STIFEL Conference Presentation February 12, 2019
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 40 35 30 25 20 15 10 5 0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Fleet Profile Owned TC/BB Chartered-In 1 37 19 Ultramax Kamsarmax Low Average Age vs. Worldwide Fleet Scorpio Bulkers Active Fleet 9.4 8.9 3.2 2.8 0.0 Handymax/Ultramax Panamax/Kamsarmax 2
Corporate and Financial Highlights Q4-2018 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 Q4 2018 Ultramax TCE of $11,072 per day booked to date in Q1 2019 (1) Kamsarmax TCE of $13,148 per day in Q4 2018 Kamsarmax TCE of $12,913 per day booked to date in Q1 2019 (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 Q1 2019 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
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, 2019 4
Youngest & Largest Fleet in Mid Size Segment # of Owned Handymax/Panamax Vessels Average Age Scorpio Bulkers 3.0 56 Star Bulk 7.5 72 Eagle Bulk 9.0 48 Navios MH 10.0 47 Safe Bulkers 8.3 39 Diana 9.3 30 Genco 8.6 28 Golden Ocean 6.6 31 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Source: Clarksons Research Services, February 2018 5
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, 2019. 6
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 Q4 18 7 Figures in $USD millions (1) Excludes fair value of the Company s investment in Scorpio Tankers Inc. common stock.
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 2020. 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 2020. 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
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
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
($/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 310 290 270 250 230 210 190 170 150 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, 2019 11
Scrubber Installation Schedule 2019 and 2020 20 Estimated Payments by Year 2018 $1.2 million 16 2019 $58.9 million 2020 $66.1 million 2021 $0.9 million 15 Total $127.1 million 12 12 10 1 6 8 1 8 4 0 5 11 4 3 9 9 3 4 3 4 3 1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2019 2020 Ultramax Kamsarmax 12
Market Update 13
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 65,000-100,000 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.
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
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 2019 2) Clarksons Research Service, January 2019. 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.
$/day $/Day Vessel Earnings Weaken in Q1-2019 Baltic Panamax Avg Earnings FY-16 FY-17 FY-18 10 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-18 10 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
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
Million Tonnes Dry Bulk Demand Continues Steady Growth 2009-2018 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 1,000-2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (f) 2019 (f) Iron Ore Coal Grain Minor Bulk Source: Clarksons Research Services, February 2019 19
Industrial Electricity Output Continues to Grow in China and India China Industrial Production Electricity (TWh) India Industrial Production Electricity (TWh) 700 180 650 170 600 160 550 150 500 140 450 130 400 120 350 110 300 100 250 90 200 80 Source: Bloomberg, February 2019 20
(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 2019 21
Millions Tonnes China Soybean Imports by Country 10 9 8 7 6 5 4 3 2 1 0 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 2019 22
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% 2011 2012 2013 2014 2015 2016 2017 2018 2019e Source: Clarksons Research Services, February 2019 23
Bulker Fleet Age Profile 0-4 5-9 10-14 15-19 20+ 100% 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 2019 24
# of Vessels # of Vessels Historically Low Ordering Newbuilding orders for ultramax and kamsarmax vessels, aside from 2016, are at their lowest level since 2001 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Newbuilding Orders in Three Year Periods 1,741 1,484 1,360 677 706 435 881 569 369 462 1,064 267 925 778 248 512 302 214 2001-2003 2004-2006 2007-2009 2010-2012 2013-2015 2016-2018 Newbuilding Orders Per Year: 2001-2019 1,000 925 900 800 358 700 599 600 Handymax/Ultramax Panamax/Kamsarmax 707 473 203 500 449 238 429 400 366 303 169 151 300 567 152 192 211 221 217 224 248 148 455 190 504 6 184 200 361 91 99 101 81 81 280 81 145 74 278 214 97 16 100 28 46 101 155 112 120 136 109 143 30 103 87 0 24 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 25 Source: Clarksons Research Services, February 2019 928 Handymax/Ultramax Panamax/Kamsarmax
# of Vessels Historically Low Scrapping Handymax Scrapping Panamax Scrapping 250 231 213 200 150 127 154 141 167 117 100 123 76 74 69 96 116 49 61 50 0 104 32 96 28 80 72 71 2 67 18 2 47 17 4 29 9 11 9 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 17 2 15 Scrapping in 2018 is at its lowest levels since 2007 Source: Clarksons Research Services, February 2019 26
# 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 (2018-2020) vs. Vessels over 20 Years Old in 2020 NB Deliveries (2018-2020) 20 Years & Older in 2020 400 300 200 100 305 341 0-100 -200-300 -400-500 -386-297 There will be more potential scrapping candidates (20+ years) than newbuildings delivered between 2018-2020 Source: Clarksons Research Services, February 2019 27