Marine Money - Odfjell SE. Leveraging an industrial platform to outperform the cycle

Marine Money - Odfjell SE Leveraging an industrial platform to outperform the cycle

Odfjell SE - Key facts Established in 1914 Listed on Oslo Stock Exchange since 1986 One of the worlds largest operator of chemical tankers and one of the pioneers behind chemicals/parcel tankers Super-segregators are our core assets Large operator of chemical tank terminals worldwide through owned and related parties Our troubles from the past has been resolved Focus on the future January 2017 We had two strategic challenges: o Renewal and growth of our core stainles steel fleet o Solve our problems at our largest tank terminal in Rotterdam Progress on two main strategic challenges: o Fleet growth and renewal programme towards 100 vessels o Considering a sale of our Rotterdam terminal

We have to start by getting to know our history Close to sixty years of operating chemical tankers and close to 50 years of operating tank terminals Chemical Tankers 1914 First Odfjell ship owning company formally registered 1950 s Small spezialised tankers become increasingly important 1960 Odfjell takes delivery of the world s first stainless steel tanker 2 1 1 1 2018 Others One of the pioneers in the chemical tanker industry with more than sixty years of experience serving the chemical industry. Strong brand and track record of solving our customers logisticial requirements 3

We have to start by getting to know our history Close to sixty years of operating chemical tankers and close to 50 years of operating tank terminals Chemical Tankers Tank Terminals 1914 First Odfjell ship owning company formally registered 1950 s Small spezialised tankers become increasingly important 1960 Odfjell takes delivery of the world s first stainless steel tanker 2 1 1 1 2018 One of the pioneers in the chemical tanker industry with close to sixty years of experience serving the chemical industry. Strong brand and track record of solving our customers logisticial requirements Others 1969 Opening of the first tank terminal of Odfjell in Buenos Aires, Argentina 4

We have to start by getting to know our history Close to sixty years of operating chemical tankers and close to 50 years of operating tank terminals Chemical Tankers Tank Terminals 1914 First Odfjell ship owning company formally registered 1950 s Small spezialised tankers become increasingly important 1960 Odfjell takes delivery of the world s first stainless steel tanker 2 2018 1 1 1 Odfjell SE owned Odfjell family owned Others One of the pioneers in the chemical tanker industry with close to sixty years of experience serving the chemical industry. Strong brand and track record of solving our customers logisticial requirements A global operator of tank terminals with close to 50 years of experience serving the chemical industry. Completes our brand and track record as a key provider of logistics services to the chemical industry 13

Our vessels are sophisticated and built for serving very complex and demanding trades, with multiple parcels of highly specialized chemicals Basic chemical tanker Sophisticated super-segregator 13WP 8WP 7WS 6WP 6W 5W 4W 3W 2W 1W 6P 5P 4P 3P 2P 1P 13WS 8WS 7WS 6WS Standardized and cost efficient Tailor-made and responsive Scale effect on basic equipment across similar ships Complex and flexible equipment Experienced crew with cost focus Experienced crew with cost focus, comprehensive technical competencies and training 14 61% of Odfjell Tankers book values

At the heart of global trade Odfjell is one of few operators operating in a truly global system with frequent sailings to all major ports: Odfjell is a critical part of the logistic chain for the oil and chemical industry No single customer accounts for more than 10% of our freight revenue Significant number of evergreen contracts where key parameters are renewed annually Our target is to have 55% - 65% of our freight revenue from contract cargoes 15

The industrial nature of our business protects our downside while we share the directional movements with our neighbouring tanker segments Source: Odfjell, Clarksons 16

We got in-house ship management that is continuously improving vessel performance and have our perspective on all aspects of operation Few, if any, external ship managers have the required competence to manage our super-segregators Bunker savings on older vessels We leverage on the integration with Odfjell Tankers and Odfjell Terminals 40 35.5-21% Fully integrated services and a ship-owners perspective on all aspects of the operation o Constant focus on ship-owners bottom line Spending one extra dollar in costs makes sense if it can generate two dollars in revenues 20 28.0 Example of recent upgrades of our super-segregators o o o o New propeller blades, New rudder bulb and fairing cone, gear optimisation Mewis duct: 8-10 per cent reduction in bunker consumption State of the art anti-fouling: up to 5% reduction in bunker consumption Unlimited fresh water production: Reversed osmosis plants on all vessels 0 Old Supersegregator Old Supersegregator "retrofitted" Crewing Superintendency and purchasing Project Management Ship inspection and vetting Insurance claims handling NB feasibility studies, specifications and supervision 17

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ROIC Markets have not treated us well the last 10 years but we still outperform more commoditized shipping segments Odfjell TankersAverage ROIC since IPO in 1986 of 7% but we remain exposed to the cyclical nature of the shipping industry where timing is of the essence 20% 18% 16% 1 1 10% 8% 6% 0% - - Avg: 5. 7% 6% Avg: 15. 17% 15% 1 Avg: 3.0% Avg: 13.0% 18% 15% 1 8% Avg: 2.0% 1% Avg: 5. 8% Avg: 10. 1 11% 10% 8% 0% - Avg: -0. 0% -1% - Strong cycle Mid-cycle Low-cycle 0% 7% 1% 18

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ROIC All our cost savings and efficiency initiatives mean that we now have a very competitive performance on margins and returns Average ROIC lifted to 8 % when adjusting for Project Felix 20% 18% 16% 1 1 10% 8% 6% 0% - - Avg: 5. 7% 6% Avg: 15. 17% 15% 1 Avg: 3.0% Avg: 13.0% 18% 15% 1 8% Avg: 5. Avg: 2.0% 1% 8% 1 10% Avg: 9.8% Adj:14. 15% 16% 11% 8% 1 0% - 0% -1% Avg: -0. Adj: 3.1% - 0% 0% Strong cycle Mid-cycle Low-cycle 7% 8% 1% 1% * Felix adjustments does not take into account full effect of savings (USD 109 mill), but is limited to USD 61 mill 19

Mar-18 84 Apr-18 84 May-18 85 Jun-18 83 Jul-18 84 Aug-18 81 Sep-18 80 Oct-18 80 Nov-18 77 Dec-18 77 Jan-19 76 Feb-19 72 Mar-19 71 Apr-19 71 May-19 71 Jun-19 71 Jul-19 70 Aug-19 70 Sep-19 71 Oct-19 Nov-19 71 Dec-19 72 Jan-20 72 Feb-20 72 Mar-20 72 Apr-20 72 May-20 73 Jun-20 74 Jul-20 74 Aug-20 74 75 Sep-20 Oct-20 75 Nov-20 75 75 Dec-20 Jan-21 75 Feb-21 75 Mar-21 74 Apr-21 74 May-21 74 Jun-21 Jul-21 73 Aug-21 73 Sep-21 73 Oct-21 73 Nov-21 73 73 Dec-21 70 74 A large part of our TC fleet is up for renewal/delivery at an attractive point in the cycle This adds flexibility should markets remain weak and could lower our costs further Odfjell fleet development by ownership and charters up for renewal Scenarios and impact on annual EBITDA Own BB TC Pool Target High case USD 15 mill Mid case USD 9 mill Low case USD 2 mill Odfjell has 18 vessels on TC in as of 1Q 18 as 4 TC vessels were redelivered during the quarter. These were not renewed and replaced by two newbuildings (CTG) and three vessels from Sinochem initially delivered on commercial management (before bareboat hire commences) Going forward, we are in a position to replace part of our timecharter fleet with modern more efficient newbuildings or renew timecharter vessels at attractive rates We will constantly monitor the ongoing development in the market. If a market recovery fail to materialises, the TC fleet provides us important flexibility to reduce our exposure if a loss making market for medium stainless steel tonnage continues 20 Source: Odfjell, * Current growth path assumes no TC renewals/additions going forward ** Owned fleet includes vessels owned, on bareboat and financial leases* Scenarios include average renewal rates at USD13,000, USD14,000 or USD15,000 per day

Our investments and growth initiatives on tankers have been concluded at a very low point on the cycle even at historic earnings, the investments are attractive 15.0% ROIC based on 2008 asset values and 2008-2017 EBIT 10.0% 5.0% 0.0% -5.0% 2.7% Super segregators 2.5% VLGC 2.1% Suezmax 0.8% Handysize Tanker 0.0% VLCC -0.1% LNG Carrier -0. Capesize -0. Panamax Bulker -0. MR Based on 2008 asset prices and 10 year median TCE rates as quoted by brokers Super segregator asset values based on quotes from shipyards in 2008 and TCE based on internal calculations ROIC based on 2018 asset values and 2018-2027 EBIT assumed in line with 2008-2017 15.0% 10.0% 5.0% 0.0% -5.0% 11. 5. Super Suezmax segregators 3.5% VLGC 2. Capesize 2. VLCC 1. 1. Panamax Handysize Bulker Tanker 0. MR -0.1% LNG carrier Based on 2018 asset prices and last 10 year median TCE rates as quoted by brokers Super segregator asset values based on Odfjell s growth/renewal initiatives Super segregators will be more than 65% of our book values by 2020 Source: Clarksons Platou, Odfjell 21

.. And the new tonnage will reduce fuel consumption and add incremental cargo space, which means that our unit cost will decrease as new tonnage is phased in Bunker consumption at sea + Additional cargo space = Unit cost improvement 1 3 28 24 40,000 54,600 Consumption old super-segregator Consumption new super-segregator CBM old supersegregator CBM new supersegregator Tonnes/day Cubic meter Old super-segregator New super-segregator 1. Improvement in unit cost Source: Odfjell 22

ODFIX includes all our vessels and is a measurement of our relative performance We also outperform on our less sophisticated tonnage ODFIX performance vs. spot earnings, Index Vessel time charter rates, USD per day 150 140 Odfix index Odfix average 2008-2017 25 000 Chemical tanker 1 MR Product Tanker Soft market Odfjell 19.9k DWT SS Strong market Soft market 130 20 000 120 110 15 000 100 90 10 000 80 70 Chemical tanker spot earnings index (midcycle = 100) Source: Clarkson Platou 5 000 60 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0 2012 2013 2014 2015 2016 2017 2018 1. 19.9k DWT SS Chemical Tanker Source: Clarksons Platou, Odfjell 23

Final remarks: Our industrial platform plays an integral part of how we can outperform the market Long history & global footprint Integrated player with synergies Flexible fleet Cost and efficiency improvements Accretive investments at bottom of cycle Outperformance Odfjell SE history as a logistics provider to the chemical industry Global footprint both on chemical tankers and terminals Strong brand with more than sixty years of experience is an important competitive factor World s 2nd largest chemical tanker operator Eight tank terminals in key shipping hubs in addition to terminals owned by related parties In-house ship mangement with shipowners perspective on all aspects of operations Mix of owned and timecharter in vessels New TC s could be renewed at lower levels in the current cycle Gives flexibility to play adjust our fleet based on directional changes in the market Saved USD 109 mill of costs in 2015 Savings also involved efficiency improvements run by our in-house technical department Strong balance sheet after sale of two tank terminals that generated USD 170 mill of cash proceeds Average ROIC north of 10% even in a weak rate environment Consolidated the market Regained lost ground after years of not investing in our chemical tankers Our TCE has historically outperformed basic chemical and product tanker TCE Cost focus, efficiency focus and new investments believed to position us for this also in the future 24

Final remarks: Our industrial platform plays an integral part of how we can outperform the market Long history & global footprint Integrated player with synergies Odfjell SE history as a logistics provider to the chemical industry Global footprint both on chemical tankers and terminals Strong brand with more than sixty years of experience is an important competitive factor World s 2nd largest chemical tanker operator Eight tank terminals in key shipping hubs in addition to terminals owned by related parties In-house ship mangement with shipowners perspective on all aspects of operations Flexible fleet Cost and efficiency improvements Accretive investments at bottom of cycle Outperformance Mix of owned and timecharter in vessels New TC s could be renewed at lower levels in the current cycle Gives flexibility to play adjust our fleet based on directional changes in the market Saved USD 109 mill of costs in 2015 Savings also involved efficiency improvements run by our in-house technical department Strong balance sheet after sale of two tank terminals that generated USD 170 mill of cash proceeds Average ROIC north of 10% even in a weak rate environment Consolidated the market Regained lost ground after years of not investing in our chemical tankers Our TCE has historically outperformed basic chemical and product tanker TCE Cost focus, efficiency focus and new investments believed to position us for this also in the future Leveraging an industrial platform to outperform the market 25

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