Stolt-Nielsen results hit by ITC terminal fire

Jul 05 2019

Stolt-Nielsen Limited (SNI) reported a net profit of $3.6 mill for the second quarter of this year, with revenue of $518.9 mill, compared with a net profit of $7.9 mill and $501.9 mill, respectively in the previous quarter.

Net profit for the first six months of this year was $11.5 mill, with revenue of $1,020.9 mill, compared with $48.3 mill, with revenue of $1,056.3 mill in 1H18.

Highlights for 2Q19, compared with the first quarter, were:

•             Stolt Tankers reported an operating profit of $12.8 mill, down from $14.3 mill, mainly reflecting an estimated negative impact of $5 mill from the ITC terminal fire in Houston in mid-March.

•             Stolthaven Terminals reported an operating profit of $19.7 mill, up from $18 mill, due in part to a $0.7 mill gain on the sale of the rail transportation business.

•             Stolt Tank Containers reported an operating profit of $12.6 mill, down from $15.7 mill, as shipment-related operating expenses increased and margins narrowed.

•             Stolt Sea Farm’s operating profit before the fair-value adjustment of inventories was $2 mill, up from $1 mill in the seasonally strong first quarter that included a $1.7 mill one-time write-off of inventory.

•             Corporate and Other reported an operating loss of $2.1 mill, compared with a loss of $3.6 mill in the previous quarter, reflecting lower profit-sharing accruals.

•             Following the end of the second quarter, the company obtained refinancing commitments totalling $620 mill.

Commenting on the Company’s results, Niels Stolt-Nielsen, SNI CEO, 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 mill 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 materialise, 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 improvements in performance, as a result of a strong US market, combined with terminal expansions and enhanced operational efficiencies. At STC, while ocean and inland freight costs 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 sulfur 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 mill in debt secured by 21 chemical tankers. In addition, the Company has obtained commitments on a new $200 mill 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 mill in available liquidity throughout that period,” he concluded.

Norne Research said SNI’s revenues were in-line with its forecasts, but a lower operating profit than predicted was mostly due to increased expenses in Tank Containers segment.

The outlook remains virtually unchanged with noted slower deliveries of new tonnage into the market. “We are likely to make only small changes to our estimates following the report and our positive stance towards the share should be maintained,” the analyst said.

The impact from the ITC Terminal fire in Houston was as expected $5 mill for the company.

A strengthening chemical tanker market is still guided by the company as it saw deliveries of new tonnage into the market slowing. With no further ships being ordered, the market is expected to turn. Gradual improvements are still guided for the Terminals, increased costs are expected to be passed to customers in Tank Containers segment, while expansion into new markets in Sea Farm segment continues.

Seeing solid available liquidity, evidence of good prospects in the chemical tanker market and no major news in the report, Norne said that it is likely to reiterate its ‘Buy’ recommendation for the stock with only minor changes to estimates.


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