Wilh Wilhelmsen Holding ASA

OSE:WWI

Earnings Call Transcript 2021-Q2

[Thomas Wilhelmsen, Group Chief Executive Officer]

Good morning, and welcome to the second quarter results for Wilh. Wilhelmsen. It's been a quarter where things have been moving in the right direction. We've had a profit of $89 million, driven by increased revenue of around 14% and goes to the same for the underlying EBITDA for our operations. Significant changes in fair value during the quarter, which I'll come back to later, and also good profitability from joint venture and associates. It's also been a period where we've been settling the segments into operations with smaller adjustments within the organizations.Overall trade and ClarkSea Index has been moving in the right direction, which is very positive for our Maritime Services segment. We've seen good growth, not enormous growth but good growth in top line, say, around 6%, but especially underlying operations have been okay in more or less all areas. Marine products have been increasing, and we see a good development within our marine product portfolio.We have increases also within Ship Agency and also within our Ship Management segment. There are, of course, certain challenges as well. There is certain inflationary pressure within this portfolio. The good thing when our customers are enjoying higher freight rates, that's positive for our performance, but at the same time, our underlying costs are then increasing such as freight for our products.So moving then into New Energy. There's been a lot of activity during the quarter. Profitability has been good, especially driven from NorSea Group. It's a strong quarter from a seasonality perspective. But regardless, I think we are pretty happy with the performance that we have seen. Within Edda Wind, things are moving in the right direction; 8 ships in the total fleet, including newbuilds, 5 of them on contracts. And we also announced a joint venture with Parkwind during the quarter. This is something which is, say, far in front of the development. But the idea is to align ourselves towards the offshore wind segment and especially now with this joint venture towards Utsira and certainly, Moss [ phonetic ]. So we will see how that goes going forward, but there's a lot of interesting opportunities within this portfolio, which we like to develop.Then on Strategic Holding and Investments, there's been significant changes and developments within Wallenius Wilhelmsen. They announced their results yesterday and with an adjusted EBITDA of $205 million, which is significantly up from previous periods. Volumes for both cars and hind-heavy is up and the supply-demand balance on capacity is coming into a much tighter position. Of course, costs will increase there as well. But overall, the underlying fundamentals are much stronger. Hyundai Glovis has had a fantastic increase in value during the quarter, which we, of course, see in the results for the Group.So looking into the coming period, I think we are still there, that the underlying activities will remain to be solid. As I mentioned initially, the ClarkSea Index has been on the rise significantly, actually. And of course, that's positive, especially for the Maritime Services segment. The cruise industry has still not fired up on all cylinders. That's an important customer group for us, and we do not see cruise coming back to pre-pandemic levels at least for the shorter -- in the shorter term. But it's slowly but truly coming into play. And as I mentioned, inflationary pressure is creeping into the Maritime Services segment, which is something we have to tackle on a daily basis. And I think we have proven in the past that we are pretty good on the overall cost control and able to match both revenue and costs.New Energy, NorSea Group's seasonality, the third and fourth quarter is normally lower activity than the second quarter. So that will probably happen this year as well. But regardless, I think there is high activity level overall throughout the segment, and we do foresee that to happen also going into the next quarters. We will work on the partnerships and the business opportunities that we have, both that we see and also that we have actually acquired or that they have in process. And when it comes to Strategic Holding and Investments, we do see that the underlying fundamental continues to be strong into the -- at least net to medium-term future.So that's just some overall comments as to the activities and occurrences during the quarter. Christian Berg will now come and do the numbers in more detail, and then we will open up for some questions afterwards. So thank you. Christian?

[Christian Berg, Group Chief Financial Officer]

Thank you. Digging in a bit more to the numbers, as Thomas gave you a short note on, good numbers in all segments, strong EBITDA development from the previous quarter of up 29%, of which Maritime Services contributed with $23 million and New Energy with $18 million. Also, as explained, JVs and associates, giving better numbers, specifically from Wallenius Wilhelmsen, contributing with $5 million and New Energy with just above $3 million for the quarter. And the biggest number in the period, giving the change in the fair value coming from, specifically Hyundai Glovis, change of $77 million. But for the quarter, then giving a pretty strong earnings per share at close to $2 per share.Going a bit further into the numbers of Maritime Services, $135 million top line for the quarter, 6% up year-over-year. As Thomas alluded to, maritime products continued its recovery from pre-pandemic, but due to the cruise industry not sort of back where we belong in a way, Agency was also, for the quarter, as also explained, but non-marine products is down due to the seasonality. And you could also say that some of the products are not that much in favor as they used to be 1 year ago, typically the sanitizing products. Ship management also up, of the $135 million, ship management accounts for around $12 million, so -- but up 9% year-over-year for the period. EBITDA of $23 million, and as you can see at the graph, pretty much picking up pre-pandemic, but not all the way up there, but getting close, both on margin and absolute level to come. And with an outlook pretty much in the more positive area. We foresee even further growth going forward for the next quarters.On the New Energy side, top line of $85 million, up 14%, very strong growth. And also, as Thomas alluded to, we see a pretty good backlog going forward into the next quarters at the end of the next year. So we foresee a good development also in the New Energy area. Specifically in the NorSea Group, we also have seen a quarter, which is pretty good on the NorSea Wind. So of the $85 million top line, $12 million -- $10 million comes from NorSea Wind in the period. A strong EBITDA of $18 million and as again, seen on the graph, that's basically in the area of pre-pandemic, so being back in the same kind of level and pretty healthy margins of 22% for the period. Even also coming from the JVs and associates, $3 million, specifically from Edda, giving $1 million and cost center base, giving close to $1 million as well. So again, as earlier alluded to, strong quarter for New Energy.On the Strategic Holdings and Investments, very good quarter when it comes to development of asset values. Of the $81 million changes in fair value, the $77 million comes from the change in the Hyundai Glovis share and the remaining $5 million comes from the Australian engagement that we do have. So strong development. On the associate side, $5 million from the numbers of Wallenius Wilhelmsen, given out yesterday, and even also the asset management, giving $9 million in other financial income for the period. As you can see on the graph on the right side, pretty much doubling the values from the sort of start of the pandemic until the period we're in now. So very good development the last year or so in this area.Coming to the cash flow from the first half year. If we sort of dig into some of the boxes, both operating from Maritime Services and New Energy, good cash flow. What we will see in the period to come and also have seen is that sort of growth in revenue will also pick up growth in working capital. For the moment, we don't see that we are picking up as much as we took it down during the pandemic. So we will, of course, try to work out in the future to maintain as efficient level as possible. And we foresee that we are able to actually be more efficient than we were pre-pandemic on the working capital on our operating areas, specifically in Maritime Services and New Energy.On the investing activities, basically the main investing activities and the main investment we've been making in the first half year is the investment in Edda Wind and some smaller other investments as well. During the period, we have paid $26 million in dividend and reduced debt and also paid the dividend to all the shareholders in pressure during the period. So a strong cash flow period as well, tying up a bit more in the working capital and reducing debt through the period is sort of headliners for the first half year.Not that much movement in the balance sheet, but as previous periods, a very strong balance sheet. You see on the right side that we do have loans that are to be refinanced -- repaid during a couple of years. And you could expect us for the next year to work on that graph to make sure that we have a longer tenor on the sort of first couple of years tenors that we do see in the graph on the maturity side. So that's something we will work on in the period sort of a year to come to prolong that tenor.As mentioned earlier, we did pay a dividend in the first half year of NOK5 per share. That was sort of a NOK3 plus NOK2 in extraordinary dividend due to the reduced dividend in 2020, which was caused by the potential sort of effects of the COVID at that time. So we tried to compensate for that in the first dividend period, also bearing in mind that we have an authorization to the Board to distribute up to additional NOK3 per share during 2021.I guess that's basically the sort of highlights for the quarter and some for the first half year. So if there are any...

[Operator]

We do not have any questions from the online audience right now.

[Thomas Wilhelmsen, Group Chief Executive Officer]

Okay. Then, thank you very much and looking forward to the next quarter. Thanks, Visa.

[Christian Berg, Group Chief Financial Officer]

Thank you.