Gaztransport et Technigaz SA
PAR:GTT

Watchlist Manager
Gaztransport et Technigaz SA Logo
Gaztransport et Technigaz SA
PAR:GTT
Watchlist
Price: 134 EUR 0.45% Market Closed
Market Cap: 5B EUR
Have any thoughts about
Gaztransport et Technigaz SA?
Write Note

Earnings Call Transcript

Earnings Call Transcript
2023-Q1

from 0
Operator

Good evening. This is the conference operator. Welcome, and thank you for joining the GTT First Quarter 2023 Activity Update Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Philippe Berterottiere, CEO. Please go ahead, sir.

P
Philippe Berterottière
executive

Thank you very much. Thank you very much to all of you to join this conference on our first quarter 2023 activity. First of all, I would like to talk about our orders and revenues. Core business, we received 26 new orders in this first quarter. And our revenues have amounted to about EUR80 million, which represents an increase of 17.2% compared to Q1 2022. As far as innovation is concerned, we -- for the fourth year, the first intermediate sized company in France in terms of patents, we've registered. We obtained 4 new AIPs, Authorization in Principle from the Japanese classification society for our latest development projects in alternative fuels. In fact, CSR in March, we've joined the United Nations global contact.Talking about the market, in this first quarter, 20.7 million tonne per annum have been sanctioned. So it's a very large amount. It's about 5% of the current worldwide energy production. In in the digital sector, we've created a new brand for our digital solutions, Ascenz Marorka. And we've obtained new contracts with shipowners related to our productive maintenance solution called Sloshing Virtual Sensor and also new contracts from Marorka, smart shipping solution.KFTC, the Supreme Court of Korea, as we checked, our appeal filed in December 2022 against our decision -- the decision of the Seoul High Court, which was taken in December last.Looking at the order book as it is today, we see in this first quarter, 25 LNG carrier orders. So now we have 273 LNG carriers in our order book, and never ever our order book has been that high, which, of course, is giving us an excellent perspective over the coming years. We see also an order for FLNG that this footing platform, producing, extracting gas, liquefying gas and storing LNG. There were some produced in the past. So here, we have a new one. And of course, it means that some LNG gas will have to go through this platform.Talking about the LNG supply, 20.7 million tonne per annum sanctioned in the first quarter. And we consider that more should come. So we had the port after in the Gulf of Mexico for 13 million tonnes. We had Plaquemines Phase 2 for 7 million tonnes. And we had the FLNG I was talking about for 0.7 million tonnes per annum.What we can see is that the contracting for new LNG quantities is remaining very strong in this first quarter. And it's quite balanced between the U.S. and the rest of the world even though we consider and we can see that on this following page, that more staff, the projects which are in the offerings for being finally sanctioned in 2023 and 2024 are mainly in the U.S. You can see on this slide, all these projects, which have already received a quite significant part of the contracts covering their production.KFTC, we been informed last Thursday that the Supreme Court of Korea has rejected the appeal we filed last December against the decision taken by the several high courts. So the situation is that if requested by the Korean shipyards, GTT will have to enter into negotiations in order to separate in all or in part the technology license and the technical assistance we were providing up to that point in a single contract. And shipyards will have the possibility to select the technical assistance, the engineering services they would like to have. Also, the KFTC fine would be significantly reduced. We paid about EUR9.5 million in 2020 as a fine, and that would be recomputed and significantly reduced.So well, the company still considers that its provision of technical assets and engineering services are essential to ensure the safety and performance of its solutions. And I hope that our standpoint will prevail in the discussions we are going to have. We do not anticipate any significant financial impact in the short or medium term.Now I will leave the floor to Virginie Aubagnac, the Group CFO for presenting to you the Q1 consolidated reviews.

V
Virginie Aubagnac
executive

Thank you, Philippe. Hello, everyone. To comment on GTT's first quarter consolidated revenues. Q1 2023 revenues are standing at EUR80 million, showing a 17.2% increase. In line with our expectation, EUR73 million came from new [ PLS royalty ] up 19% compared to last year. Over the first quarter, GTT booked EUR66.2 million revenue for LNG and ethane carrier, up 23% versus same period last year. From Q2 2023, numerous vessels will come under construction. So we expect quarterly revenues to significantly pick up notably in H2 2023. Revenues from FSU show a decline with the delivery of 1 FSU during the first quarter and a second FSU entering the end of construction phase.LNG as fuel revenues surged at EUR5 million, starting to benefit from the 2021 and 2022 high order book. Elogen's revenues stand at EUR1.5 million compared to EUR0.9 million in Q1 2022. Growth has been limited in Q1, but we expect an acceleration over the year. Services revenue stands at EUR4.9 million compared to EUR5.5 million in Q1 2022. This is due to a slowdown in pre-project studies for which demand is fluctuant by nature and in assistance services for vessels in operations.This leads us to confirm our 2023 targets. So in the absence of significant delay, consolidated revenues for 2023 should be in the range of EUR385 million to EUR430 million. Consolidated EBITDA should be in the range of EUR190 million to EUR235 million. And in line with our long-term dividend policy, we aim at distributing a minimum of 80% of our net income for 2023.I now let Philippe Berterottier, our Chairman and CEO, conclude this presentation.

P
Philippe Berterottière
executive

So thank you very much. Thank you for listening to this presentation. And now we are ready to answer to your questions.

Operator

[Operator Instructions] The first question is from Jean-Luc Romain with CIC Market Solutions.

J
Jean-Luc Romain
analyst

Two questions, if it's possible. On the rejection of the appeal of KFTC, was that -- was it a reduction of the receivability of AiP law or a reduction of the base of difference? And second question is, did you already have some shipyards was to kind of unbundle the technical assistance and the license agreement? And how do you see your approach in terms of pricing both parts severity and continuing to kind of give any quality insurance to your final clients who are the shipowners?

P
Philippe Berterottière
executive

So on the -- your first question, as far as we understand the decision, it's on the background base of the facts that the Supreme Court has taken its decision. On the point about the shipyards, I think we said that in the past, but in fact, we -- the decision asked us to split our contracts. They don't ask us to reduce our prices. So that may be something we could discuss or we could not discuss that would be a matter of discussion with the shipyards. And for the time being, I would say that nobody has asked us to split our contracts. So this is something that they could do, they wish they could ask us if they wish. But for the time being, we did not receive any request in that direction.

Operator

The next question is from Kevin Roger with Kepler Cheuvreux.

K
Kevin Roger
analyst

Sorry for that, Philippe, but I will have to come back on the decision from the KFTC and the TALA agreement. You never wanted to give us some color on what could be the split between the time line, the contract value currently. Is there anything now that you have the decision that you can share with us what would be in, let's say, worst case scenario, the revenue that will be removed currently from your services, and that will be managed by the Korean yard, that would be the first question, please, if you can provide us anything on that side.The second one, on the commercial dynamics, so it remains relatively impressive, 25 vessel in the first quarter based on the distribution that you have currently with potential clients, would you say that this is a run rate that you can hold for the coming quarters? Or at some time, the famous, let's say, slowdown that anyone could expect should really happen at any time? And the third question, if I may, is related to the LNG as a fuel. So any update on that side in terms of commercial dynamic also because it has remained slightly muted recently. So do you see an acceleration? What's the trend here, please?

P
Philippe Berterottière
executive

So with news from our services, once more, we are not -- we don't have to reduce our royalties. To give you colors on our technical assistance, we have about 500 lines of deliverables we provide to shipyards. These lines are not associated to a particular price. So it depends very much on how the discussion will go, whether yards would like to replace everything, which, in my opinion, is probably a little bit extreme, or whether they would like to -- we are on some of these deliverables on the entire part.Tied consequences, as I said, we are not obliged. So it's better -- I would not say it's a matter of negotiations or discussions. And what is important for us is to have a very safe and very reliable way of working, making sure that ships are well built. And I'm sure that it's the concern of the entire industry, the shipyards, but also the shipowners and the charters. And so no discussions have been initiated. For me, it's too early to say anything on that, except that I don't see financial consequences in the short to medium term.On the 25 orders, I would say that after 162 orders in 2022 and 68 orders in 2021, it's a strong flow of orders. But also, I can see that through the projects, which may be decided and through the renewal plans of several shipowners, I have the feeling that the flow of orders will continue in 2023 and 2024. So we are -- well, I would say that we are not going to beat the figures we obtained in 2022. But I'm pretty sure we are going to obtain very decent figures in 2023.With LNG as a fuel, we say that the very high price that LNG has reached in 2022 as a consequence of the crisis between Ukraine and Russia has had a fairly deterring consequence on the shipowners. But prices are back to normal. And people know that there may be some kind of volatility. So they are working on schemes in order to get protected on some hedging scheme in order to be protected. We see that anyway the market is fairly small for the time being. There is a methanol kind of competition from methanol, which, in our opinion, is a bad solution. But we talk about that with shipowners, of course. And for them, it's a kind of a way of not putting all their eggs in the same basket in hedging the technical solutions or the fuel solutions, they are choosing for comparing with CO2 emission regulations rather than a strong choice for methanol, which for the time being, is generating more than LNG.So we are still convinced that LNG is the right solution, both in terms of emissions and in terms of prices and that this solution will finally prevail. We are keeping on, as you could see from the AIPs we obtained in Japan, we are keeping on working on technical solutions and expanding that to shipyards through their classification societies, that it's the right solution. And we are still quite optimistic on this solution.

Operator

[Operator Instructions] The next question is from Guillaume Delaby, Societe Generale.

G
Guillaume Delaby
analyst

Yes. Quite nasty questions in a row, nasty but not so nasty, do not panic. First point, do you still have some further legal options in Korea? Or is the case totally settled? First question. Second question, I'm going to try hard. Probably I will not make it, but let's try it. If we assume that the maximum risk, financial risk, let's say, in the medium term, it could be maybe circa 10% of revenue and maybe circa 5% of EBITDA is it, I would say, a reasonable proxy? Third question, I would like to come back maybe on the debate LNG versus methanol. My perception is that since the beginning of the year that it's not on a perception that ship owners are, I would say, rather structurally rather than conventionally turning to methanol versus LNG. So I understand it's not your opinion, but what makes you so confident? And my fourth question is don't -- are you still very -- I guess you are still comfortable with the guidance, but a noncore revenue were only EUR6.5 million in Q1. I understand that you expect those non-core revenue to ramp up dramatically in the remaining of the year. However, don't you think that your guidance, at least from the noncore non-royalty revenue part might be a little bit ambitious.

P
Philippe Berterottière
executive

Okay. So on legal options in Korea, we don't have any legal options anymore. The only possibility in the decision is that if we don't agree with shipyards, we can go to arbitration, which is -- that is the decision from the KFTC. That's what the KFTC is saying, if you don't agree, you go to arbitration. And in a certain way, it's back to our contractual relationship because in our TALA, if we have a dispute, we go to arbitration. So we never went to arbitration with any current shipyards.For risk, you mentioned figures. But I would like to say that, first of all, -- for that, we should at least be requested to enter into discussions first. And second, we should agree on letting some deliverables going to be provided by shipyards. And third, we should agree on price rebate on the decrease of the amount for LTs, for these deliverables that we will not provide anymore. So I would not say that the figures you were mentioning is a reasonable proxy of the financial consequences. And far from that, I think that our deliverables are very much needed. And I think they are going to continue to be appreciated by the industry.Energy versus methanol, we are -- I don't think that methanol is such a good fuel. First of all, for the time being, when it's fossil methanol, it's more expensive -- very significantly more expensive, by the way, and generating more CO2 than the HFO, the heavy fuel outlet. So far above LNG. So more extensive than energy, generating more CO2 than any fuel oil. So it's bad by any aspects. In addition to that, the energy density is lower. So you need a much bigger tank than for LNG. So you lose cargo space. So for me, I don't see so much of the merits. At a certain point of time, you may blend your fossil methanol with biomethanol or synthetic methanol. These ones are going to be significantly expensive, it cost quite a lot. If you want to match LNG in terms of CO2 emissions, you need to blend your propyl methanol with 45% of bio or synthetic methanol. And in terms of prices, you're going to be much higher than -- much, much higher than LNG. So you can go to a totally bio or e-methanol. But here, we consider that you're going to be at about or even above the price of LNG.So in fact, through LNG, you are better in terms of prices and CO2 right now. And you are better or at least at the same level at the end of the day when everybody will have switched to a synthetic fuel. And when I say at the end of the day, it's quite far away because you need the facilities, for example, for producing green hydrogen, which as far as we can see through the hydrogen window, are not yet built or are not yet built in sensitive dimension. So it's for all these reasons that I don't see that the interest for methanol is something structural, but rather something for hedging bets between various profile shops or various tubes.On the third -- on the fourth question, I would let Virginie to answer to you.

V
Virginie Aubagnac
executive

Yes. On the guidance, as you can see already -- I mean, your revenue is mainly royalties. And we do not give a guidance on the core business and noncore business. So you were talking about noncore revenues. And if it was below our expectation, which is actually not the case. First, electrolyzers are going to ramp up throughout 2023. And services, it's a small amount of reduction. And it's very hard to predict. And in between order and revenue recognition, it's very -- within a very short time period. So it doesn't mean that it's done for the year. And actually, we have some types.So studies, we did not look, I mean, recognize as much revenue in terms of studies as the same period last year. But it can be otherwise in the quarters to come. And that's the same with assistance services for vessel in operation. Hard to predict, but it always happens. And from one quarter to the other one, there can be variations. So yes, we do confirm our guidance and revenue guidance.

Operator

The next question is from Matthew Marc with Cambium.

M
Matthieu Driol
analyst

I just have one question. How are you impacted by the current inflation context, I mean, in terms of wage increase? And to what extent can you pass it through in your royalties?

P
Philippe Berterottière
executive

So inflation, as you said, most of our costs are salaries. And we decided to rebalance our remuneration system and between profit sharing and individual remuneration, which is going to have a cost impact in 2023. We talked about it at the occasion of our 2022 year results in February. It's probably the very right moment to do that in order to increase these salaries at the moment when there is a quite strong inflation. Inflation in fact, our royalties are indexed according to the increase of salaries in the French engineering industry. So we could say that in a certain way, we are hedged, we are protected against wage inflation, wage increases in France, thanks to this indexation in our contracts.

Operator

The next question is from Jean-Francois Granjon with ODDO BHF.

J
Jean-Francois Granjon
analyst

Two questions from my mind. Regarding the decision in Korea and with the KFTC, do you see any risk to see the same things with the Chinese shipyard? And the second question concerns the business you have with some Korean or Asian shipyard for the Russia project, you mentioned EUR24 million for the sales with 6 LNGCs. What's the situation currently? Are there also any risk regarding these 6 LNGCs?

P
Philippe Berterottière
executive

Okay. So KFTC, we don't -- you see our engineering services, our technical assistance is very much needed. And probably the discussions will be around that. The discussions with shipyards will be around that. We are working for 40 years with Korean yard. We still think that at the page, we improve our systems, our technical assistance is very much needed. We are now working with 5 shipyards in China, one for 20 years and the 4 other for about a year. In my opinion, all of them are leading our technical assistance at Korean yard needing our technical assistance.So anyway, the -- according to our contract, if we split our contract, we have to provide the same conditions to everybody. So if Chinese yards would like to ask for that, they could. But once more, I think we are very much needed.On the Russia Korea yard situation, we continue to build the 6 vessels in Korea. So it's going on.

Operator

And the last question is from Jean-Luc Romain with CIC Market Solutions.

J
Jean-Francois Granjon
analyst

You mentioned the growth that will accelerate in hydrogen for the rest of the year. We had like 69% growth in the first quarter. So should -- do I understand correctly that we should expect more growth than that first quarter year?

P
Philippe Berterottière
executive

Yes, we expect a significantly stronger growth in 2023.

J
Jean-Francois Granjon
analyst

Can you remind us what the order was at the beginning of the year?

P
Philippe Berterottière
executive

The orders?

J
Jean-Francois Granjon
analyst

What the order book was at the end of the year, end of 2022?

V
Virginie Aubagnac
executive

It was EUR15 million.

Operator

Mr. Berterottiere, there are no more questions registered at this time.

P
Philippe Berterottière
executive

Okay. Thank you very much. Enjoy your evening.

Operator

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.

All Transcripts

Back to Top