Textainer Group Holdings Limited (TGH) Deutsche Bank 2012 Aviation and Transportation Conference Call September 06, 2012, 02:45 pm ET Executives Steve Bishop - COO & CFO, SeaCube Container Leasing Ltd Hilliard Terry - EVP & CFO, Textainer Group Holdings Limited Analysts Presentation Unidentified Analyst
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Currently we’ve got 43% of our portfolio in reefers, 55% in dry containers and a small 2% in generator sets. In terms of the investment highlights of SeaCube, you know, I won't go in to each one of these points, but we look at our portfolio and your investment in SeaCube is having high return, low risk assets, strong market fundamentals, a global container fleet. The growth has been about 8.8% over the last 30 years, significant growth potential. Our balance sheet allows us to continue to invest in containers and these container investments then drive revenue earnings and cash flow growth.The management team has been together quite a period of time all focused on this business and a very good track record and a customer relationships there are no differentiator when you think about SeaCube. In terms of the – just a couple of commentaries on the industry background. Obviously container shipping, it is important part of the global economy, $200 billion in annual revenue, the global fleet of containers right now is about 32 million TEUs. The container lessors are important part of that fleet owning about 45%. The trend recently has been to significantly hire as the shipping companies look to companies like SeaCube and Textainer for a significant portion of their acquisition of containers. So I think we saw last year roughly 65% of all containers came from container leasing companies. This year probably absent Maersk, the largest some that saw the containers there being produced, have been produced by four container leasing companies. So it continues to be at that 65% plus range. Again the 30 years we've had continued growth at 8.8% and right now as we look at the end of this year we are probably at about 33 million TEUs at the end of the year.
Supply demand factors, I think there is a lot of discussion I think about the shipping lines and to the first bullet under the demand side, I think gets a lot of the attention, deserves a lot of attention. We continue to tweak this. There are a couple of things that I think that we loose sight of is that you know 2011 freight rates were very, very low. 2012 the industry and particularly beginning of the year got general rate increases.So when you look at the first six months of 2011 versus the first six months of 2012, the freight rates are actually 20% higher all in. What you do see lately is some deterioration, some of that trading back. At the same time the leader in the industry Maersk has again announced another general rate increase. So I think when we look at the overall industry we're going to see better freight rates in 2012 than in 2011 and we did see that in the second quarter numbers for all the shipping companies, they had better numbers in the second quarter than the first quarter. I think we will see decent numbers from them in the third quarter. Fuel continues to bounce around, it looks like there was a trend where lower bunker fuel was going to help them. I think it’s probably going to be a net net neutral. The other thing that you lose some times of the ship side of it is the fact that the shipping companies have been focused on cost reduction in all of 2011 continuing in 2012. So they in general have taken out a fairly significant amount of cost out of their structure. We certainly like our customers to do well, but at the same time being in the business of lending them capital, we also want them to borrow money from us. And so we really are focused more on them have enough money to pay us, but not so much money that they don’t need us.
And the last bullet here is can the shipping companies can they rely on us and we think that’s going to continue to be a trend. The manufacturing on the supply side, the important thing to know about the supply side is the manufacturers only build to demand. So there is not a lot of speculative inventory overhang and in fact to some degree the manufacturers will produce in a tight demand market because it helps their pricing.Read the rest of this transcript for free on seekingalpha.com