IR Presentation - samsungshi · Commercial Vessels "Solid" L연결 손익계산서-T Demand for LNG carriers, and LNG-FSRU continue to Expand * Source: Gaslog, BP, etc “Solid”

IR Presentation March 2017

I. Financial Highlights

II. Market Outlook & Performance

III. Appendix

Contents

Earnings Overview

2015 2016 1st quarter

2nd quarter

3rd quarter

4th quarter

Revenue 9,714 2,530 2,721 2,778 2,385 10,414

Operating Profit (OP Margin)

-1,502 (-15.5%)

6 (0.2%)

-284 (-10.4%)

84 (3.0%)

46 (1.9%)

-147 (-1.4%)

(KRWb)


- 1 -

2016 4th Quarter Earnings

- Revenue: KRW 2.4t(KRW 400b decreased vs. 3Q 2016)

∙ Slow-down of Construction to manage Sharp decrease in Order Backlogs from 2017

- Operating Profit: KRW 46b(KRW 38b decreased vs. 3Q 2016)

∙ One-off provisional loss(23b) recognized for possible LD as a result of Jack-up Rig Accident

2016 Annual Earnings

- Revenue: KRW 10.4t(KRW 702b increased from 2015)

- Operating Loss: KRW -147b(KRW 1.4t Increased from 2015)

∙ Continued loss in 2016 from the last year mainly due to Restructuring Process

* Voluntary Resignation Package cost: KRW 210b

* Liquidation Damage

Financial Status as of 2016

연결 손익계산서

(KRWb)

2016 2015 2014

Asset 17,22200 17,30200 17,12200

Cash and Cash Equivalents (a) 1,77100 2,13700 89300

Accounts Receivable 5,44500 4,64200 6,23400

Liabilities 10,94700 13,03600 11,54900

Interest Bearing Debts (b) 5,32800 5,03300 3,82700

Advance Payments 1,85500 3,92800 3,79900

Stockholders’ Equity 6,27500 4,26600 5,57300

Net Debt (b-a) 3,55700 2,89600 2,93400

Debt-to-Equity Ratio 174%00 306%00 207%00


- 2 -

Net Debt & Debt-to-Equity Ratio

- Net Debt level: KRW 3.5t(Increased 0.6t from 2.9t in 2015)

∙ Working Capital burden from increased portion of heavy-tail payment construction

- Debt-to-Equity Ratio: 174%(Decreased from 306% last year)

Cash-flow


(KRWt)

2016 2017 Remarks

Cash-flows from Operation & Investments -1.7 2.0

New Share Issuance 1.1 - 231mil → 390mil shares(159↑)

Debt Financing(Repayment) 0.3 -1.7 Corp. Bond due in 2017: KRW600b

Total Interest Bearing Debts 5.3 3.6

Cash-in-hand 1.8 2.1

Net Debt 3.5 1.5


- 3 -

No Liquidity Issues Anymore

- Cash Deficit of KRW 1.7t in 2016

∙ Due to increased heavy-tail payment construction and limited number of New Orders in 2016

- Cash Surplus of KRW 2.0t in 2017(Estimated )

∙ The number of deliveries will be increased from 29 units last year to 54 units in 2017

∙ More advance payments to be received from potential New Orders in 2017

Self-Rescue Plan


Self-Rescue Plan has been making Good Progress in 2016

- Sharing Burdens by Employees

∙ Job-Cut, Salary-Cut(15%~30%), and Reduction of Employee Benefits

- Rights Offering was Successfully completed by securing KRW 1.1t

- Sales of non-core Asset such as Investment Securities and Properties

∙ During 2016, SHI sold KRW 174b worth of non-core Assets by exceeding yearly Target,

and the Remaining Amount of KRW 372b is well Expected to be sold in 2017 and 2018

For the next two years in 2017 and 2018, SHI will continue to carry-out

Restructuring process to reduce Fixed Cost and Generate adequate

Operating Margin regardless of Revenue decline


- 4 -



III. Appendix

Commercial Vessels

연결 손익계산서 LNGC, Containership and COT market Expected to Turnaround in 2017

- By 2019, the New Order Size for these 3 major products will Reach back to

2011~2015 yearly level of 20 million CGT(Entire Sector: 42 million CGT)

*Source: SHI (2011~2015 yearly average new order in 100%)

2011~2015 Average

2016 2017 2018 2019 2020

Total 100% 25% 70% 80% 99% 118%

COT 41% 63% 58% 48% 52% 55%

Containership 46% 29% 29% 40% 38% 37%

LNG carriers 13% 8% 13% 11% 9% 8%

New Order Size for the Entire Sector in 2016 recorded the lowest level during

the recent 20-year period

Market Sentiment Expected Turnaround in 2017, Especially for LNGC and FSRU

* Approximately 11 million CGT, 480 units

- 5 -

II. Market Outlook

Commercial Vessels

연결 손익계산서 "Solid" L-T Demand for LNG carriers, and LNG-FSRU continue to Expand

* Source: Gaslog, BP, etc

“Solid” LT Demand for LNG Carriers

- Yearly 30 LNGC orders are Expected from 2017

∙ Market downturn of 2016 already digested

massive incoming orders in 2014 and 2015

LNG-FSRU Demand Expanding

- In order to meet excessive demand of

electricity in Southeast Asia, South America

and Africa, more FSRU will be on demand

* LNG-FSRU can be quickly available to use and

the Construction cost is a half of Onshore Terminal

- LNG market is Dominated by Korean Big 3,

where SHI’s global Market Share is at 32%

2014 2030

LNG Trade Volume

258mtpa

500mtpa

(CAGR 5%)

Gloabal LNG Fleets

469

(1.6 unit/1mtpa)

900

(30 units/year)

New Orders Modification Total

Current Fleet 19 5 24

Under Const. 9 - 9

Total 28 5 33

SHI 9 - 9

- 6 -

II. Market Outlook

Commercial Vessels

연결 손익계산서 Environmental Regulations

- SOx Emission and BWTS Regulations will Require More LNG-fueled vessels

and Replacement of Old vessels

Types Regulations Effective Year

Energy Efficiency Design Index(EEDI) To improve fuel efficiency by improving design and structure of vessel Under progress

Nitrogen-Oxide Emission(Tier 3) To regulate and put limits on Nitrogen-Oxide Emission 2016

Ballast Water Treatment System(BWTS) To prevent transferring foreign marine specifies(microbes) to local ocean 2017

Sulfur-Oxide Emission(SOx) To regulate and put limits on Sulfur-Oxide Emission at different levels 2020

Carbon-Dioxide Emission(CO2) To regulate and put limits on Carbon-Dioxide at different levels 2020

Age Tankers Bulkers Containerships General Cargo Gas Carrier Specialized Vessel Total

Units ‘000 GT Units ‘000 GT Units ‘000 GT Units ‘000 GT Units ‘000 GT Units ‘000 GT Units ‘000 GT

21yr < 4,003 22,772 1,219 39,160 839 13,778 11,761 24,000 576 10,054 2,659 11,479 21,057 121,243

% 39% 8% 11% 9% 16% 6% 60% 38% 31% 15% 43% 17% 39% 11%

16~20yr 893 45,254 1,028 34,915 816 24,497 1,384 7,175 189 5,017 633 9,202 4,943 126,060

% 9% 15% 9% 8% 16% 11% 7% 11% 10% 8% 10% 13% 9% 11%

Total 10,135 293,754 10,870 439,968 5,167 217,345 19,610 62,493 1,875 66,773 6,205 69,311 53,862 1,149,644

*Source: Clarkson(2016) - 7 -

II. Market Outlook

Offshore Facilities


With Oil Price Recovery and Improved BEP level for Offshore Projects,

More Opportunities can be Expected from the Market

More Projects are under Review as Oil Price Recovers above USD 50/bbl level

- Only 3 Projects were Available during 1st half of 2016 (MaddogII FPU, Coral FLNG, Eqquss FPU)

∙ MaddogII FPU has been Ordered in Jan 2017, and Coral FLNG Expected in 1st quarter of 2017

- However, New Projects such as WhiteRose P/F, Johan Castberg FPSO, Zabazaba FPSO and

Other 4~6 Potential projects are Expected to be available in the near future

IOC’s BEP level Lowered to USD 50/bbl range throughout Cost-Saving Efforts

- Value-Chain Activities in entire Oil-Service Sector improved by Collaboration, Standardization

and Technology enhancement

※ Recently, IOC Recorded BEP around 40~60/bbl for Deep-Water Development(IRR 14% basis)

- 8 -

II. Market Outlook

Offshore Facilities

연결 손익계산서 Output Declining at Aging Fields and Sharp Capital Spending Cut

- Offshore will drive Future Production Growth (Sharp CAPEX Cut in 2014~2015)

0

20

40

60

80

100

120

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Existing Production from Onshore Oil & Gas Fields

Existing Production from Offshore Oil & Gas Fields

Gross Addition Needed for Production decline and demand increase

Producing fields estimated to naturally

decline at 6.2% per year → Output decline

Huge Untapped Oil Reserve makes

Deep-water Area More Attractive

(mbbl/d)

60% 72%

40% 28%

Reserve Production

Offshore Onshore

60%

35%

40%

65%

Reserve Production

Shallow-water Deep-water

- 9 -

II. Market Outlook

Performance in 2017


Others 1%

Tanker 8%

LNGC

12%

Offshore Facilities

51%

Containership 6%

Drilling Rigs 22%

II. Performance

Unit USDb

Containerships 11 1.7

LNGCs 16 3.4

Tankers 37 2.2

Drilling Rigs 10 5.9

Offshore Facilities 9 13.9

Others 2 0.3

Total 85 27.4

- 10 -

Good Start in 2017

- Total New Order amount is USD 1.5b in 2017

∙ One Floating Production Unit USD 1.3b and One LNG FSRU USD 0.2b

Order Backlogs as of February 28, 2017

- Delivery basis is USD 27.4b



III. Appendix

Revenue & Operating Profit Trends


(KRWt)

-15.5%

III. Appendix

8.8%

6.5%

5.3%

3.7%

0.4%

0.1%

1.7%

5.3%

6.9%

6.6%

8.0%

8.7%

8.3%

6.2%

1.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Revenue(Shipbuilding&Offshore)

Revenue(Others)

OP Margin

3.6 4.1 4.3 4.2

4.8

5.6

6.4

8.5

10.7

13.2 13.1

13.4 14.5

14.8

12.9

9.7

10.4

- 11 -

-1.4%

New Order Trends III. Appendix


(USDb)

3.8

1.7

2.8

5.4

6.5

4.9

13.5

21.2

15.3

1.4

9.8

14.9

9.7

13.5

7.3

5.3

0.5 1.5

- 12 -

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Feb-17

Containership

LNG Carrier

Tankers

Drilling Rig

Production Facility

Others(WTIV etc)

Major Offshore Projects

Shell, Prelude LNG FPSO

- Exclusive L-T Partnership with Shell for FLNG Market Dominance Since 2009

Contract Details

- Contract Price: USD 3.4b(90% Received)

∙ Hull EPC + Topside Construction

- Expected Delivery: 2Q 2017(95% Completed)

- Key Specifications

∙ Size 489m(L) × 74m(W) × 110m(D)

∙ Weights: 256 thousand tons

∙ Production Capacity: 3.6m tons/year(LNG)

- Operation Field: 200Km from Australia

North West Coast

LNG FPSO vs. Onshore LNG Plant

- LNG FPSO is capable of Production,

Processing, Liquefaction, and Offloading all

on the surface of ocean(No pipe line needed)

Extract Natural Gas

Processing

Liquefaction

- 13 -

III. Appendix

Major Offshore Projects

Inpex, Ichthys CPF Total, Egina FPSO

Contract Price: USD 2.7b(89% Received)

Delivery(expected): 1Q 2017(94% Completed)

Key Specs (Ichthy Field, Australia NW)

- Weight: 112K tons [110m(L) × 110m(W) × 47m(H)]

- Production Capacity: 1,657 million ft3/day

∙ Water, Gas and Condensates are separated and,

Gas/Condensates sent to land and FPSO

Contract Price: USD 3.0b(74% Received)

Delivery(Expected): 2018(68% Completed)

Key Specs (South 150Km, Nigerian Coast)

- Weight: 144K tons[330m(L) × 61m(W) × 60m(H)]

- Production Capacity: 206k barrels/day

※ Nigerian Yard is at operation under Local Content

- 14 -

III. Appendix

Disclaimer

• This presentation has been prepared by Samsung Heavy Industries Co., Ltd. and contains

forward-looking statements that are subject to risks, uncertainties, and assumptions.

• The presentation is solely for your information, subject to change without notice, and

makes no representation or warranty, expressed or implied and no reliability should be

placed on the accuracy, fairness, or completeness of the information presented herein.

• The Company, its affiliates, or representatives accept no liability for any losses arising

from any information contained in the presentation.

• The contents of this presentation may not be reproduced, redistributed or circulated,

directly or Indirectly, to any other person or organization, or published, in whole or in

part, for any purpose.

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IR Presentation - samsungshi · Commercial Vessels "Solid" L연결 손익계산서-T Demand for LNG carriers, and LNG-FSRU continue to Expand * Source: Gaslog, BP, etc “Solid”