 $20.2 $13.5 $11.1 $2.5 $5.3 -$2.1 -$1.7 -$4.5 -$18.1 -$27.5 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 $870 $770 $670 $570 $470 $370 $270 $170 $70 -$30 $281.6 $279.8 $501.6 $477.7 $369.9 $456.9 $452.7 $761.1 $647.0 $649.6 $650.5 $647.6 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q Figures in $USD millions (1) Excludes fair value of the Company s investment in Scorpio Tankers Inc. common stock.

8 Industry Regulations IMO 2020 The International Maritime Organization (IMO) will require shipowners to reduce sulfur emissions from 3.5% currently to 0.5% in January How will Scorpio comply? The Company plans to install scrubbers on substantially all of its owned and finance leased Kamsarmax and Ultramax vessels between the second quarter of 2019 and the fourth quarter of The majority of scrubber installations will be coordinated with scheduled dry docks, reducing the amount of off hire The Scrubbers and their installation will cost between $2.0 - $2.5 million per vessel, and the Company anticipates that between 60-70% of these costs will be financed. Scrubbers manage the downside risk of rising fuel prices and provide upside potential through fuel savings Ballast Water Treatment Systems The IMO will require all vessels trading internationally to a install ballast water treatment system (BWTS) after September 8, 2019 at their next special survey. BWT systems for small to mid size modern vessels cost at least $450,000 per vessel based on $350,000 for equipment and $100,000 for installation Retrofits on older, existing ships, can be more challenging and expensive as they were designed without the space in the engine room to fit BWTS (see how large these BWTS are) How will Scorpio comply? All 56 of SALT s vessels are fitted with BWT systems No $25.2 million in future capex (56 vessels x $450,000) 8

9 Announced Penalties for Non Compliance Country Max Fine Other Penalties Belgium $6,600,000 Crew Fine Vessel Detention Canada $19,000 Crew Fine Vessel Detention Denmark No Maximum Crew Fine Vessel Detention Finland $880,000 Vessel Detention France $220,000 Crew Fine Vessel Detention Germany $60,000 Vessel Detention Penalties vary between Port State Control in Europe US policy implementation to ensure that the penalty is greater then the benefit of non compliance Latvia $3,200 Netherlands $275,000 Crew Fine Vessel Detention Norway $90,000 Crew Imprisonment Poland $715,000 Vessel Detention Sweden $1,200,000 Vessel Detention UK $4,350,000 Hong Kong $100,000 Crew Fine Vessel Detention Six Months Imprisonment for Officers/Crew 9 Source: Platts

10 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 $/MT Historical MGO & HSFO Spread $1,400 Rotterdam Historical Bunker Prices MGO Rotterdam HSFO Rotterdam Rotterdam MGO- HSFO Spread Brent Crude Oil Price (bbl) $1,200 Apr 2011 Brent Crude Price: $123/bbl Apr-2011 $1,017 $642 $375 $123 Feb-2016 $287 $144 $143 $32 $1,000 $1,017 $800 $600 $642 Feb 2016 Brent Crude Price: $32/bbl $272 $400 $200 $375 $144 $143 $0 Source: Clarksons Research Services February 2019 MGO Rotterdam (S/MT) HSFO Rotterdam (S/MT) RotterdamMGO-HSFO Spread ($/MT) 10

11 ($/mt) Forward Curve Spread Between Rotterdam 3.5% HSFO vs 0.1% Low Sulfur Gasoil 330 Pre-2020 Average of $233/mt Post 2020 Average of $289/mt Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Source: Bloomberg, February 8 th,

12 Scrubber Installation Schedule 2019 and Estimated Payments by Year 2018 $1.2 million $58.9 million 2020 $66.1 million 2021 $0.9 million 15 Total $127.1 million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Ultramax Kamsarmax 12

13 Market Update 13

14 Fleet Focused on Mid Size Asset Classes Vessel Type DWT Cargoes Vessels Owned Handysize/Handymax < 50,000 Grain, minor bulks - Supramax/Ultramax 50,000-64,000 Iron ore, coal, grain, minor bulks 37 Panamax/Kamsarmax 65, ,000 Iron ore, coal, grain, bauxite, steel 19 Capesize >100,000 Iron ore, coal - 14 Major Bulks: Iron ore, coal, grain Minor Bulks: Bauxite, steel, scrap, cement, salt, forest products, potash/fertilizer, coke, nickel ore, sugar.

15 Cargo Carriage 2018 Kamsarmax Ultramax Steel, 1% Other, 6% Other, 3% Cement, 5% Logs, 1% Salt, 4% Ore, 13% Fertiliser, 6% Coal, 34% Minerals, 6% Steel, 10% Grain, 16% Coal, 58% Ore, 6% Minerals, 16% Grain, 15% 15

16 Trading Summary Q4-18 & January 2019 General trade war and macroeconomic uncertainty reduced trading appetite from cautious importers ready to close their books at the end of the year. Increasing soybean imports from Brazil in early Q4-18 was not enough to offset the total reduction in Chinese imports. China s total soybean imports for November and December fell from 18.3m MT in 2017 to 11.1m MT in 2018, 39% y-o-y decrease (1) Strong increases in Indian thermal coal imports were mitigated by the reduction in Chinese imports due to above average coal inventories Mild winter conditions in the North America and Europe have reduced coal trading activity Going Forward Progress in the US-China trade war which was reported in late November could materialize after Chinese New Year, boosting US grain and soybean exports Historically, slow periods of Chinese GDP growth have been followed by government stimulus which would boost iron ore and coal imports Limited supply in mid size segments with 3% and 1.5% net fleet growth for 2019 and 2020 (2) 16 1) Bloomberg, January ) Clarksons Research Service, January Includes ultramax and kamsarmax vessels. Assumes newbuildings deliver as scheduled and 10 yr avg scrapping of 2.7m DWT and 4.6m DWT for Ultramax and Kamsarmax vessels, respectively.

17 $/day $/Day Vessel Earnings Weaken in Q Baltic Panamax Avg Earnings FY-16 FY-17 FY Yr Avg FY-19 $16,000 $12,000 $8,000 $4,000 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Baltic Supramax Average Earnings FY-16 FY-17 FY Yr Avg FY-19 $16,000 $12,000 $8,000 $4,000 $0 Source: Clarksons Research Services, February 2019 Baltic Supramax Avg of 6 T/C Routes Baltic Panamax Avg of 4 T/C Routes Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 17

18 Asset Values Have Recovered Since 2016 $40 Ultramax NB Kamsarmax NB Ultramax Resale Kamsarmax Resale $35 Future expectations push values for young vessels above newbuilds $30 $25 $20 $15 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 $1 million increase in asset values equates to $0.79 in NAV per share Figures in million US$, Source: Clarksons Research Services, February 2019 Resale defined as to be delivered before year end of less than one year old. 18

19 Million Tonnes Dry Bulk Demand Continues Steady Growth Iron Ore Coal Grains Minor Bulks Total Dry Bulk CAGR 5.8% 5.0% 5.5% 4.0% 4.9% 5,000 4,000 3,821 4,068 4,302 4,558 4,816 4,812 4,892 5,091 5,206 5,326 3,401 3,000 2,000 1, (f) 2019 (f) Iron Ore Coal Grain Minor Bulk Source: Clarksons Research Services, February

20 Industrial Electricity Output Continues to Grow in China and India China Industrial Production Electricity (TWh) India Industrial Production Electricity (TWh) Source: Bloomberg, February

21 (Thousand Tonnes) (Thousand Tonnes) Coal Inventory Stocked up this Winter 35,000 30,000 China Thermal Coal Total Inventory at Ports 25,000 20,000 15,000 10,000 45,000 35,000 India Coal Stocks All Region 25,000 15,000 5,000 Source: Bloomberg, February

22 Millions Tonnes China Soybean Imports by Country Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Soybean Imports from US Soybean Imports from Brazil Soybean Imports from Other Countries Source: Bloomberg, February

23 Steady Growth in Our Primary Cargoes 15.0% Dry Bulk Demand Minor Bulks Grains Coal 10.0% 5.0% 0.0% 7.3% -0.5% 7.8% 2.0% 11.3% 9.4% 6.4% 4.9% 5.2% 12.2% 5.3% 4.9% 2.9% 1.5% 1.6% 0.0% 0.2% 6.1% 5.3% 4.0% 3.1% 2.9% 1.3% 4.1% 3.4% 1.1% -6.5% -5.0% -10.0% e Source: Clarksons Research Services, February

24 Bulker Fleet Age Profile % 90% 80% 70% 4% 6% 14% 7% 8% 11% 9% 14% 17% 16% 8% 14% 60% 50% 40% 52% 42% 43% 44% 30% 20% 10% 24% 23% 27% 19% 0% Cape Panamax Handymax Handysize Source: Clarksons Research Services, February

25 # of Vessels # of Vessels Historically Low Ordering Newbuilding orders for ultramax and kamsarmax vessels, aside from 2016, are at their lowest level since ,000 1,800 1,600 1,400 1,200 1, Newbuilding Orders in Three Year Periods 1,741 1,484 1, , Newbuilding Orders Per Year: , Handymax/Ultramax Panamax/Kamsarmax Source: Clarksons Research Services, February Handymax/Ultramax Panamax/Kamsarmax

26 # of Vessels Historically Low Scrapping Handymax Scrapping Panamax Scrapping Scrapping in 2018 is at its lowest levels since 2007 Source: Clarksons Research Services, February

27 # of Vessels Scrapping Expected to Increase Potential acceleration in scrapping of older tonnage due to: Age: significant number of vessels 20 years and older in the mid size segment Environmental regulations: Increasing fuel costs of older less fuel efficient tonnage (IMO 2020) and cap ex for BWT systems Newbuild Deliveries ( ) vs. Vessels over 20 Years Old in 2020 NB Deliveries ( ) 20 Years & Older in There will be more potential scrapping candidates (20+ years) than newbuildings delivered between Source: Clarksons Research Services, February