Stolt-Nielsen Posts Reduced Second Quarter Net Profits

Stolt-Nielsen

Stolt-Nielsen reported unaudited results for the second quarter ended May 31, 2019.

Net profit attributable to shareholders in the second quarter was $3.6 million, with revenue of $518.9 million, compared with a net profit of $7.9 million, with revenue of $501.9 million, in the first quarter of 2019. Net profit attributable to shareholders for the first six months was $11.5 million, with revenue of $1,020.9 million, compared with $48.3 million1, with revenue of $1,056.3 million in the first half of 2018.

Highlights for the second quarter of 2019, compared with the first quarter of 2019, were:

• Stolt Tankers reported an operating profit of $12.8 million, down from $14.3 million, mainly reflecting an estimated negative impact of $5.0 million from the ITC terminal fire in Houston in mid-March.
• The Stolt Tankers Joint Service Sailed-in Time-Charter Index held steady at 0.53 for the third consecutive quarter.
• Stolthaven Terminals reported an operating profit of $19.7 million, up from $18.0 million, due in part to a $0.7 million gain on the sale of the rail transportation business.
• Stolt Tank Containers reported an operating profit of $12.6 million, down from $15.7 million, as shipment-related operating expenses increased and margins narrowed.
• Stolt Sea Farm’s operating profit before the fair-value adjustment of inventories was
$2.0 million, up from $1.0 million in the seasonally strong first quarter that included a $1.7 million one-time write-off of inventory.
• Corporate and Other reported an operating loss of $2.1 million, compared with a loss of $3.6 million in the previous quarter, reflecting lower profit-sharing accruals.
• Subsequent to the end of the second quarter, the Company obtained refinancing commitments totalling $620.0 million.

Commenting on the Company’s results, Niels G. Stolt-Nielsen, Chief Executive Officer of Stolt-Nielsen Limited, said: “Stolt-Nielsen Limited’s second-quarter results were essentially unchanged from the first quarter as the chemical tanker market appears to have bottomed out. Results at Stolt Tankers were held down by an estimated $5.0 million negative impact resulting from the fire at the ITC terminal. Stolthaven continued to perform in line with expectations, driven by terminal expansions and ongoing operational and commercial improvements. In contrast, results at Stolt Tank Containers were below expectations, as the positive impact of a double-digit increase in shipments was offset by rising shipment-related costs. Stolt Sea Farm’s results were down from the seasonally strong first quarter, excluding a first-quarter inventory write-off.”

“As far as the outlook is concerned, evidence of a definitive upturn in the chemical tanker market has yet to materialize, but deliveries of new tonnage into the market are slowing. With no further ships being ordered, the market is expected to turn. At Stolthaven, we expect continued gradual are rising, we expect to be able to pass these costs along in subsequent quarters. The second half of 2019 will be telling, as we continue to monitor the potential impact of trade disputes on both STC and Stolt Tankers. At SSF, we continue to expand into new markets for our sole and turbot, and expect our new sole farms now under construction in Tocha, Portugal and Cervo, Spain to support additional growth once these facilities fully ramp up production towards the end of 2020.

“The implementation of the IMO 2020 regulations aimed at reducing sulphur oxide emissions is now less than six months away. As we have said repeatedly, it is economically unfeasible for the shipping industry to absorb these costs. While these regulations mainly impact Stolt Tankers, they also have implications for Stolt Tank Containers. We continue to maintain that customers and, ultimately, consumers must bear the costs imposed by these new regulations aimed at protecting the environment.”

“Subsequent to the end of the second quarter, the Company obtained refinancing commitments, subject to documentation, for Stolt Tankers totalling $420.0 million in debt secured by 21 chemical tankers. In addition, the Company has obtained commitments on a new $200.0 million US private placement secured by the New Orleans terminal. With these two facilities, SNL will have sufficient funds to repay the Nordic bond debt coming due in September 2019 and April 2020, while maintaining a minimum of $200.0 million in available liquidity throughout that period.”

On April 16, the Company announced that all agenda items were approved and all nominated Directors were elected at Stolt-Nielsen Limited’s Annual General Meeting of shareholders in Bermuda. The final dividend for 2018 of $0.25 per Common Share, as recommended by the Board of Directors on February 14, 2019, was approved and paid on May 9, 2019 to shareholders of record, as of April 25, 2019.

During the second quarter, SNL purchased 17,549 shares under the Company’s current share buy- back programme at an average price of NOK 114.94 per share, for a total spend of approximately $0.2 million, leaving approximately $8.8 million available for further purchases.

SNL Performance Summary and Results

Debt, net of cash and cash equivalents, was $2,295.8 million as of May 31, 2019, compared with $2,304.2 million as of February 28, 2019.

Equity attributable to shareholders of SNL as of May 31, 2019 was $1,397.9 million, down from $1,457.9 million as of February 28, 2019, reflecting the payment of dividends in May, as well as currency-translation adjustments on foreign subsidiaries and a decrease in the value of equity instruments.

Net interest expense in the second quarter was $32.8 million, compared with $34.2 million in the first quarter. SNL had $133.8 million of cash and $276.4 million of available and undrawn committed overdraft facilities as of May 31, 2019, compared with $125.2 million of cash and $243.3 million of available and undrawn committed overdraft facilities as of February 28, 2019.

Segment Information

Stolt Tankers

Stolt Tankers reported second-quarter revenue of $293.6 million, up from $287.6 million in the first quarter. A modest decline in deep-sea freight revenue—reflecting fewer operating days and slightly lower volumes, driven in part by the fire at the ITC terminal—was more than offset by increased demurrage revenue, higher bunker surcharges and marginally higher freight rates. Regional fleet revenue rose by 8.4% in the second quarter, mainly reflecting higher revenues at the Stolt-Nielsen Inter-Europe Service, which was positively impacted by a recovery of regional spot market, as both volumes and rates improved from the preceding quarter.

Stolt Tankers reported a second-quarter operating profit of $12.8 million, down from $14.3 million in the first quarter. Results for the quarter were held down in part by higher depreciation and higher sublet expense, in addition to the estimated loss related to the ITC fire. During the quarter, the average cost of intermediate fuel oil consumed fell to $417 per tonne from $422 per tonne in the first quarter. Bunker fuel expense, net of bunker surcharges and bunker hedge results, was down
$0.6 million from the prior quarter. Equity income from joint ventures increased by $0.5 million in the quarter.

Stolthaven Terminals

Stolthaven Terminals reported second-quarter revenue of $63.1 million—essentially unchanged from $63.3 million in the first quarter—reflecting continued stability in most markets. Excluding the rail transportation business—sold in April 2019—from both quarters, revenue was up $1.0 million in the second quarter, mainly reflecting higher services revenue in the U.S. While utilisation at Stolthaven’s wholly owned terminals slipped to 91.0% from 92.3%, total product handled increased by 3.6% in the second quarter.

Stolthaven reported a second-quarter operating profit of $19.7 million, up from $18.0 million in the first quarter. Results for the quarter included a gain of $0.7 million on the sale of Stolthaven Houston’s rail transportation business in early April, and insurance income of $0.2 million in Singapore. Operating expenses decreased by $0.6 million in the quarter, mainly due to $0.9 million lower freight expenses from the sale of the rail transportation business, seasonally lower utilities expenses, and lower personnel and manning costs, partially offset by higher maintenance and consumable costs. Equity income in the second quarter decreased by $0.3 million, mainly because of lower utilisation at the division’s joint-venture terminal in Antwerp, Belgium, partially offset by the impact of higher utilisation at the joint-venture terminal in Ulsan, South Korea.

Stolt Tank Containers (STC)

Stolt Tank Containers reported second-quarter revenue of $135.8 million, up from $124.1 million in the first quarter. The increase was driven by a 12.7% increase in total shipments. Transportation revenue per shipment was essentially unchanged in the second quarter. The total number of tanks in STC’s global fleet increased by 1.7% in the quarter, as STC continued to take advantage of favourable leasing arrangements.

STC reported a second-quarter operating profit of $12.6 million, down from $15.7 million in the first quarter. While revenue per shipment was flat in the quarter, transportation costs per shipment were up 4.9%. The increase was driven by rising ocean freight contracts—costs that will ultimately be passed on to customers—and an increase in inland trucking and repositioning expenses caused by more shipments and longer trade lanes, resulting in a 14.7% decrease in margin per shipment.

Stolt Sea Farm (SSF)

Stolt Sea Farm’s second-quarter revenue of $25.4 million was unchanged from the first quarter. Revenue from turbot sales was flat for the quarter, reflecting a 4.2% increase in volume sold, offset by a 2.6% decrease in the average price. Sole revenue surged by 27.2%, after dipping in the first quarter due to less available inventory and increased competition from a seasonally high wild catch. Average sole prices rose by 3.3%, while volume was up 26.2%, driven by marketing campaigns and improved market conditions. Caviar revenue decreased in the quarter, reflecting the combined impact of lower market prices and sales of discounted inventory.

SSF reported a second-quarter operating profit of $0.8 million, compared with an operating loss of $1.1 million in the first quarter, as the accounting for inventories at fair value had a negative impact of $1.2 million in the second quarter, compared with a negative impact of $2.1 million in the first quarter. Operating profit excluding the impact of the fair-value adjustments was $2.0

million in the second quarter, compared with $1.0 million in the first quarter, which reflected a
$1.7 million write-down of inventory.

Stolt-Nielsen Gas (SNG)

Stolt-Nielsen Gas is now an investment arm of SNL focusing on the gas segment, with holdings in Avenir LNG Ltd, Avance Gas Holding Ltd and Golar LNG Ltd. Avenir’s results are reported as a joint venture, while changes in the share prices of the Avance Gas and Golar investments are reported as Other Comprehensive Income. Stolt-Nielsen Gas reported an operating loss of $1.4 million in the second quarter, compared with an operating loss of $0.5 million in the first quarter, which was mainly attributable to costs related to the continued development of various small-scale LNG projects.

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