Stolt-Nielsen in cautiously optimistic mood

Feb 01 2019

Stolt-Nielsen Limited (SNI) reported a net profit of $3.6 mill for the fourth quarter of last year, compared with a net profit of $3 mill in the third quarter.

Revenue for 4Q18 was $526.1 mill, compared with revenue of $543.1 mill in the third quarter of 2018.

For the full year, net profit was $54.9 mill, with revenue of $2,125.5 mill, compared with $50.3 mill, with revenue of $1,997.1 mill in 2017.

Highlights for 4Q18, compared with the previous quarter, were:

*Stolt Tankers reported an operating profit of $7.7 mill, down from $21.4 mill, mainly reflecting lower freight revenue combined with higher bunker costs and a $4.1 mill loss on bunker hedges, compared with a $1.3 mill bunker-hedge gain in 3Q18.

*Stolthaven Terminals reported an operating profit of $11.7 mill, down from $18.6 mill, reflecting $6.1 mill in impairments in 4Q18, and a $1.7 mill decrease in equity income from joint ventures.

*Stolt Tank Containers reported an operating profit of $18.1 mill, up from $17.7 mill. Operating profit rose, despite lower revenue, mainly due to improved operational efficiencies.

*Stolt Sea Farm's operating profit before the fair-value adjustment of inventories was $0.9 mill, versus $2.1 mill, due to lower volume sold ahead of the peak Christmas sales season.

*Corporate and other included an operating loss of $11.9 mill, compared with a loss of $3.4 mill in 3Q18, mainly reflecting a $5.9 mill write-off of assets at Stolt Bitumen Services.

During 4Q18, SNL and its partners, Golar LNG and Höegh LNG Holdings, established Avenir LNG, a joint venture to pursue small-scale LNG sales and distribution.

Commenting on the results, Niels Stolt-Nielsen, SNI CEO, said: "The challenging chemical tanker market impacted SNL's fourth quarter results. At Stolt Tankers, softness in deepsea markets driven by deliveries of newbuildings, combined with a shift in Stolt Tankers' product mix for the quarter, resulted in a decrease in revenue for the period. While there was a welcome drop in bunker fuel prices toward the end of November, the timing of the decrease resulted in a $4.1 mill loss on Tankers' bunker hedges.

“At Stolthaven, while revenue was essentially unchanged and utilisation held steady, operating income was down as a result of impairments. Stolt Tank Containers showed improved results once again this quarter, but the seasonal autumn pick-up in shipments failed to materialise, driven in part by increasing global economic uncertainty as the year wound down.

“At Stolt Sea Farm, while the volume of turbot sold was down in the quarter, average turbot prices climbed to their highest level in over seven years, and sole prices reached the highest level since SSF entered the market in 2010.

"Our outlook for 2019 remains cautiously optimistic. In the chemical tanker market, we expect the balance between tonnage supply and demand to improve as the year unfolds. Beyond that, if newbuilding orders remain moderate and there is an easing of trade tensions, Stolt Tankers may finally see some healthy market conditions into 2019 and beyond.

“At Stolthaven Terminals, ongoing initiatives to enhance utilisation and operational performance are steadily generating better results, which we expect to continue in 2019. At STC, we expect to benefit as the global market for tank containers continues to grow, further supported by STC's continuous actions to improve operational efficiency. Finally, at Stolt Sea Farm, we are gaining increased traction as prices for our products continue to rise, driven by efforts to expand both our markets and our product offerings.

"With the formation of Avenir LNG Limited, we successfully registered the company on the Norwegian OTC market during the quarter. Avenir's strategy is to become a leading supplier of small-scale LNG ships for the power, bunkering, trucking and industrial markets. With the support and knowhow of the founding partners, we believe the company is uniquely positioned to succeed in this new segment," he concluded.

Norne Research wrote that the results were lower than predicted, mainly due to weak tanker performance.

However, the guidance for 2019 remains cautiously optimistic with expectations of the market to improve as the year unfolds.

Adjusted for $12 mill impairment costs and $4.1 mill hedging losses, EBIT came in at $44.4 mill ($46.9 mill expected by Norne). Stolt Tank Containers and Sea Farm showed improved results, Terminals and Corporate were stable if adjusted for write-downs, but Stolt Tankers EBIT was much lower quarter on quarter and year on year at $7.7 mill ($21.4 mill 3Q18, $20.4 mill for 4Q17). 

Norne said that the outlook for chemical tanker market remained positive in general, although more cautious than from their competitors, therefore the long term view towards the share price is likely to remain positive.


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