SeaCube Container Leasing Ltd. (BOX) Deutsche Bank Aviation and Transportation Conference September 6, 2012 2:45 PM ET Executives Stephen Bishop – CFO Hilliard Terry – Textainer, CFO Presentation Unidentified Analyst
In terms of the investment highlights of SeaCube, I won’t go into each one of these points, but if you look at our portfolio and your investment in SeaCube is that have been high return, low risk assets, strong market fundamentals, our container – global container fleet 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. The management team has been together quite a period of time all focused on this business and very good track record and our customer relationships are another differentiator when you think about SeaCube. In terms of – just a couple of commentaries on the industry background. Obviously container shipping 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 a significantly higher as the shipping companies look to companies like SeaCube and Textainer for a significant portion of their acquisition of containers. And so I think we saw last year, roughly 65% of all containers came from container leasing companies, this year, probably absent, Myers is the largest, almost all the containers that are being produced, are being produced by four container leasing companies. So containers will be at that 65% plus range. Again, for 30 years, we’ve had continued growth at 8.8%. And right now, as we look at the end of this year, we’re probably about 33 million TEUs at the end of the year. Supply demand factors, I think there’s a lot of discussion, I think, about the shipping lines. And so the first bullet under the demand side, I think gets a lot of attention and it deserves a lot of attention.
We continue to tweak this. There’s a couple of things I think that we lose sight of, is that 2011, the freight rates were very, very low. 2012, the industry particularly the 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 12% – are 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 Myers, again announcing 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 then the first quarter. I think we’ll see decent numbers from that in the third quarter. Fuel continues to bounce around. It looks like there’s a trend where lower bunker fuel is going to help them. I think it’s probably going to be net-net neutral. The other thing that you lose – sometimes you lose sight of, is the fact that the shipping companies have been focused on cost reduction in all of 2011 continuing 2012. So they in general, have taken out a fairly significant amount of cost on 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. On the last bullet here is Canadian shipping companies can rely on us and we think that’s going to continue to be a trend. On the manufacturing, on the supply side, the important thing to know about the supply side is that manufacturers only build to demands. So there’s not a lot of speculative inventory overhang. And in fact, to some degree, the manufacturers will produce the, in a tight demand market because it helps their pricings. Read the rest of this transcript for free on seekingalpha.com