Higher bunker costs eat into Stolt-Nielsen’s earnings

Apr 13 2018

Stolt-Nielsen Limited (SNL) has recorded a net profit in the first quarter of this year of $38.7 mill, with revenue of $515.3 mill, compared with a net profit of $1.1 mill, and revenue of $506.8 mill, respectively in 4Q17.

SNL’s first-quarter results included a one-off gain of $24.9 mill, reflecting the reduction in the company's net deferred tax liability following the lowering of the US federal corporate income tax rate from 35% to 21%, effective 1st January, 2018.

As for the divisions, Stolt Tankers reported a 1Q18 operating profit of $10.9 mill, down from $20.4 mill, mainly reflecting the impact of higher bunker costs.

Stolthaven Terminals reported an operating profit of $25.9 mill, up from $5.4 mill in 4Q17. The fourth quarter included an $8.4 mill impairment of assets, while 1Q18 joint-venture income included an $8.2 mill gain from a reduction in deferred taxes.

Excluding these one-off items, operating income increased by $3.9 mill.

Stolt Tank Containers reported an operating profit of $16.2 mill, down from $17 mill, reflecting sustained strength in volumes in the first quarter, typically STC's weakest.

Stolt Sea Farm's operating profit before the fair value adjustment of inventories was $2.2 mill, compared with $0.1 mill in 4Q17, reflecting improved margins. The accounting for inventories at fair value had a positive impact of $3.3 mill, compared with a positive impact of $4.8 mill in the previous quarter.

Corporate and Other reported an operating loss of $3.6 mill, compared with a loss of $9.4 mill in the previous quarter. The 4Q18 figure included an $8.4 mill impairment of assets in Stolt Bitumen Services, partially offset by a $7.2 mill gain from changes in the US retiree healthcare benefits plan.

In the current quarter administrative and general expenses were down $1.8 mill and results from joint ventures improved.

Commenting on the results, Niels Stolt-Nielsen, SNL CEO, said: "SNL's first-quarter underlying operating performance was largely in line with expectations, reflecting the surge in bunker prices that we have experienced lately, but excluding the impact of one-time items in both quarters.

“At Stolt Tankers, higher fuel prices had a negative impact of over $14 mill, taking into effect bunker hedges and surcharge revenue, which was partially offset by higher COA nominations. Excluding one-offs, Stolthaven continued its steady improvement in performance. For Stolt Tank Containers, continued strength in volume resulted in a stronger than usual first quarter, typically STC's seasonally weak quarter. Stolt Sea Farm's performance was largely in line with our expectations for the quarter.

"Looking ahead, the fundamentals remain unchanged. While the chemical tanker market appears to have bottomed out, we are unlikely to see any meaningful improvement until next year, as the orderbook shrinks and new deliveries are absorbed in the market.

“At Stolthaven Terminals, we expect continued slow, but steady improvements in performance driven by increased utilisation and ongoing operational enhancements. At Stolt Tank Containers, the outlook is positive as global tank container demand continues to grow. For Stolt Sea Farm, results are expected to improve, with sustained strength in pricing driven by efforts to expand our markets," he concluded.

Norne Research said that the results came in line with its estimates, while the planned two vessel addition was also completed during 1Q18. “We are likely to keep our recommendation (to buy) with only slight adjustments to our estimates,” the analyst said.


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