STAR REEFERS INC

1
STAR REEFERS INC

• STRATEGY AND ACTION PLANS REVISITED
• STRONGER SERVICES AND EARNINGS RECOVERY
• OSLO 4 NOVEMBER 2003

2
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

3
1. Reefer market fundamentals
4
Conventional reefer landscape
MAJOR REEFER OPERATORS (Post split)
Source Star
Source Drewry
5
Market share Reefer import export
Source UN
6
Trade patterns (Banana trade)
Source UN
7
2. Star Reefers Inc
8
Star Reefers in brief

• A leading provider of reefer transportation
  services
• Operating a fleet of 37 large reefer vessels
• Leading market position

9
Historic highlights

• Jan. 01 New equity USDM 44. Creditor write off
  USDM 55
• Jul. 01 Acquisition Star Reefers London -
  Commercial operator - 6 owned and 18
  chartered vessels
• Aug. 01 Pool with NYK
• Nov. 02 Renegotiation of long term t/c
• Nov. 02 Dividend pay out of USD 0.10
• 2001 - 03 Sold 11 vessels for USDM 52
• 2002 - 03 Acquisition of 9 vessels (incl. 2
  options) for USDM 114
• 2003 Stand alone from Jan. 04 (Pool with NYK
  terminated)

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Current fleet
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Tonnage analysis Sale Purchase 2003
OLD NEW
Swan class Durban Star
Built 1979 1993
Capacity cbft 473 000 517 000
Revenue cent 28,0 54,0
Ships opex per day 4 100 4 300

Revenue 1,6 3,4
Opex excl. drydock -1,5 -1,6
EBITDA 0,1 1,8

Asset Value 2,7 11,0
EBITDA / Investment 3,4 16,2
ROE negative 36

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Fleet changes
Disposal of Vessels
Vessels name 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
4 531 446 114,8
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Profit Loss Account

• .

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Balance sheet

• .

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Sensitivities

• Star Reefers Sensitivities
• Revenue /- 5 /- USD 0.78 per share
• Vessel opex. /- 3 /- USD 0.16 per share

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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

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3 Market drivers and outlook
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Factors influencing demand

• Consumer expenditures and general economic
  conditions

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
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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
• 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

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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

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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
22
Illustration of historic development of
second-hand value
Source Orion Shipping
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Strategic matrix Reefers vs containers

• REEFERS
• SOUTH NORTH LANE
• SPEED ADVANTAGE
• PORT TO PORT
• LOW DRAFT
• GEAR
• HIGH AVERAGE AGE
• QUALITY PAYS
• NO ORDER BOOK
• HIGH VOLUME LOW VALUE

• CONTAINERS
• EAST WEST LANE
• SPEED IMPROVEMENTS TO COME
• TERMINAL TO TERMINAL / DOOR TO DOOR
• DRAFT LIMITATIONS
• NO GEAR
• LOW AVERAGE AGE
• ESTABLISHED QUALITY
• HIGH ORDER BOOK IN 3000 TEU RANGE
• LOW VOLUME HIGH VALUE

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Projected Seaborne Trade Developments
Source Drewry
Conventional reefer trade continues to grow
steadily
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Projected Seaborne Trade Developments
Reefers still dominate the important fruit
trades
Source Drewry
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Historic rate developments
Source Orion Shipping

• Influx of newbuildings during 80s and mid 90s
• Impacts of El Niño and La Niña
• USD appreciation of some 20 during 90s
• EU enacted a restrictive quota system for bananas
  in 1993
• Collapse of USSR during mid-90s and Asian
  financial crisis
• Fruit majors suffering at end of 90s
• 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 the supply/demand balance in the
  reefer market

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Seasonal spot rates

• Steady increase in rates from historic low levels

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12 Months T/C rates
Size 350-550.000 cbft vessel
Source Orion Shipping
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4. Strategy and action plans revisited
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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

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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