Wilh Wilhelmsen Holding ASA

OSE:WWI

Earnings Call Transcript 2020-Q2

[Thomas Wilhelmsen, Group CEO]

Okay. Good morning. Welcome to the second quarter result for the Wilh. 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 million, 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 Wilhelmsen maritime services. There has been due to the COVID situation, a -- 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 NorSea 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 an investment Wallenius Wilhelmsen, 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 lay-up 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 Glovis, Qube, 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 Ahrenkiel, where we have bought 50% of Ahrenkiel Steamship. We've tried for a long period of time to enter the German market, but also the container segment, 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 an exciting, say, 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, short-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 or 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've presented before some of these projects that we are embarking on, typically, Massterly. Massterly has just won a contract proving to be then the first, say, autonomous 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?

[Christian Berg, Group Chief Financial Officer]

Thank you. Thank you very much, Thomas. As Thomas introduced, the year of -- or the quarter -- the second quarter, stable on operating activities and 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 USD 197 million 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 USD 11 million being negative. And we have a loss of USD 21 million net from associates basically or more or less only coming from our ownership in Wallenius Wilhelmsen, who did their presentations yesterday. So you can dig more into the numbers of Wallenius Wilhelmsen there. Coming back to the financial value of Wallenius Wilhelmsen in the second quarter, which have increased in -- during the quarter, but underlying operations, giving us a negative USD 21 million as associated company. Thomas introduced the $87 million in net financial values changes, come back to the different split of that, giving us net profit of $57 million 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 of -- positively it's not a surprise, 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 a good product development, being able to deliver on other products, nonmarine products like the product there, the sanitizing products, been a good quarter for the 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 under full technical management, but give or take, stable during the quarter. So EBITDA down 11% year-over-year. But again, on a positive delivery during a tough quarter. So what we have seen is that the quarter has given us challenges that 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 the currency overall towards Norwegian krone has been also positively helping us during the quarter on marine services. Again, supply services, we have seen a very high activity level. We've seen an increase in -- during the quarter. So all activity or activity levels in the NorSea 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 or higher visibility during the next quarter to see that the activity level are almost 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 the people working in the typically -- specifically the NorSea 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, USD 16 million, up 8% year-over-year and a margin of 22% if you are excluding the sale of own assets. $2 million share of profit from associates, that being basically then Coast Center Base, CCB and Vikan Næringspark Invest. Coming to 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 of profit from Wallenius Wilhelmsen of USD 22 million -- USD 24 million negative and as I said, some positive from CCB and Vikan Næringspark. But underlying negative share price-wise, value-wise, we've seen an increase in and around 20% for Wallenius Wilhelmsen during the quarter. The biggest value impact comes from Hyundai Glovis shares moving positively, USD 47 million for the quarter. And for those of you who have seen the development after the quarter, we've 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 bought back 2.5 million shares. They've had this program, and they have had a good positive response from the market when doing those transactions. We did participate in an offer, an entitlement offer in Qube during the period, an offer where we invested around USD 11 million. The total value of our Qube holding have increased with $44 million during the quarter of which $23 million is value increase on the underlying shares. And as Thomas mentioned, the value of the portfolio that we are sitting on, the financial assets, had a gain during the period of USD 11 million of being even positive or even beating then the relevant indexes that we are measuring that portfolio towards. On the cash flow side. For the half -- first half year, starting off with USD 153 million, ending basically the same with $149 million 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 a 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 USD 100 million in both assets and equity, giving us the number which we more or less have seen for a lot of 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, always working to find good opportunities. But still, as we do 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 and in a -- for the group as such, we have said that spread of COVID-19 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 -- 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 the screen. And there are no questions. None? None?

[Thomas Wilhelmsen, Group CEO]

None.

[Christian Berg, Group Chief Financial Officer]

None?

[Thomas Wilhelmsen, Group CEO]

Okay. Thank you.

[Christian Berg, Group Chief Financial Officer]

Thank you very much.

[Thomas Wilhelmsen, Group CEO]

Thanks for listening in.