Stolt-Nielsen Ltd Ord

Good afternoon, and welcome to Stolt Nielsen's fourth quarter results. As always, the earnings release and related materials are available on our website. We will also be recording this session, and it will be available from tomorrow. Included in this presentation are various forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, and we refer you to our latest annual report for further details. I'm Alex Ng. Vice President of Corporate Development and Strategy, and will be facilitating our Q&A session at the end of the presentation. During the Q&A, we will first take questions on the phone, then the room, and then via the webcast. To ask a question online, simply type into the bottom right-hand side of the screen. Joining me today are Udo Lange, CEO, and Jens Grunerheger, CFO. So, over to you, Udo.

Yeah, thank you so much, Alex. Greatly appreciate it. So, of course, before I get started, a very, very warm welcome to all of you who made it today at this wonderful day in Oslo to our earnings presentation. And, of course, to all of you on the call as well. And I would highlight we have a very special guest here today, our board member, Jakob Stolt-Nielsen. So thanks for joining us as well. Greatly appreciate it. So today I will begin with a review of the Group's financial results for the quarter and the full year. Jens will then cover the financial highlights before handing back to me for the divisional highlights, market outlook and a few closing remarks. Before I talk about our exceptional fourth quarter and outlook, I would like to thank our employees for their excellent work during 2023. The financial results don't always paint the whole picture. The past few years have challenged us all and this year has been no different. We are all living in an increasingly volatile world. The ongoing situation in the Red Sea is threatening vital supply chains and historically low water levels in the Panama Canal have also impacted shipping routes. During these challenges, I really see the quality of our Stolt Nielsen people. They are quick to respond, diligent in assessing risks, and focused on delivering value for our customers and shareholders. I'd also like to thank our thousands of loyal customers. Without their trust in us to safely handle their products, we would not be able to achieve these great results. We ended the year on a high note, delivering our strongest first quarter ever, capping off excellent full-year results. Our strong performance was a direct result of focused execution across all businesses and some favorable tailwinds. During the quarter, we made several important announcements relating to growth initiatives. we announced the signing of a new building order for six 38,000 ton fuel efficient stainless steel tankers. These are scheduled for delivery from 2027 onwards and are the first new build order for Stoll tankers since 2018. Yard capacity remains very tight and we are pleased that we are able to secure these new buildings with a favorable delivery window. Second, we strengthened our position in Asia by adding two ships from INEOS Ocean, the Japanese integrated energy company, to our fleet in the region. Third, Stoll Seafarm began the expansion of the sole hatchery, a key milestone in our long-term plans for increasing sole production. And finally, in December we paid an interim dividend of $1 per share and closed the year with our balance sheet in a very strong position. Now we'll take a closer look at what happened during Q4. Amid an uncertain macro backdrop, we delivered a strong underlying performance compared to our previous quarter and the fourth quarter of 2022. EBITDA came in at a very strong 217 million and increased compared to the third quarter. This was mainly due to higher rates both at Stoltenkers and Stolthofen terminals. And if you compare the fourth quarter to the same period last year, we improved 10.6%. You can clearly see our focus and executing our strategy is supported by solid market fundamentals. Thanks to the strong cash generation from our businesses, I am also very pleased to see our profitability translate to free cash flow, which increased quarter on quarter to 131 million up from 124 million. Our focus on cash flow generation has helped us to deliver a healthy balance sheet and improve our net debt to EBITDA ratio. We have managed our balance sheet effectively by extending debt maturities. It is worth noting that both free cash flow and net debt to EBITDA excludes 133 million of insurance proceeds received in the first quarter relating to the MSC Flaminia legal claim. Moving to the full year picture. Our performance is very positive. It's great to see we have everything showing green on this slide. Adjusted EBITDA was very strong compared to last year. A remarkable 21% increase. The key performance drivers for all the businesses remained favourable. Cash generation also improved as illustrated by the 12.3% increase of free cash flow to 580.2 million up from 516.5 million last year. We continue to make progress on our sustainability ambitions. Looking specifically at our environmental progress, AER for the year decreased to 10.73 compared with 10.91 in 2022 and we are on track to meet IMO targets and our 2030 ambition. I was really very proud when our Stoll Tankers team received a gold EcoVertis rating last month. During the quarter, several sustainability initiatives were also implemented. Stoll tankers announced new building orders and these ships are designed to maximize fuel efficiency using modern engine design, hull form optimization and feature a wide range of energy savings devices. They can also connect to shore power and be retrofitted for future battery and methanol propulsion. Stoll tankers is also ready to comply with the EU ETS regulations for the shipping industry. Stoll tank containers continues to pioneer technology. One exciting development is the online option for customers to choose a method or mode of transportation based on potential emissions. And we made progress towards our safety ambitions to achieve zero harm. This is of course our top priority. We benchmark our performance and believe we are equal or even better than others in our markets. Now, and I know you are always curious about that, I would like to walk you through some key areas of our 2024 outlook. we expect the chemical tanker market to benefit from strong supply-demand fundamentals. On the demand side, we expect modest growth of global chemical production, while the impact of corn supply chain disruptions is of course still unclear. On the supply side, thanks to our fleet size and flexibility, we could benefit from strong tailwinds including the historically low order book and limited yard capacity. We are confident that all our businesses will capitalize on positive market dynamics to continue to deliver a strong performance. Overall, we have a very positive sentiment for 2024 with tanker rates firming at a new plateau. That's all from me now. So I'll hand over to Jens to take you through our wonderful financial highlights. Jens, over to you.

Thank you very much, Udo. And good afternoon to everyone here in Oslo. And good morning to those of you listening in from the United States. I just want to remind you, as I always do, that our fiscal year is slightly off. Fourth quarter began September 1st and ended November 30th. Now, as Udo did, and different from what we have done in years past, is we're comparing now fourth quarter this year with the fourth quarter last year. So keep that in mind when I go through the changes, please. Revenue was down due to lower rates in SDC, and that was due to the lower transportation cost. As you might know, this is a pass-through expense. So when the transportation cost for SDC goes down, we charge less revenue through to our customers. In addition, we continue to see a margin squeeze in SDC, as Udo will show later. This was offset by higher contract rates in tankers, improved storage rates for terminals, and higher prices for sole in particular. And that also was combined with good volume. Operating expenses were significantly down. on the back of the falling ocean freight and trucking costs, and a favorable movement in the fair value adjustment of biomass at Stoll Seafarm of about 10 million compared to the fourth quarter of 2022. As a result, gross profit before depreciation for the quarter was 277 million, up 8% from the prior quarter, but up 11% from the same quarter in the previous year. Equity income from joint ventures was up, driven by improved terminal JV results and a reduction in the loss at Avenir LNG, where we are a shareholder sitting with about 47.5%. Administrative and general expense was up by 13.6 million. And keep in mind, since we're now comparing with the fourth quarter of 22, that includes then one annual salary adjustment, as well as because of the improved results, there's a higher accrual for profit sharing. Operating profit came in at 140 million for the quarter. That's up from 132 million in the fourth quarter of 22. And interest expense was down as debt levels reduced, countering the increase in interest rates. I will talk about the debt in some further detail later. Income tax expense was $13.6 million in the quarter, compared with $4.2 in the same quarter last year. And that's due to improved profits at both Stoltham Terminals and Stolth Sea Farm. And net profit for the quarter ended up at a strong 98.4 million with EBITDA of 216.7 million. Just briefly looking at the full year results, they were, of course, marked by the Flaminia provision that we took at the end of May in 23. But otherwise, it reflects a strong performance in Stoltankers, Stolthaven terminals, and Stolseafarm, with anticipated weakness in Stoltank containers market kicking in in the second half of the year. The year consequently ended at a net profit of 296.7 million, up from 280.9 million last year. Moving over to the cash flow. Cash from operations was driven by strong performance, as mentioned earlier, but the bulk of the improvement in the fourth quarter is due to the receipt of insurance proceeds related to Flaminia, which will be paid out later on settlement. And these funds were received during October 23. Interest payments came down in line with the reduction in debt levels. Capital expenditures included $7 million in dry docking expenses, $19 million on terminal expansions, $37 million primarily on the purchase of tank containers, as well as continued investments in Stoll Sea Farm's production capacity. During the quarter, we repaid net $13 million in debt. And note that the dividend declared and announced in this November was not paid until December 7th, subsequent to the quarter end, so that's not included in these numbers. Our liquidity position was strong at the end of the quarter, but this also reflects the 133 million Flaminia insurance proceeds and cash that we're holding to pay off the balance of SNI 08, the bond that matures right now in February this month. This is our debt maturity profile, and you see here the remaining balloon falling due in first quarter 2024. This will be paid with 81.5 million, and we had earlier retired quite a portion of this bond when we issued the bond last September, so therefore the lower amount. Our next significant maturity after this will be the US private placement, which matures in March of 2025, at which time it will have about $236 million outstanding. That US private placement is secured by the Houston Terminal. Debt during the quarter, and again, I differentiate from what I mentioned earlier about net debt, debt during the quarter was slightly up, reflecting 9.7 million in capitalization of leases, net of retirements. Note the new bond issue as previously reported in September and the TAP issue completed at the end of November. With this, the bond S&I 10 has knocked 1.525 billion outstanding, and this has been swapped into a total fixed obligation of approximately $144 million and carries an interest rate of about 7.8%. Looking at the capex, the full year 2023 capex spend was 228 million, including 63 million spent in the fourth quarter. And you can see that in 2024, we are projecting a significantly higher amount. going up to 333 million. And the tanker capex there relates to progress payments on new building order. The bulk of the Stolzhaven capex relates to the expansion of our Houston and New Orleans terminals, while Stolz C farm capex relates to the growth of our soil farms in Spain. The continuous strong performance of the company has translated into a good performance on our various KPIs. The top two are bank covenants. The top left is showing our debt to tangible net worth, which has been on a steadily improving trend and ended the fourth quarter at one even. That's our lowest level, I think, at least as long as I've been with the company. At the top right, you can see the improvement in our EBITDA to interest expense. This has been driven by the reduction in debt levels and an increase in interest rates, as mentioned earlier, while the improving EBITDA has allowed this ratio to improve to 5.9 times. At the bottom right is our EBITDA. In the fourth quarter, we produced our highest EBITDA for the year. At the bottom left, you can then see that this strong EBITDA has translated into a net debt to EBITDA ratio of 2.48, as Udo mentioned earlier. To note that these figures exclude 133 million cash inflow that I was referring to earlier regarding the MSC Flaminia. And with this, I'd like to hand it back to you, Udo.