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Stolt-Nielsen: Positive bottom line in the seasonally worst quarter

Stolt-Nielsen’s December-February figures were somewhat below our and consensus’ estimates, but nothing dramatic happened during the seasonally worst quarter. Lower numbers reflect the severe winter weather in the northern hemisphere that had a negative impact for both the tankers and the terminals. Following no changes in optimistic medium to long-term outlook, revealed USD 1m cost related to Suez Canal and still ongoing preparations for the SSF and Stolt Tankers IPOs, we will make only limited changes to our estimates and our positive stance towards the share is likely to be reiterated.

Cold winter negatively impacting the figures

The first quarter is usually the weakest for Stolt-Nielsen and we expected the figures to be down QoQ, but the reported numbers were lower than both we and consensus predicted. This was explained by the severe winter weather in the northern hemisphere, which caused delays and impacted scheduling. Such winter storms in Texas were last seen in 19th century and the terminal in Houston had to be precautionary temporary shut down, which resulted in reduced volumes. Although Tank Containers saw an increased activity in levels, the financial results were impacted by higher ocean freight and other move-related expenses. Sea Farm continued to drive improvements in volume sold.

Optimistic medium to long-term outlook remains

Vaccination procedures around the world and related struggles bring little clearance, still the situation is improving, while the demand is supported by economic stimulus in the U.S. and EU and the economic growth recovery in China. With low chemical tanker orderbook it is still expected to be a matter of time before the chemical shipping market begins to firm. Stolt Nielsen’s CEO commented to be looking forward to a recovery beginning in earnest during 2H21. Notably, it was also communicated that the disruption of operations related to Suez Canal should cost the company less than USD 1.0m in delays, which will be reflected in the second quarter. Also, preparations for a potential IPO of Stolt Sea Farm and Stolt Tankers were said to continue during the quarter.

Following the weaker than predicted figures we will adjust our model accordingly, but the positive outlook signals little changes to our estimates, thus, Buy recommendation for the stock is likely to stay.
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Source: Norne Securities

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