Stolt-Nielsen Ltd (SOIEF) Q3 2024 Earnings Call Transcript Highlights: Strong operational …

• Operating income: Up 5.5% year-on-year.

• Operating profit: An increase of more than 9% year over year to $139.3 million.

• EBITDA: $209.4 million, up 4% year over 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% from last year.

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

• Operating income of Stolt Sea Farm: $33.6 million, up 8% year over year.

• Operating profit of Stolt Sea Farm: $8.7 million, up 43% from last year.

• Stolt Sea Farm EBITDA: $11 million, up 18% from last year.

• Net profit: $99.2 million for the quarter.

• Capital expenditure: $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 2, 2024

For the full transcript of the conference call, please see the full conference call minutes.

Positive points

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

• The company reported an increase in operating revenue of 5.5% and an increase in operating profit of more than 9%, demonstrating effective cost management and margin focus.

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

• Stolthaven Terminals recorded a 3.5% year-on-year EBITDA increase, driven by strong inventory 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 is impacting shipping markets, resulting in longer voyages and impact on cargo volumes.

• Conditions in the tank container market remain challenging, with a competitive trading environment and lower demurrage revenues negatively impacting profitability.

• The International Longshoreman's Association strike brings potential disruption to the tank container business with uncertain financial implications.

• Deepwater revenue decreased 1.2% due to fewer operating days and lower volumes, partially offset by higher freight rates.

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

Q&A highlights

Q: Can you tell us about your strategy to deepen customer interaction by using your terminals, tankers and tank containers as one offering? A: We are increasingly viewed by our customers as a strategic supplier and not just a tactical provider. We conducted strategic workshops with customers to better understand their supply chains and where we could add the most value. This approach is making good progress.

Q: How does the current situation in the Middle East affect your activities, especially in the Red Sea? A: Our priority is the safety of our sailors. We are closely monitoring the situation with the security authorities. To date, there is no evidence of risks and we have not yet identified any impact on our business.

Q: What impact do you see the ILA strikes having on your container business? A: The ILA strike is having a significant impact on container trade in the US, particularly at East Coast and Gulf ports. Although it does not impact our terminal or tanker business, it is relevant to our tank container business. We have contingency plans in place with our customers to minimize disruptions.

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

Q: Are there any financial targets for the fourth quarter or 2025? A: Our goal is to keep the net debt to EBITDA ratio below 3.5 to allow flexibility in capital expenditures and shareholder dividends. We focus on strategic capital allocation to grow our business and generate returns.

Q: Are you considering a spin-off from Stolt Tankers to highlight its value? A: We do not currently intend to pursue an IPO for Stolt Tankers. We are pleased with our returns and IPO market conditions are not favorable at the moment.

Q: Can you explain the adjustments to Consolidated EBITDA reported in the press release? A: The most important adjustment relates to the fair value of Stolt Sea Farm's biomass, which we do not take into account due to its volatility. We focus on showing the underlying performance of the group.

Q: What is the strategy for Avenir and are you planning a sale or is this a long-term strategic direction? A: We are strategically repositioning Avenir, focusing on LNG bunkering and considering a stock market listing. We see growth opportunities in the LNG-powered fleet and support Avenir's future capital raising.

For the full transcript of the conference call, please see the full conference call minutes.

This article first appeared on GuruFocus.