global shipping & logistic solutions - wallenius …...global construction machinery demand is...

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CAPITAL MARKETS DAY 2019

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Wallenius Wilhelmsen ASA – Capital markets day 2019 program

Market outlook Michael HynekampEVP and Chief Operating Officer WW Ocean and WW Solutions

Decarbonisation Roger StrevensVP Head of Global Sustainability

Digitalisation Simon WhiteEVP and Chief Digital Officer

Mats AmlandVP Head of Transformation Office

Market Outlook

Mike HynekampEVP and COO WW Ocean & WW Solutions

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There is no doubt that the industry around us is changing…

Source: Market Insight WW

AutonomyElectrification Mobility models Flexible manufacturing

New entrants

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Light vehicle sales growth expected to see a CAGR of ~2.1% going forward

Source: IHS Markit / Market Insight WW

2021

4.5

27.5

2018

3.7

19.9

4.57.0

9.6

5.0

25.9

8.4

20.3

20.6

25.7

20.3

2019

4.04.6

6.8 10.28.6

19.8

5.75.46.4

5.8

10.6

5.5

2022

28.1 30.1

2024

5.85.66.4 6.3

11.1

20.3

21.821.921.2

31.1

2025

6.0

11.7

20.4

22.1

19.6

6.4

32.1

2026

5.2

20.1

5.0

6.4

100.3

26.8

20.7

19.7

9.1

89.9

6.64.8

29.2

2023

21.6

104.3

4.3

20.7

97.9

4.7

102.1

2020

8.9

20.3

6.9

93.790.1 92.2

94.9-4% 0% +2%

+3%+3%

+2.1%

+2% +2% +2%

LV global sales, sales region, million units, 2018-26

ME/Africa

S Amr

Japan/Korea

South Asia

NA

Europe

G China

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Forecasted growth in deepsea volumes in all key markets


WW Ocean trade routes

EUKOR trade routes

ARC trade routes

NA export

Europe export

China export

Japan export

Korea export1.20.8

1.9

20262019

1.6

4.2 4.6

+1.2% S Amr

G China

South Asia

ME/Africa

Europe

NA

1.0

2026

1.1

2019

2.2 2.4

+1.1%G China

S Amr

Europe

South Asia

ME/Africa

NA

0.6

2019

0.61.3 1.5

2026

3.33.8

+2.0% S Amr

South Asia

G China

Japan/Korea

ME/Africa

NA

2026

0.4

2019

0.3

0.5

1.1

+12.5%Japan/Korea

South Asia

Europe

NA

ME/Africa

S Amr0.5

2019

0.7

2026

1.41.7

+2.8% South Asia

ME/Africa

S Amr

Japan/Korea

G China

Europe

Armacup trade routes

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Chinese light vehicle export set to be ramped up to >1 million units / year

Chinese LV export per consumption region 1000 units, 2017-26FC Comments on Chinese LV export

53

57

427464

14

2017

127

2018 2019 2020 2021 2022 2023 2024 2025

411

154

994

260

161

2026

80

296427

485

632

816

1 027 1 054

+12.5%North America

Japan/Korea

Europe

South Asia

Middle East/Africa

South America

• China largest production region globally, expected to increase from 26m in 2018 to 32m in 2026

• Open capacity at Chinese plants

• Chinese export of LVs to increase from 296k in 2017 to 1054k in 2026

• Battery electric vehicles (BEVs) expected to contribute to most of export growth

• Regional emission regulation to influence consumption of BEVs, where Europe is expected to be a large consumer of these vehicles


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North American light vehicle production and H&H sales show stable outlook

Vehicle processing

LV production NA

Mill units, 2018-24FC

2020 20222018

17.016.5

202420212019

16.8

2023

16.417.0 16.8 16.6

+0.3%

25%

14%

7%

15%

2%

4%

6%

2018 2019 2020 2021

0%

Caterpillar Inc. (CAT-US) Deere & Company (DE-US)

Source: IHS Markit / Market Insight WW, Factset data and Analytics (14.10.19) | Analyst consensus sales growth – Fiscal years (Caterpillar – North American sales of construction and mining equipment divisions only | Deere – Global sales of Agriculture & Turf division only) (USD, y-o-y %)

Equipment processing H&H Equipment OEM sales growth Analyst consensus est, 2019-21FC

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Outlook for marine terminals is solid

Terminals

LV export and import NA


2019

1.4

5.1 4.9

20212018

1.4

6.2

1.4

2023

4.8

2020

1.4

4.8

1.71.6

4.6

2022

1.7

4.8 4.8

2024

6.46.56.3 6.2 6.2

6.5

+0.5%

Export

Import


Terminals

LV export and import Europe


Terminals

LV export and import APAC


2019

2.8

3.5

3.8

3.5

2.9

2018

2.9

3.3

2020 20232022

3.7

3.0

2021

6.4

3.6

3.2

3.7

3.5

3.7

2024

6.3

7.2

6.26.6 6.8

7.5+3.9%

Export

Import

11.811.3

12.3

3.2

8.2

3.1 3.1

8.0

2018 2024

7.9

20212019

3.1

2020

3.2

7.9 8.1

3.1

2022

8.6

3.1

2023

9.1

11.1 11.0 11.1 11.2

+2.1%

Export

Import

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Engine replacement

We appear to be in the start of a Mining truck replacement cycle - Trucks commissioned during 2007/2008 are approaching theoretical replacement age

The number of trucks that are approaching the end of their chassis life is steadily growing over the next years Large mining truck fleet characteristics

Source: : The Parker Bay Company (Q3 2019) | Large mining truck (+91mt payload) fleet characteristics (Age distribution (years) and maintenance/replacement needs) (Not considering parked/idled machinery)1The industry is currently changing truck engines at between 24 000 and 28 000 hours (every 4 to 5 years) 2Life of a truck is a minimum of 80 000 hours, but the industry is aiming to extend that to well over 100 000 hours, as improved engine technology (live digital monitoring, oil sampling, RPM limiting) and preventative maintenance is leading to extended life

Truck replacement

80 – 90 khrs(13 – 15 yrs)

24 – 28 khrs(4 – 5 yrs)

5.5 – 6.0 khrs/yr

Truck replacement2Engine rebuilds1Yearly utlisation

0

1000

2000

3000

4000

5000

6000

1720+

Age

30+ 911

# Operating mining trucks

40+ 1819 616 15 <114 13 12 10 8 7 5 4 13 2

OEM quotes on Mining equipment replacement demand

“(…) most commodity prices remain at investable levels (…) the

end-user demand for mining equipment remains positive. And

large mining trucks have further room for growth. We

continue to believe we are in the early stages of a multiyear

recovery in mining. However, miners are cautious due to

economic uncertainty.”

- D. James Umpleby III , Chairman & CEO Caterpillar

Q3 19 Earnings Call

“(…) the sentiment for ultra-large hydraulic excavators (over

300t) and dump trucks (payload over 150t) for major

mining companies is bullish.”

Q2 FY2019 presentation (Period: Jul.- Sep.19)

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Global construction machinery demand is expected to weaken through 2021 before growing again in 2022

0

1.000

700

300

1.100

400

1.200

100

900

200

500

800

600

2017 2019e 2020e2016 2022e

1000 Units

2014 2023e2021e2015 2018

-16%

+2%

+27%

+24%-3%

-7%

-5%

-1%

+4%+4%

China

Europe

India North America

Japan Rest of the World

-3% -5% -3% -2%

202320202019 20222021

0%

North American sales are believed to grow through 2022, European demand edging down, while the Chinese market is expected to once again decline strongly before improving in 2022Global Sales of Construction Equipment by Region (Units)

EUROPE

+8% +6% +5%+1%

-6%

202220202019 2021 2023

NORTH AMERICA

+3%

-5%

+3% 0%

20222019 2020 2021

0%

2023

JAPAN

-4%

-15% -16%

+12% +10%

2019 20222020 20232021

CHINA

-10%

+10% +9% +6% +4%

20212019 2020 2022 2023

INDIA

-8%

-16%-12%

+6%+13%

2019 2020 2021 2022 2023

Rest of the World

Source: Off-Highway Research | Construction equipment sales (Units)

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The economic outlook for farmers is expected to be mixed across key markets- In the US, direct government payments to affected farmers aim to soften the short-term blow of the ongoing trade war

US farm profits expected to increase slightly in 2019US Farm Income Forecast1

Source: 1USDA | August 2019 US Farm Income Forecast (Real 2019 USD) vs Cash receipts 2EU Commission - Agriculture and Rural development | Forecasted EU Farm entrepreneurial income (EU-28 Factor income in real terms) and commodity prices (Pork/Beef/Milk) (EUR/t) 3ABARES (September 2019 Agricultural Commodities Report) | Australian farm income (Gross, Net cash) (Mil AUD)

EU farmer income is expected to decline slightly over the next 18mEU Farm income and commodities forecast2

100

350

0

300

50

400

450

150

5002

01

0

20

17

20

19

E

USD bn (Real 2019)

20

18

20

00

20

01

20

02

20

03

20

04

20

11

20

05

20

13

20

07

20

08

20

09

20

12

20

06

20

16

$ 112,6

$ 88,0

20

15

20

14

0

10

20

30

40

50

60

70

80

90

100

110

3 800

4 100

3 900

4 000

0

100

200

1 400

1 500

1 600

300

1 700

3 600

3 700

Farm income (Real)

20

14

20

12

20

11

20

13

20

15

20

16

Commodity price(EUR/t)

20

10

20

18

20

19

e

20

17

20

20

e

Beef and veal

Pork

Milk

Farm income (Real, EU-28)

10-year avg.(2008-17)

Australian farm income is expected to drop below 5-year avg.Australian Farm income3

Net Farm Income (NFI)

Cash receipts

Net Cash Farm Income (NCFI)

2000-18 average NFI

2000-18 average NCFI

50

30

20

0

60

80

10

40

70

2019/20E

21.4

2014/15

23.6

2015/16

27.6

2016/17 2018/19E

26.4

2017/18

26.3

23.2

61.6

54.4

Farm income(Mil AUD)

56.659.6

62.259.4

+4%-5%

Record winter harvest

Gross farm production value

Net farm cash income

5-year average

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Recycling might pick up over the next 5 years - Potential for upward pressure on rates

Source: Seaweb.com 1capacity includes only Active vessels.

0

10

20

30

40

50

60

70

200

400

150

0

100

250

350

300

50

20

01

19

87

19

99

19

91

19

94

20

15

20

16

19

90

19

96

CEU Capacity(1000) # Vessels

20

10

19

88

20

13

20

07

19

89

19

92

20

08

19

93

20

06

19

98

19

95

20

00

19

97

20

02

20

03

20

04

20

05

20

09

20

11

20

12

20

14

20

17

20

18

20

19

Active #Vessels

Over the next 5 years 16 vessels will reach

replacement age

Over the next 10 years 79 vessels will reach replacement age

Fleet composition by year of build CEU capacity (>4000), Active by September 20191

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An unrivalled and agile global RoRo network to meet changing demand…



EUKOR trade routes

ARC trade routes


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… and a global network of Landbased entities well positioned for future growth



EUKOR trade routes

ARC trade routes

In-plant vehicle processing centres

In-plant equipment processing centres

Terminals

Vehicle processing centres

Equipment processing centres

Inland distribution networks


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Despite uncertainty in the short term we see solid development expected for the next 5-7 years and remain optimistic for horizon beyond



EUKOR trade routes

ARC trade routes

In-plant vehicle processing centres

In-plant equipment processing centres

Terminals

Vehicle processing centres

Equipment processing centres

Inland distribution networks

Global trade coverage with diverse customer

and cargo mix

Advanced and flexible fleet

Solid network of landbased entities

Well-positioned to capitalize on trends


Decarbonisation in shipping

Indispensable industry, unprecedented challenge

Roger StrevensVP Head of Sustainability

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○ Relative CO2 reduction of at least 40% by 2030 compared to 2008

○ WW CO2 intensity 2008:2018 -32%

○ Absolute reduction in total GHG of at least 50% by 2050 compared to 2008

○ Will require zero emission vessels

○ CAPEX and or OPEX?

○ Changes to service?

○ Competitive landscape?

○ All of the above

○ Engagement advisable

IMO regulatory targets Wider meaning…

Past to present

20

Increase in economy of scale

0

1000

2000

3000

4000

5000

6000

7000

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

Total

Total

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

6000-8000CEU+

4000-5999CEU

1000-3999CEU

….so the fleet average has been increasingNew vessels have been getting bigger…

21

Panama canal expansion

22

Other contributing factors

23

Toward 2030…

Digitalisation to extract efficiencies

Hull fouling management to reduce inefficiencies

No comment… for competitive reasons

Pushing progress

25

Engage in the regulatory process

Attract innovators to our industry

Our approach to achieving progress

Take the initiative to position for the future

Partner to find Lean:Green solutions

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Progress imperatives: 3 perspectives

Incremental reductionBusiness as usual

Step improvementCarbon neutral

Final destinationZero emissions

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What makes an innovation stack up?

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NB: Shifting frame of reference

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2020: Next-level transparency

○ Addressing climate risk - TCFD based on SASB

○ Physical and transition risks

○ TCFD: the ‘what’, SASB: the ‘how’

○ CDP: most widely used carbon reporting framework

○ SBT: top-down target setting approach

○ Will inform new GHG target setting

Into the future

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Partnership: when the total is greater than the sum of the parts

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○ WPCC: Wind Assisted Car Carrier

○ Design development by Wallenius Marine

○ Concept feasibly assessment underway

○ Conclusions expected H1 2020

Wind assisted propulsion

Introducing LEO: Lignin Ethanol Oil

○ Natural polymer, byproduct of paper production

○ LEO: potential 2nd generation biofuel

○ Near carbon neutral, no sulphur

○ Heavy ‘drop-in’ fuel for existing fleet

○ Bench-top now, test engine ca. Q4 2020

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Getting to zero 2030 – we’re onboard

‘Accelerating maritime shipping's decarbonisation with the development and deployment of commercially viable deep sea zero emission vessels by 2030’

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&ved=2ahUKEwj3u_Oz07_lAhUluVkKHT9pAvgQjRx6BAgBEAQ&url=https%3A%2F%2Fwww.weforum.org%2F&psig=AOvVaw2ijxJBrQd3bQudRxF28HEb&ust=1572376054674496

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Orcelle Award hosted by the Ocean Exchange

○ Flow battery technology

○ Potential ‘at-berth’ solution

○ 2019 Orcelle Winner

○ Carbon-oxide battery

○ In-water hull cleaning with capture

○ Significant operational savings

○ Forum for accelerating sustainable innovation

○ Wallenius Wilhelmsen proudly sponsor

○ Helping close gap to zero emissions

Lean:Green #Leadershipping

Thank you for your attention

Digitalisation

Simon WhiteEVP and Chief Digital Officer

Mats AmlandVP Head of Transformation Office

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Digitalisation

Building the Foundation

Digital Acceleration & pilots

Re-imagining the supply chain together with our customers

Digitalising Operations Energy efficiency &

Sustainability

Current Digital FocusAreas

Digital pilots

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○ Corporate Partnership

○ Digitisation of cargo survey

○ Digital Pilots initiated in the areas of

○ Cargo Risk and Biosecurity

○ Mixed reality training

○ Video AI – Safety and efficiency

○ Worker safety technology

○ Cargo measurement and yard management

○ Partnerships

Current activities – Digital Pilots

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○ Immediate opportunity to reduce emissions and lower costs by removing waste in the supply chain

○ From track and trace to the intelligent supply chain

○Potential for the connected vehicle in the supply chain

○Digitalised solutions supporting fleet and mobility models

Re-imagining the supply chain together with our customers

Digitalising Operations Energy efficiency & Sustainability

43

Data connectivity and data platform will form the basis for the digital transformation

Application developmentAI/ML

Data analysis / science

Data platform

Data connectivity

DigitalisationThe process of considering how best to apply digitisedinformation to simplify specific operations.

DigitisationThe process of making information available and accessible in a digital format.

Digital TransformationThe process of devising new business models that integrate all the digitised data and digitalisedapplications.

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Vessel Voyage Cargo

Energy efficiency and bunker optimisation:

o Energy Management

o Fuel consumption monitoring

o Weather monitoring and routing

o Speed management

o Trim & ballast

o Hull & propeller performance

o Main engine performance

o Aux engine performance

Voyage follow up and optimisation:

o Tonnage planning

o Bunker management

o Voyage management (Trade)

o Predictive maintenance

o Maintenance management

o Performance management

o Stowage and cargo optimisation

o EDI, Customs++

o Customer data support

Vessel digitalisation has great potential to improve efficiency across vessel, voyage and cargo

45

High frequency data opens up opportunities through analysis and real time monitoring

Energy efficiency Time series data

46

A real-world example: finding inefficiencies based on granular data - and taking corrective action

Thermopylae, abt. 26% above baseline

Thalatta, abt. 13% above bassline

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Thermopylae before

Thermopylae after

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Digitalisation benefits across the supply chain

Enhanced Visibility Improved Efficiency Better Resilience Less Administration

New BusinessOpportunities

Better Transport & Event Management

Improved Utilisation Lower Emissions

48

Q&A

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