Release Date: July 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stolt Tankers achieved a record high average TCE rate, growing 9.7% versus last quarter.
- The company completed a new $450 million note issue in the US private placement market, ensuring ample liquidity.
- Stolt Sea Farm delivered an outstanding quarter with strong prices and stable production volumes.
- The company saw a significant increase in shipment volumes for Stolt Tank Containers, achieving an all-time record.
- Stolt-Nielsen Ltd (SOIEF, Financial) maintained a strong balance sheet and continued focus on cash flow generation.
Negative Points
- Adjusted operating results were down compared to the same time last year due to a return to pre-COVID margins at Stolt tank containers.
- Operating profit and net profit both declined 12% year on year mainly due to lower operating results in Stolt tank containers and higher time charter expenses, bunker costs, and ship management costs in Stolt Tankers.
- Utilization at Stolthaven Terminals fell compared to Q2 2023 as tanks were freed up for higher-margin business.
- Operating expenses increased due to inflationary pressures and higher interest rates on floating rate debt.
- The company experienced a negative cash flow during the quarter of $245 million due to the Flaminia payment.
Q & A Highlights
Q: We've seen some softening in the current tanker markets and spot rates. Can you comment more on the outlook for the second half of the year?
A: (Udo Lange, CEO) The MR market continues to be strong, and we predict a 2% to 4% increase in TCE rates, achieving a new record quarter for our tanker business. The summer months are seasonally bigger, and we need to see if this is a seasonal or structural situation. Overall, we remain positive for the second half of the year, with solid demand and favorable supply conditions.
Q: What do you expect for the OpEx level going forward, given the quarter-on-quarter increase in both tank containers and tankers?
A: (Jens Grüner-Hegge, CFO) Controlling OpEx is a continuous exercise. We are impacted by inflationary pressures, but we aim to drive efficiencies and grow our businesses on a scalable platform. We expect to keep a lid on operating expenses and focus on cost control, potentially even reducing ANG expenses through digitalization and system improvements.
Q: When will the ongoing expansion projects in Houston and New Orleans be completed?
A: (Jens Grüner-Hegge, CFO) These organic growth projects will utilize existing infrastructure and are expected to be completed throughout this year and most of 2025. The impact on EBITDA will be seen gradually towards the end of 2025 as these projects become operational.
Q: Can you provide more details on the recent $450 million note issue in the US private placement market?
A: (Jens Grüner-Hegge, CFO) We completed a $450 million note issue, securing 7- and 10-year funding at fixed rates below 6%. This ensures ample liquidity to execute our strategic initiatives and reflects the strong position of the company.
Q: How is the performance of Stolt Sea Farm, and what are the expectations for the future?
A: (Udo Lange, CEO) Stolt Sea Farm delivered an outstanding quarter with strong prices and stable production volumes. Operating revenue increased significantly, driven by firming prices for turbot and sole. We expect prices to hold steady as we enter the seasonally stronger summer, with a focus on balancing market prices and demand.
Q: What are the main performance drivers for Stolt Tankers, and what is the outlook?
A: (Udo Lange, CEO) Stolt Tankers had an exceptional quarter, achieving a record high average TCE. The supply and demand fundamentals for chemical tankers remain positive. We expect TCE rates to increase by 2% to 4% in the third quarter, with firm rates continuing for the foreseeable future.
Q: How did Stolthaven Terminals perform, and what is the outlook?
A: (Udo Lange, CEO) Stolthaven Terminals reported strong results with operating profit up 1.5% year on year. Utilization fell but was offset by rate increases due to strong demand for high-quality storage. We expect earnings to be positively impacted by higher contract rates and improved utilization going forward.
Q: What are the expectations for Stolt Tank Containers in the second half of the year?
A: (Udo Lange, CEO) We expect a slowdown in shipment volumes during the second half of the year. However, we see firming demand out of the Americas and Southeast Asia, with China exports picking up. The focus is now on improving margins with strong volumes in place.
Q: Can you explain the impact of the MSC Flaminia legal claim on the financial results?
A: (Jens Grüner-Hegge, CFO) The MSC Flaminia legal claim impacted both the second quarter of this year and last year. We settled the claim with a $290 million cash payment in April, which affected our cash flow. However, our operations generated strong cash flow excluding this amount, and our balance sheet remains strong.
Q: What is the outlook for the overall market and Stolt-Nielsen's businesses?
A: (Udo Lange, CEO) The long-term market fundamentals are favorable across all our businesses. We expect continued strong earnings during the second half of 2024, with attractive supply-demand fundamentals for Stolt Tankers, positive impacts from rate optimization at Stolthaven Terminals, normalized operating results for STC, and steady prices for Stolt Sea Farm.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
