Stolt-Nielsen Ltd (SOIEF) Q3 2024 Earnings Call Transcript Highlights: Strong Operational ...

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  • Operating Revenue: Increased by 5.5% year-on-year.

  • Operating Profit: Up more than 9% year-on-year, reaching $139.3 million.

  • EBITDA: $209.4 million, up 4% from the prior year.

  • Free Cash Flow: $212 million for the quarter.

  • Net Debt to EBITDA Ratio: 2.25.

  • TCE per Day for Stolt Tankers: $33,400, up 17% year-on-year.

  • Stolthaven Terminals EBITDA: $43.5 million, up 3.5% year-on-year.

  • Stolt Sea Farm Operating Revenue: $33.6 million, up 8% year-on-year.

  • Stolt Sea Farm Operating Profit: $8.7 million, up 43% year-on-year.

  • Stolt Sea Farm EBITDA: $11 million, up 18% year-on-year.

  • Net Profit: $99.2 million for the quarter.

  • Capital Expenditures: $58 million for the quarter.

  • Cash and Cash Equivalents: $336.7 million at the end of the quarter.

  • Available Credit Lines: $431 million.

Release Date: October 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Stolt-Nielsen Ltd (SOIEF) achieved near record levels of EBITDA for the second consecutive quarter, indicating strong operational performance.

  • The company reported a 5.5% increase in operating revenue and a more than 9% rise in operating profit, showcasing effective cost management and margin focus.

  • Stolt Tankers delivered a record high TCE per day of $33,400, reflecting a 17% growth compared to the same quarter last year.

  • Stolthaven Terminals saw EBITDA increase by 3.5% year-on-year, driven by strong storage rates and margin improvements.

  • Stolt Sea Farm achieved record quarterly performance in both operating profit and EBITDA, supported by higher prices and good volumes.

Negative Points

  • The ongoing situation in the Red Sea has impacted shipping markets, leading to longer voyages and affecting cargo volumes.

  • Tank container market conditions remain challenging, with competitive trading environments and reduced demurrage revenues impacting profitability.

  • The International Longshoreman's Association Strike poses potential disruptions to the tank container business, with uncertain financial impacts.

  • Deep-sea revenue was down 1.2% due to fewer operating days and lower volumes, partly offset by increased freight rates.

  • Net interest expense increased due to higher average interest rates and lower interest income, impacting overall financial performance.

Q & A Highlights

Q: Can you update us on your strategy to deepen customer interaction using your terminals, tankers, and tank containers as one offering? A: We are increasingly seen as a strategic supplier by our customers, not just a tactical provider. We've had strategic workshops with customers to understand their supply chains better and identify where we can add the most value. This approach is progressing well.

Q: How is the current situation in the Middle East affecting your operations, particularly in the Red Sea? A: Our priority is the safety of our seafarers. We are closely monitoring the situation with security agencies. So far, there is no indication of risk, and we have not seen any impact on our operations yet.

Q: How do you see the ILA strikes affecting your container business? A: The ILA strike significantly impacts the container trade in the US, especially on the East Coast and Gulf ports. While it doesn't affect our terminal or tanker businesses, it is relevant for our tank container business. We have contingency plans in place with our customers to minimize disruption.

Q: Can you provide more detail on TCE guidance for the fourth quarter and the COA/spot contract mix? A: We don't have a specific target for COA or spot rates; it's about finding the right market balance. Due to a lag effect, we expect Q4 TCE to be lower by 7% to 11%, but anticipate an increase in early 2025 as the market strengthens.

Q: Are there any financial targets for Q4 or 2025? A: We aim to maintain a net debt to EBITDA ratio below 3.5, allowing flexibility for capital expenditures and shareholder dividends. We focus on strategic capital allocation to grow our businesses and achieve returns.

Q: Are you considering spinning off Stolt Tankers to highlight its value? A: Currently, we do not intend to pursue an IPO for Stolt Tankers. We are satisfied with our earnings, and the IPO market conditions are not favorable at this time.

Q: Can you explain the adjustments in consolidated EBITDA reported in the press release? A: The main adjustment is the fair value of Stolt Sea Farm's biomass, which we report excluding due to its volatility. We focus on showing the underlying performance of the Group.

Q: What is the strategy for Avenir, and do you plan to divest or is it a long-term strategic focus? A: We are strategically repositioning Avenir, focusing on LNG bunkering and considering a listing. We see growth opportunities in the LNG-fueled fleet and are supporting Avenir's future capital raise.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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