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Stolt-Nielsen: Positive view forward remains after 4Q20 figures came in line with expectations

Stolt-Nielsen posted its 4Q20 (September-November) results on Thursday. As projected, surprisingly strong 3Q figures were not repeated following an easing in tanker volumes, but the adjusted results were solid and somewhat above our expectations. While 1Q21 is guided to be seasonally slower, the supply/demand of the Chemical Tanker market and the medium-to-long-term prognosis remain favourable. We made only limited changes to our model as the situation in the market unfolds in our suspected direction, thus, Buy recommendation is reiterated at an unchanged NOK 150/sh Target Price.

Solid quarterly figures, while tanker volumes were easing

It was a welcome to reality after a superb 3Q20, but that was expected both by us and the consensus. SNI communicated of an easing in tanker volumes during 4Q20, however, Tankers’ results for the quarter even improved, driven by lower ship management costs, as crew changes have become easier in recent months. Overall, keeping adj. EBIT above USD 50m line is very solid in our view, while it was far more than that – adjusted for impairments related to Australian Terminal and JV loan and other one-off items, EBIT came in at USD 58.4m vs. our predicted USD 53.3m (USD 54.0m consensus). Terminals saw a steady demand over the quarter, while Container shipments showed a solid increase towards the end. Sea Farm’s both volumes and prices were returning to pre-Covid 19 levels, also, during the quarter Sea Farm successfully completed the sale of its caviar business.

1Q21 to be slower, LT outlook unchanged

Due to the still unrestrained pandemic and the uncertain timing of the roll-out of Covid-19 vaccines, it is hard to predict the economic situation in 2021, but Stolt-Nielsen declares having limited downside by securing contracts across all operating segments. The company remains optimistic towards the medium-to-long-term outlook, although in the short term volatility in the market could be predicted. First fiscal quarter of 2021 (December-February) tends to be seasonally slower as Christmas and Chinese New Year holiday falls into it, while December and January were even called “challenging” by the company for Tankers. This might be offset by healthy demand for Terminal segment and strong Container bookings.

Buy recommendation stays under little-changed estimates

Following the unsurprising report and no new information on Stolt Sea Farm IPO, we made only limited adjustments to our estimates. While 1Q21 is expected somewhat seasonally weaker QoQ, our long-term prognosis remains positive seeing strong fundamentals in the market with new chemical production capacity for exports in the ME and US driving tonnage demand and low tanker orderbook.
Source: Norne Research

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