Transcript Document 7350264

STAR REEFERS INC
STRATEGY AND ACTION PLANS REVISITED
STRONGER SERVICES AND EARNINGS RECOVERY
OSLO 4 NOVEMBER 2003
Outline
Reefer market fundamentals
Brief introduction to the Reefer industry and its characteristics
Star Reefers Inc
Star Reefers in brief
Fleet and market position
Key financial figures
Market drivers and outlook
Demand and supply
Structural changes
Star Reefers – Strategy and action plans revisited
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 2
1.
Reefer market fundamentals
Conventional reefer landscape
MAJOR REEFER OPERATORS (Post split)
Source: Star
Reefer commodities
Conventional reefer vessels distance volume
Meat
10 %
Others
2%
Dairy
1%
Bananas
43 %
Fish
21 %
Exotics
2%
Citrus
11 %
Deciduous
10 %
Source: Drewry
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 4
Market share – Reefer import & export
Market share - Reefer
Export Seaborne distance volume
Market share - Reefer Import
Seaborne distance volume
Lat. America
3%
Other
1%
Africa
6%
Med
5%
Baltic
9%
W. Europe
39 %
Med Others
6% 1%
N. America
13 %
Lat. America
42 %
N. America
14 %
W. Europe
16 %
Asia
29 %
Asia
16 %
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
Source: UN
slide no. 5
Source: UN
Trade patterns (Banana trade)
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 6
2.
Star Reefers Inc
Star Reefers in brief
A leading provider of reefer
transportation services
Operating a fleet of 37 large reefer
vessels
Leading market position
Management
CEO Aage Thoen
CFO Terje Aschim
Board of Directors
Chairman, Kristian Siem
Ole Martin Siem
Per Chr. Haukenes
Mike Delouche
Largest shareholders
Siem Industries Group
Maas Capital Investment B.V.
Hafslund Invest AS
Vestey Group Limited
DnB Markets
Aage Thoen Ltd AS
Danske Bank AS
Other
Total
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
No of shares
5 612 015
552 505
478 955
210 500
200 000
175 000
77 576
339 649
7 646 200
Pct stake
73.4 %
7.2 %
6.3 %
2.8 %
2.6 %
2.3 %
1.0 %
4.4 %
100.0 %
slide no. 8
Historic highlights
Jan.
Jul.
01
01
:
:
Aug.
Nov.
Nov.
2001 2002 2003
01
02
02
03
03
:
:
:
:
:
:
New equity USDM 44. Creditor write off USDM 55
Acquisition Star Reefers London
- Commercial operator
- 6 owned and 18 chartered vessels
Pool with NYK
Renegotiation of long term t/c
Dividend pay out of USD 0.10
Sold 11 vessels for USDM 52
Acquisition of 9 vessels (incl. 2 options) for USDM 114
Stand alone from Jan. 04 (Pool with NYK terminated)
Development in share price and volume
70.00
60 000
60.00
50 000
50.00
Volume
30 000
30.00
20 000
20.00
10 000
10.00
Share price
00
3
00
3
03
.0
9.
2
00
2
03
.0
3.
2
00
2
27
.1
2.
2
00
2
20
.0
6.
2
00
2
15
.0
5.
2
00
2
12
.0
3.
2
00
1
06
.0
2.
2
00
1
03
.1
2.
2
00
1
08
.1
0.
2
00
1
06
.0
9.
2
00
1
31
.0
8.
2
00
1
21
.0
8.
2
00
1
06
.0
8.
2
23
.0
7.
2
19
.0
6.
2
00
1
-
00
1
-
12
.0
6.
2
Share price (NOK)
40 000
40.00
Volume
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 9
Current fleet
CLASS
C-Class
NAME
Cote D'Ivorian Star
Colombian Star
Caribbean Star
Costa Rican Star
CBFT
550 600
550 600
550 600
550 600
2 202 400
CLASS
S-Class
Polar Argentina
Polar Brasil
Polar Colombia
Polar Chile
Polar Ecuador
526 044
528 891
536 890
525 891
526 044
2 643 760
Total Cha Class
Belgian Reefer
Brazilian Reefer
690 880
690 880
1 381 760
Total C-Class
Polar Class
Total Polar Class
NAME
Solent Star
Southampton Star
CBFT
485 000
485 000
970 000
Chaiten
Swan Chacabuco
673 748
677 143
1 350 891
Auckland Star
Canterbury Star
English Star
Scottish Star
465 164
465 164
465 164
465 164
1 860 656
Total S-Class
Chacabuco Class
H+W Class
Total H & W Class
BB-Class
Total BB Classs
Penguin Class
Tauranga Star
Welligton Star
Total Penguin Class
Tundra Class
411 008
424 307
835 315
Tundra King
Tundra Princess
Tundra Queen
Tundra Consumer
Tundra Trader
596 160
596 160
596 157
576 064
576 064
2 940 605
Regal Star
Regent Star
520 000
520 000
1 040 000
Total Tundra Calss
Harvester Class
Harvester
378 055
Trojan Class
Trojan Star
Tudor Star
477 757
477 757
955 514
Total Trojan Class
New Zealand Class
Chiquita Brenda
Chiquita Joy
Napier Star
Nelson Star
479 367
479 834
486 761
479 450
1 925 412
Cape Town Star
Durban Star
Total Reef Class
515 862
516 530
1 032 392
Total Cbft Star
19 516 760
Total NZ Class
Reef Class
R-Class
Total R-Class
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 10
Tonnage analysis – Sale & Purchase 2003
OLD
NEW
Swan class
Built
1979
Capacity cbft
Durban Star
1993
473 000
517 000
Revenue cent
¢ 28,0
¢ 54,0
Ships opex per day
4 100
4 300
1,6
3,4
-1,5
-1,6
0,1
1,8
Asset Value
$ 2,7
$ 11,0
EBITDA / Investment
3,4 %
16,2 %
negative
36 %
Revenue
Opex excl. drydock
EBITDA
ROE
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 11
Disposal of Vessels
Vessels name
Fleet changes
Capacity (cbft.)
Built
Price (USD million)
Date Sold / Bought
Canadian Reefer
597 000
1979
3
Nov-01
Ecuadorian Reefer
597 000
1980
3
Nov-01
Belgian Reefer
691 000
1983
6,5
May-02
Brazilian Reefer
691 000
1984
6,5
May-02
Anglian Reefer
703 000
1988
10
Mar-03
Argentinean Reefer
703 000
1988
10
Mar-03
Swan Lagoon
474 998
1980
2,65
Aug-03
Swan Ocean
474 998
1980
2,65
Aug-03
Swan Strean
474 998
1980
2,6
Aug-03
Swan River
467 315
1978
2,4
Dec-03
Swan Bay
466 322
1979
2,4
Dec-03
6 340 631
51,7
Acquisition of Vessels
Chiquita Brenda
486 761
1993
11
Oct-02
Chiquita Joy
486 761
1994
11
Oct-02
Napier Star
486 761
1994
11
Oct-02
Nelson Star
486 761
1993
11
Oct-02
Tauranga Star
425 777
1992
10
Oct-02
Durban Star
516 530
1993
10,5
Jul-03
Cape Town Star
514 095
1993
10,5
Sep-03
Costa Rican Star
564 000
1998
19,9
Option
Caribbean Star
564 000
1997
19,9
Option
4 531 446
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
114,8
slide no. 12
Profit & Loss Account
YTD
30-Jun-03
YTD
30-Jun-02
Net operating revenues
$ 64.9 $ 66.7 $
Ships operating expenses
-20.6
-19.8
Charter hire expenses
-26.3
-23.5
Administrative expenses
-1.8
-1.2
EBITDA
16.2
22.2
Depr. and amortization
-4.5
-6.0
Gain sale ships subsidiary
0.4
-0.7
Operating profit
12.1
15.5
Interest expense
-3.4
-4.1
Other financial items
-0.1
0.2
Net income
$
8.6 $ 11.6 $
.
EPS
$
1.13 $
1.53 $
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
Jan-Dec
Jan-Dec
2002
2001
109.0 $ 85.5
-40.3
-35.2
-41.7
-22.1
-3.5
-3.5
23.5
24.7
-11.0
-11.5
1.5
14.0
13.2
-7.8
-10.3
0.3
1.8
6.5 $
4.7
0.86 $
0.65
slide no. 13
Balance sheet
30-Jun-03
31-Dec-02
Vessels
Other fixed assets
Other current assets
Bank deposits
Total assets
$ 144.6
9.0
22.6
23.4
$ 199.6
$ 168.3
10.4
16.4
17.7
$ 212.8
Equity
Provisions
Interest-bearing debt
Short term liabilities
Total equity and liabilities
$
$ 59.2
1.9
134.2
17.5
$ 212.8
.
Equity ratio
Equity per share
67.9
1.9
112.1
17.7
$ 199.6
34%
28%
$8.88
$7.75
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 14
Sensitivities
Star Reefers – Sensitivities
Revenue +/- 5%
Vessel opex. +/- 3%
= +/- USD 0.78 per share
= +/- USD 0.16 per share
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 15
Star Reefers – 2004 platform
Improved and modern fleet – Average 12 years / Banana Type
Improved operational cost base
Quality name
Dedicated and energized staff
Positive market outlook
Termination of NYKSTAR
Consolidation paused
37 ships fleet and ranked as a number 3 among reefer operators
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 16
3
Market drivers and outlook
Factors influencing demand
Consumer expenditures and general economic conditions
Consumption
pr. capita
A Theoretical Approach
14
12
A)
Low income, basic need
coverage
B)
Rising income changing
spending (eating) habit.
Economy in focus by
multinationals (Distribution
network/promotion).
C)
Consumption reaches top
point. Rising income
triggers substitution to more
sophisticated fruits
10
8
6
4
2
0
B
A
Russia Other Saudi
E. Eur. Arabia
1930
2355
6870
C
Other
EU
19755
Germany USA
25280
Other
W. Eur.1)
25820 25927 GDP per capita
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 18
Factors influencing demand cont.
Currency exchange rates
Since the main export areas are USD economies and the largest import areas are
EUR economies, USD/EUR fluctuations have a significant impact on consumers
demand of reefer products
Euro vs USD
1.5
1.4
1.3
EUR/USD
1.2
1.1
1.0
0.9
0.8
0.7
0.6
2002
2000
98
96
94
92
90
88
86
84
82
80
0.5
Non economic variables
Changes in consumer preferences/taste/trends
The effect of political decisions (Import ban, taxes)
Availability of domestic volumes either from own production or from volumes in
continued improved storage facilities
Climatic factors
Banana regime up for revision in 2006
Market access for developing countries
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 19
Factors influencing supply – Reefer vessels order book
vs scrap
Source: Orion Shipping
The reefer fleet (above 300 cub. ft.) consists of around 505 vessels, equivalent to around 233
million cub.ft. (Source: Drewry)
The reefer fleet reached its peek in 1993, and has slowly been reduced due to historic low
rates in the period from 1998 – 2002, and consequently very limited newbuilding
The order book is presently at 0.5 million cub.ft.
The drop in second hand values for reefer ships has not been reflected in new building prices,
hence little anticipated new building activity going forward
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 20
Reefer fleet age distribution – 2003
Global
Source: Orion Shipping AS, Oslo
SRI Owned
0
1
5
6
6
1
SRI Ch. In
0
0
2
8
4
4
SRI Fleet Average – 11.7 years
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 21
Illustration of historic development of second-hand value
USD per cbft
Development of secondhand value of a modern self sustained
reefer vessel abt. 527.000 cbft, built 1991, contract price abt.
USD 47,5 per cbft
54
52
50
48
46
44
42
40
38
36
34
32
30
28
26
24
22
20
18
16
1992
2nd hand value
Dep. over 25 years
eco.life
1993
1994
1995
1996
1997
1998
1999
2000
(Values at the beginning of each year)
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
2001
2002
2003
Source: Orion Shipping
slide no. 22
Strategic matrix – Reefers vs containers
REEFERS
CONTAINERS
SOUTH – NORTH LANE
EAST – WEST LANE
SPEED ADVANTAGE
SPEED IMPROVEMENTS TO COME
PORT TO PORT
TERMINAL TO TERMINAL / DOOR TO DOOR
LOW DRAFT
DRAFT LIMITATIONS
GEAR
NO GEAR
HIGH AVERAGE AGE
LOW AVERAGE AGE
QUALITY PAYS
ESTABLISHED QUALITY
NO ORDER BOOK
HIGH ORDER BOOK IN 3000 TEU RANGE
HIGH VOLUME – LOW VALUE
LOW VOLUME – HIGH VALUE
BANANA TRADE
CHANGE OF BANANA REGIME 06
NO BANANA TRADE EXCEPT FOR
BRAZIL/USWC
NO IMPACT TO THE CONTAINER
WEAK SERVICE & CHAIN MANAGEMENT
STRONGER LOGISTICAL BASE
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 23
Projected Seaborne Trade Developments
Growth trend for conventional reefer trade 2000 vs. 2010
Seaborne trade (million tonnes)
30.15
30
27.48
25
20
15
13.84
11.54
10
5.84 6.36
3.12 3.51
5
2.87
3.17
0.64 0.52
2.71 2.35
0.46
0.29 0.2
0
as
n
na
a
B
C
u
itr
s
D
us
o
u
id
c
e
E
s
ic
t
xo
M
t
ea
2000
D
ry
ia
sh
Fi
s
O
er
th
0.21
l
ta
o
T
Source: Drewry
2010
Conventional reefer trade continues to grow steadily
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 24
Projected Seaborne Trade Developments
100 %
90 %
2000 Est. Modal Split:
Conventional reefers vs. Containers
90 %
81 %
80 %
70 %
80 %
73 %
63 %
60 %
50 %
40 %
30 %
20 %
Non-container
44.2%
37 %
27 %
28 %
Container
27 %
20 %
19 %
10 %
O
th
er
s
To
ta
l
10 %
0%
Fi
sh
the important fruit trades
55.8%
53 %
47 %
Ba
na
na
s
C
itr
us
D
ec
id
uo
us
Ex
ot
ic
s
M
ea
t
D
ia
ry
Reefers still dominate
73 %
72 %
2010 Est. Modal Split:
Conventional reefers vs. Containers
90 %
97 %
83 %
73 %
69 %
62 %
61 %
55 %
5050
%%
Non-container
Container
31 %
17 %
10 %
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
th
er
s
To
ta
l
3%
Source: Drewry
O
27 %
45 %
39 %
Fi
sh
38 %
Ba
na
na
s
C
itr
D
us
ec
id
uo
us
Ex
ot
ic
s
M
ea
t
D
ia
ry
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0%
slide no. 25
Historic rate developments
Timecharter spot rates for larger vessels
120
100
80
1999
2000
60
2001
2002
USC / CBFT
40
20
Source: Orion Shipping
0
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEPT
OCT
NOV
DEC
Influx of newbuildings during 80’s and mid 90’s
Impacts of El Niño and La Niña
USD appreciation of some 20% during 90’s
EU enacted a restrictive quota system for bananas in 1993
Collapse of USSR during mid-90’s and Asian financial crisis
Fruit majors suffering at end of 90’s
Commission driven market players
High tech storage technology - controlled atmosphere
Container influx and penetration
The market during the years 1998 –2001 experienced many negative events
simultaneously which
disrupted
theassupply/demand
in the reefer market
STAR
Reefers AS,
managers for STARbalance
Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 26
Seasonal spot rates
140
Source: Orion Shipping AS, Oslo
120
100
80
60
40
20
0
Jan
Feb
Modern 02
Mar
Apr
Older 02
May
Jun
Small 02
Jul
Aug
Modern 03
Sep
Oct
Nov
Older 03
Dec
Small 03
Steady increase in rates from historic low levels
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 27
12 Months T/C rates
Size: 350-550.000 cbft vessel
Source: Orion Shipping
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 28
4.
Strategy and action plans revisited
Star Reefers - Strategy revisited
TRANSFORMATION TO A STRONGER SERVICE PROVIDER
Ad hoc logistics / chain management
Reorganisation – overhead reduction – adjustment to strategy execution
Dedicated services
Trade sectors
Reefer services
Creative customer solutions
Rates on quality ships will increase
Increase spot exposure
Worldwide representation
Improve operating efficiency
Market growth
Tapping the tonnage supply market
Alert to consolidation – opportunity knocks
Strategy of executing accretive acquisitions
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 30
Impact to Star Reefers
Improved operating margins
Increased market control
Increase in working capital needs
Increase fleet efficiency
Increased topline revenue growth
Continued quality improvements
Improved share liquidity and free float
STAR more attractive as a consolidation partner
STAR Reefers AS, as managers for STAR Reefers Inc
Rådhusgaten 23, N-0158 Oslo, Norway
slide no. 31