Stolt-Nielsen Limited Reports Says COVID-19 Impact “Relatively Modest”
Stolt-Nielsen Limited (Oslo Børs: SNI) reported unaudited results for the second quarter ended May 31, 2020. The Company reported a second-quarter net profit attributable to shareholders of $3.6 million, with revenue of $503.5 million, compared with a net loss attributable to shareholders of $20.0 million, with revenue of $497.1 million, in the first quarter of 2020. The net loss attributable to shareholders for the first six months was $16.3 million, with revenue of $1,000.5 million, compared with a net profit attributable to shareholders of
$11.5 million, with revenue of $1,018.4 million, in the first half of 2019.
Highlights for the second quarter of 2020, compared with the first quarter of 2020, were:
• Net profit from continuing operations amounted to $12.3 million in the second quarter, up from a loss of $19.3 million in the first quarter of 2020.
• Stolt Tankers reported an operating profit of $20.0 million, up from $4.7 million, mainly reflecting a $12.2 million increase in deep-sea revenue driven by improved export volumes from the US Gulf, combined with an increase in operating days.
• The Stolt Tankers Joint Service Sailed-in Time-Charter Index rose to 0.56 from 0.50.
• Stolthaven Terminals reported an operating profit of $19.2 million, up from
$18.9 million, as markets remained stable overall.
• Stolt Tank Containers reported an operating profit of $13.0 million, up from
$6.7 million, reflecting higher demurrage revenue and lower repositioning costs.
• Stolt Sea Farm reported an operating loss of $4.7 million, which included impairments of $1.8 million. This compared with an operating loss of $8.8 million in the first quarter, which included a $12.0 million write-down of biomass value.
• Stolt Sea Farm’s caviar business has been reclassified as held for sale and SSF has recognised an impairment of $8.1 million.
• Corporate and Other reported an operating profit of $2.7 million, compared with an operating loss of $2.6 million in the first quarter, mainly reflecting a lower profit- sharing accrual.
• Cost saving and capex reduction initiatives will improve the cash position by $83 million in 2020.
Commenting on the Company’s results and outlook, Niels G. Stolt-Nielsen, Chief Executive Officer of Stolt-Nielsen Limited, said: “The net financial impact of the COVID-19 pandemic on our businesses, excluding Stolt Sea Farm, has so far been relatively modest. That said, we are seeing indications that the third quarter will be more challenging.
“At Stolt Tankers, overall volume improved in the second quarter, driven mainly by strength in deep-sea shipments, reflecting less MR tonnage operating in the chemical trade. Results were also positively impacted by lower fuel costs and more operating days. At Stolt Tank Containers, after a record number of shipments in March and continued strength in April, shipments slowed in May. Operating income for the quarter overall was on target, which also reflected the positive impact of actions taken to reduce operating expenses. Results at Stolthaven Terminals were stable. Demand for chemicals used in packaging and healthcare has remained strong, offset by weak demand for products bound for the automotive and construction sectors. Stolt Sea Farm had another very difficult quarter, due to the impact of the pandemic on restaurants and hotels, especially in SSF’s key European markets.
“The outlook is difficult to predict and highly uncertain. We are seeing signs of a slowdown in certain regions at Stolt Tank Containers, which we suspect may be a result of consumption declining, but also the beginning of a seasonal summer slowdown typically observed at STC. While we enjoyed a stronger chemical tanker market in the second quarter, we expect the third quarter to be more challenging due to the combination of a weaker MR market and a slowing economy. To counter the impact of a possible slowdown, we have taken steps to protect our revenue base by increasing our contract coverage at improved rates. At Stolthaven, we continue to see healthy demand in most regions and expect continued improved performance from our terminals. Finally, at Stolt Sea Farm, we believe the worst is behind us. As restrictions in Europe are lifted, we expect a steady improvement in demand for our products, as restaurants and hotels reopen in our main markets.
“As noted last quarter, we have taken extensive actions to reduce costs and shore up our liquidity position. We have thus far improved our cash position by $83 million through cancellations or delays of capital expenditures, as well as reductions in operating and administrative and general expenses. In addition, the Board of Directors temporarily cut board fees by 50%, and our senior management team took a voluntary salary cut of 20%, both effective April 1. We are also diligently working to protect our revenue base, which includes working closely with customers to create solutions to help them adapt in this constantly changing environment.
“On a positive note, following the recent bond placement, the Company currently has just under half a billion dollars in available liquidity.”
On June 16, the Company announced the successful placement of a new senior unsecured bond issue of NOK 1.25 billion, swapped into a fixed-rate $132 million obligation with a maturity date of June 29, 2023. The bond carries a coupon of three months NIBOR + 450 bps p.a. with quarterly interest payments. In connection with the placement of the new bond issue, the Company has repurchased approximately NOK 522 million ($80.6 million) of the SNI05 bonds with the maturity date of March 18, 2021 (ISIN: NO0010705551), leaving approximately $153.7 million to repay in March 2021. The transaction was significantly oversubscribed.
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.
SNL Performance Summary and Results
Debt, net of cash and cash equivalents, was $2,337.8 million as of May 31, 2020, compared with
$2,393.7 million as of February 29, 2020.
Equity attributable to shareholders of SNL as of May 31, 2020 was $1,289.3 million, compared with $1,329.5 million as of February 29, 2020.
Net interest expense in the second quarter was $33.4 million, compared with $35.0 million in the first quarter. SNL had $229.9 million of cash and cash equivalents and $181.4 million of available and undrawn committed revolving credit lines as of May 31, 2020, compared with $191.3 million of cash and cash equivalents and $328.0 million of available and undrawn committed revolving credit lines as of February 29, 2020.
Stolt Tankers reported second-quarter revenue of $293.9 million, up from $280.7 million in the first quarter. Deep-sea top-line growth for the quarter was driven mainly by increased exports from
the US Gulf to China and India, as markets there began to reopen. Total volume increased by 8.8% due to an increase in operating days and utilisation. Spot rates were flat for the quarter, while COA rates increased slightly. Deep-sea revenue growth was held down by a $13.0 million negative swing in bunker surcharge revenue, as the combined average cost of intermediate and low-sulphur (VLSF) fuel oil consumed dropped to $388 per tonne from $506 per tonne in the first quarter. Regional fleet revenue remained steady in the second quarter, mainly reflecting a decrease in bunker surcharges and lower demurrage revenue, partially offset by higher freight revenue.
Stolt Tankers reported a second-quarter operating profit of $20.0 million, up from $4.7 million in the first quarter. Second-quarter results reflected the growth in revenue for the period, the positive impact of lower shipowning expenses and a $2.4 million increase in equity income from joint ventures, partially offset by higher voyage-related expenses.
Stolthaven Terminals reported second-quarter revenue of $59.7 million, compared with
$61.7 million in the first quarter. The modest decrease in second-quarter revenue was mainly attributable to the impact of foreign exchange as well as lower utility revenue in the US due to warm weather. Utilisation rose to 95.2% from 90.5%, driven by increased activity in Australia and Singapore.
Stolthaven reported a second-quarter operating profit of $19.2 million, up from $18.9 million in the first quarter, which included $1.3 million in accruals related to an incident at the Moerdijk terminal. Equity income from joint ventures increased by $0.5 million in the second quarter, driven by reduced expenses at the terminal in Ulsan, South Korea, and higher utilisation at the terminal in Lingang, as markets in China reopened.
Stolt Tank Containers (STC)
Stolt Tank Containers reported second-quarter revenue of $135.2 million, up from $129.4 million in the first quarter. While transportation revenue was essentially unchanged in the quarter, demurrage revenue and ancillary charges increased during the quarter. Total shipments were also essentially unchanged, though average utilisation increased by 1.7% compared with the first quarter. The number of tanks in STC’s global fleet held steady.
STC reported a second-quarter operating profit of $13.0 million, up from $6.7 million in the first quarter. Along with the increase in revenue, results for the second quarter also reflected a decrease in empty tank repositioning costs, which had surged in the first quarter. Ocean freight costs were also down, as bunker fuel costs declined. In addition, actions by STC to reduce operating costs and administrative and general expenses had a positive impact across the business.
Stolt Sea Farm (SSF)
Stolt Sea Farm reported second-quarter revenue of $13.6 million, down from $24.0 million in the first quarter, reflecting the impact of pandemic-driven market conditions and restaurant shutdowns, particularly in Spain, SSF’s main market for turbot. Revenue from turbot sales dropped by 45.7%, as volume and prices both declined by about 25%. Sole revenue decreased by 22.7%, mainly reflecting a decline in prices, along with somewhat lower volume.
SSF reported a second-quarter operating loss of $4.7 million, compared with a first-quarter operating loss of $8.8 million. Results for the first quarter included the previously reported $12.0 million impairment of biomass value. Excluding the biomass impairment and fair value adjustment, operating results fell by $7.5 million reflecting the sharp drop in prices and volume together with a loss of $1.8 million related to construction-in-progress (CIP) impairments.
Stolt-Nielsen Gas (SNG)
Stolt-Nielsen Gas is an investment arm of SNL focusing on the LNG segment, with holdings in Avenir LNG Ltd and Golar LNG Ltd. Avenir’s results are reported as a joint venture, while changes in the share prices of the Golar investment are reported as Other Comprehensive Income. Stolt-Nielsen Gas reported a second-quarter operating loss of $0.8 million, compared with a loss of $1.3 million in the first quarter.