Gaztransport et Technigaz SA

PAR:GTT

Earnings Call Transcript 2019-Q1

[Operator]

Good afternoon, ladies and gentlemen, thank you for standing by, and welcome to the GTT First Quarter 2019 Activity Update Conference Call. [Operator Instructions] I must advise you the conference is being recorded today, Tuesday, the 16th of April, 2019.I would now like to turn the conference over to your speakers today, Marc Haestier, CFO, GTT. Please go ahead.

[Marc Haestier, Chief Financial Officer]

Thank you, Lora, and good afternoon, everybody. I'm pleased to once again be there to give you some highlights on -- in this case, our first quarter trading activity.The key highlights, first quarter consolidated revenues stand at just under EUR 59 million, EUR 58.9 million to be specific, and I'll give more details a bit further in this presentation. We've had strong level of new orders in the first quarter, which I'm sure you have been following, with 14 LNG carriers and 1 bunker ship in the first quarter. The order book on core business, which stood at 97 units at the end of 2018, now stands at 101 units, made of 88 LNG carriers, 8 FSRUs, 2 FLNGs and 3 onshore storages. The movements in the first quarter were precisely what I mentioned, the new orders, the 14 new orders for LNGCs, and there were also 10 deliveries, 9 LNG carriers and 1 FSRU.On the LNG as a fuel business, new business, the order book now stands at 12 units at the end of the first quarter with an additional order for 1 bunker ship in this quarter. Now no doubt you all have seen the announcement we made yesterday. So this is post first quarter, but it's worth to mention that we've had a new success in the LNG fuel business with an order for a retrofit of a very large containerships, which -- containership, which will be converted to LNG.A brief update of the market. And since we discussed this at the end of February, nothing much new. The trends are still obviously very positive for LNG demand, which is expected to double between 2018 and 2035, with growth coming mainly from Asia and continuous growth expected over the years, so nothing new on this front.On the shipping market, we're seeing now charter rates stabilizing, whether we're talking of spot charter rates, which are now standing at around $60,000 per day, but also on the 1-year charter rates, which are stabilizing around $90,000 per day.We also were talking earlier this year of liquefaction projects and FIDs, which were expected. In the first quarter, we had an FID for Golden Pass project, which is a 15.6 million tons per annum project that was in February, which means that in 1 year-to-date, we've had FIDs for a total of 36.5 million tons per annum. You will remember that last year there were 3 projects, which reached their FIDs, 1 in the U.S., 1 in Canada and 1 in -- and 1 smaller one in Africa. We're clearly expecting more FIDs in the next couple of years as various projects are working their way towards their investment decision, for example, the Mozambique LNG Area 1, where 9.5 million tons have been contracted out of the total of 12 million tons and this project to be taken over by Chevron, so these are positive signs going ahead. The other one is -- the second one is Arctic LNG 2, where some slots, 14 exactly slots, have been booked at the Zvezda shipyard for potential future ship orders, also showing signs of strong activity on this particular project. And finally, Qatar LNG expansion, where engineering contracts have been signed for the expansion of the North Pars project.A word on LNG as a fuel. We are pursuing our entrance or our entry in this new market with a new bunker ship ordered in March of this year, a 12,000 cubic meter tank with -- equipped with Mark III Flex technology and owned by MOL shipper. And last but not least, in April, one very large containership, which is -- which will be converted for LNG that we will be retrofitting a tank with 6,500 cubic meters capacity also equipped with Mark III technology in this case. This is a ship which is owned by Hapag-Lloyd, so also it's an interesting diversification in terms of container ship-owners. We had orders from CMA CGM, you will remember, for new LNG carriers. So now we have a new ship-owner and a retrofit project, which is also a first.Now moving on to some numbers. I mentioned total revenues at EUR 58.9 million. If you compare to the first quarter of last year, this is a decrease in total of 8.2%, with which really comes from the core business and is linked to the phasing effect of our revenues based on the order book. In 2018, we still had a lot of orders in our revenues, which were linked to orders which dated prior to 2016, so 2015 and to some extent 2014. Whereas in the first quarter of this year, we are beginning to build up the revenues based on the orders received in 2017 and in 2018. And I will also remind you that our revenues in each quarter may vary, so I would not suggest that you multiply this number by 4 to get a view of our full year revenues.Revenues from services have been on the increase compared to the first quarter of last year, and this is notably due to the rise -- the increase in maintenance services and also to some extent to the contribution of Ascenz.All this places us in a position, not surprisingly, to confirm our outlook for 2019. For memory, in terms of revenue, we are looking at a range of EUR 255 million to EUR 270 million. For EBITDA, we are looking at a consolidated EBITDA in the range of EUR 150 million to EUR 160 million. And as far as dividends are concerned, we are looking at a payout of at least 80% of consolidated profit. So that is it for this brief introduction. I would now hand back to Lora for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Jean-Luc Romain.

[Jean-Luc Romain]

I was wondering if you have an kind of estimate of how large the LNG carrier -- oh, sorry, container carrier market -- well, progression market might be?

[Marc Haestier, Chief Financial Officer]

This is clearly a difficult one to answer. I mean, we know what the fleet of a very large carrier is. In fact, this was presented in our full year presentation. But clearly, the real question is not so much how many ships there are, but those -- which of those which will be a good candidate for retrofit. And this will very much depend on a number of factors, but in particular, the age of the ship, because obviously, the younger the ship, the better it is suited for retrofitting. But it's difficult to give a number in that respect.

[Jean-Luc Romain]

And may I ask an additional question about the size of a tank? It's about 3x smaller than the tanks that were ordered for CGM container carriers?

[Marc Haestier, Chief Financial Officer]

That's correct.

[Jean-Luc Romain]

Always what's determined?

[Marc Haestier, Chief Financial Officer]

Well, it really depends on the actual size of the ship. I mean, the CMA CGM ships are really extremely the largest container vessels ever built. For this one, you are looking at a slightly smaller, even if the number of containers is still quite impressive. So it's really a question of size of ship.

[Operator]

Your next question comes from the line of Martin Boeris.

[Martin Boeris, Analyst of French Mid Caps]

Yes. Martin from Exane. Two questions on my side. First, at the international LNG conference in Shanghai in early April, Qatar said that it will invite very shortly shipyards to participate in a tender for the provision of LNG ship construction slots. Have you have a view on when Qatar could effectively announce its big order and when shipyards could start the construction of the ships?

[Marc Haestier, Chief Financial Officer]

Well, again, a difficult one to call. I think there was a lot of communication around the announcements made, in fact, at this trade conference. It was clearly a statement made to the market saying we are around and we will be, hopefully, ordering a large number of ships, but they haven't been that more specific about it. But clearly, this will contribute to -- presumably contribute to our orders in the future. And you know what our estimates are over the next 10 years, okay.

[Martin Boeris, Analyst of French Mid Caps]

Okay. And my second question was on your favorite topic, Solidus. DSME received the approval from Lloyd's Register for the new version of its Solidus membrane technology. Have you had the opportunity to look at the new characteristics of its new version? And do you usually talk with DSME on Solidus?

[Marc Haestier, Chief Financial Officer]

Yes. Well, we've certainly seen the announcement on Solidus, and I suspect that our technical people are looking at that very, very closely. Sorry, what was the second part of your question?

[Martin Boeris, Analyst of French Mid Caps]

And I was wondering if you talk on -- if you talk of Solidus with DSME on the...

[Marc Haestier, Chief Financial Officer]

Whether we talk?

[Martin Boeris, Analyst of French Mid Caps]

Yes. If it is a subject you are having with...

[Marc Haestier, Chief Financial Officer]

As you know, DSME is one of our largest customers. We talk with them a lot. And I'm sure in these conversations, the subject of Solidus must come into the conversation, yes. But I can't expand really that much on that because -- I mean, clearly, they are not necessarily going to tell us very much about the system.

[Operator]

[Operator Instructions] The next question comes from the line of Guillaume Delaby.

[Guillaume Delaby, Equity Analyst]

Yes. A very small and very, very specific question. Regarding your services revenue, you mentioned an increase in maintenance operation. I may be wrong, but I think it is the first time you mentioned that. So does it mean that basically, I think, you have you've a thermal camera and a concept, which is called Balloon. Are those 2 products starting to find their market, yes or no? And basically, if I'm right, should we expect basically those products to continue to increase?

[Marc Haestier, Chief Financial Officer]

Okay. When we are mentioning this increase, we're talking of maintenance mainly. So these are the current maintenance, which are performed when the ship is at -- is docked. And the increase in this volume is really a -- in a way a reflection of a better shipping market, where, first of all, there are more ships around progressively and the ship-owners are, say, more keen to spend a bit of money on the maintenance of their ships. So we're not really talking about the 2 products you mentioned in this case. But certainly, our inspection services with thermal cameras, which is called TAMI, is a product, which has had our service, if you like, which has had a lot of success in the past year. So it's not kind of a new product. The Balloon is something perhaps more recent, and it's probably -- it's still fairly marginal.

[Operator]

Your next question comes from the line of Kevin Roger.

[Kevin Roger, Research Analyst]

Yes. Two question on my side, please. The first one is related to the current day rate of the ENGIE cargo. We have seen a decline year-to-date, end of last year when you were mentioning the -- basically big raise in the rate. You were mentioning the fact that there were no available vessel on the spot market. Can you tell us what's the situation currently? How many vessel are available on the spot market currently? And the second question is related to the phasing of the construction of the new cargoes. In the press release, you say that on the 48 cargoes that you have received, only 14 are already in construction. But if I'm not wrong, you have almost 30 units that are scheduled for delivery before end 2020. So basically, is there any some delays or things like that, because if I remember, you need at least something like 2 years, 2.5 years for the construction of a cargo?

[Marc Haestier, Chief Financial Officer]

Yes. Okay. First question, I don't have the exact number of available ships, and that can fluctuate quite a lot from one period to another. These are not huge numbers, of course. But I think, really, the stabilization is more due to the fact that there's not so much demand for chartering of ships. I guess this is more the reason. As far as the schedules, we are -- first of all, we are not seeing any specific delays in construction. It is more due to the phasing of the actual planning of the various ships, so nothing out of the usual here. And when we were mentioning the 14 ships out of 48 orders, we are talking of the 2018 orders. There are orders -- there were orders in 2017 which obviously are under construction and which orders which will -- and this is our views, by the way, which orders which will be delivered first before the 2018 orders.

[Kevin Roger, Research Analyst]

Yes, yes. If I am not wrong, I understood that the 14 that you were mentioning on the 48 are related to the units secured in 2018. But when I look at the delivery dates that you mentioned in each press release for each one, I think you have almost 30 units that are scheduled for delivery by end 2020. So it's just that I'm a bit surprised to see that, let's say, half of those vessel are already in construction for delivery in 2020.

[Marc Haestier, Chief Financial Officer]

Yes, but these vessels are not necessarily ships which were ordered in 2018. They can -- could have been ordered earlier than that. And you're looking at the 20 -- on average, you're looking maybe at 18 months for the construction of a ship. So it's not inconsistent as far as I can see.

[Kevin Roger, Research Analyst]

Okay. So 18 months for the construction, okay.

[Operator]

[Operator Instructions] Your next question comes from the line of Jean-Pierre Dmirdjian.

[Jean-Pierre Dmirdjian]

Yes. Marc, a quick question to be sure about your guidance because I think there is a disclaimer that was not formally there the previous quarter. You are saying that in the absence of significant elections or delays, I believe that you said that sequential decline we've seen in revenues in Q1 from LNG carriers is just due to phasing and not to any potential construction delays. I just wanted to be sure that whether you may have expected any potential signs at the moment of future risks of construction delays, such as protest strikes at the shipyards or anything else? Do you have any signs that there could be tangible signs that such risks materialize in the next quarter or so?

[Marc Haestier, Chief Financial Officer]

Yes. Thank you, Jean-Pierre. First of all, as of today, we are not saying -- seeing any such signs. But I should point out that this little sentence you will find in all our quarterly press releases, going back to -- it was in the full year. But you should go back even last year or the year before, you will find that sentence, which is always a precaution -- a general protection we take -- precaution we take in terms of our guidance. So nothing to read in that little piece of sentence. And so far, no signs of potential delays. But of course, the future will let us know if such a situation does occur. But at this stage, no sign.

[Operator]

[Operator Instructions] Your next question comes from the line of Kevin Roger.

[Kevin Roger, Research Analyst]

Yes. One follow-up, please. Any update on the potential impact for you from the merger between Hyundai and DSME in terms of commercial description, et cetera? Any update on that side?

[Marc Haestier, Chief Financial Officer]

Nothing particularly new from what we said at year-end. I mean, again, it's still fairly early stages in this merger. I think we mentioned at the time, we have potential views on that. But nothing new from what we said at year-end.

[Operator]

[Operator Instructions] The next question comes from the line of Martin Boeris.

[Martin Boeris, Analyst of French Mid Caps]

Yes. Just a follow-up question on Q1 '19 orders. Do you confirm that these orders will not contribute to fiscal year '19 revenue? Or would we have a slight effect on revenue?

[Marc Haestier, Chief Financial Officer]

If there is, it will be very marginal. It really much -- it very much depends on the beginning of construction, as you know, because you have to [indiscernible] revenues from the steel cutting point. So -- but clearly, the bulk of the revenues on these orders will not be in 2019.

[Operator]

[Operator Instructions]

[Marc Haestier, Chief Financial Officer]

Okay. It seems there are no further questions.

[Operator]

We have no further questions at this time.

[Marc Haestier, Chief Financial Officer]

All right. Thank you, Lora. Well, all that remains for me is to say thank you for attending this call and goodbye. And no doubt, we will be talking again soon. Thanks. Bye.

[Operator]

That does conclude the conference for today. Thank you for participating. You may all disconnect.