Stolt-Nielsen Ltd Ord

Good afternoon, and welcome to Stolt Nilsson's 2024 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 Ung. Vice President of Corporate Development and Strategy. Joining me today is Udo Lange, our CEO, and Jens Grunerheger, our CFO. At the end of the presentation, there will be a Q&A session. We'll be taking questions both in the room and online. To ask a question online, simply type into the Q&A function on your screen. Thank you. And over to you, Udo.

Thank you so much Alex and welcome everyone and thanks for joining us. We are really pleased to present our Q4 results to you today and to be able to share this with international participants online as well as usual. I will begin our presentation with an overview of the group's results for the fourth quarter and the full year and share some key highlights. Jens will then cover the financial results before handing back to me to run through the performance of our divisions, our view of the market outlook and a few closing remarks. I am really delighted to present these results and our key achievements for the final quarter of 2024. we have delivered a steady Q4 with strong financial performance once again. Despite fluctuating market conditions and we continue to progress our simply the best strategy. Before we get into the detail, I want to thank all our employees for the dedication to delighting our customers and for their strong commitment to safety. In terms of the results, we achieved a strong performance in the final quarter of the year with EBITDA over 200 million for a sixth consecutive quarter to cap off another strong year. We see robust results across our liquid logistics operations underpinned by favorable tanker markets. Performance at Stoll Seafarm has also been strong with firm pricing across Turbo and Sol. And as you know, we are investing for future growth across our divisions. Investing in our fleet, adding four C4s currently on long-term bare boat and buying the remaining 50% stake in our eight vessels for the C33 joint venture. Expanding our terminals footprint, we completed 70,000 cube expansion of our Malaysian terminal, increasing the capacity by a third. And strengthening our exposure in the LNG sector through the purchase of our partners' shares in Avenir. We continue to be focused on balance sheet management which allows us to fund the investment needs of our divisions to facilitate future growth, meet debt service obligations and provide dividends with ample headroom. Sustainability is important to us, and we are delighted to have been recognized in this area by Ecovades, achieving market-leading gold ratings for each of our logistics businesses during 2024. Let's now turn the page to review our key performance drivers at a more granular level. Overall, we are pleased with the fourth quarter, which caps off another strong year. Q4 overall has seen steady performance with a number of key metrics in line with the prior year. Operating revenue was 2% up, whilst EBITDA was over 200 million for a sixth consecutive quarter. Operating profit was down 9.6 million, although our results for this quarter have been impacted by a 6 million impairment we took on our high gas investment. Free cash flow is lower this quarter, as you can see at the bottom, reflecting higher capital investment for growth across our four businesses. And finally, we continue to improve our net debt to EBITDA ratio, which currently sits at 2.2, giving us significant financial flexibility and a strong liquidity position. Moving to the full year picture, it's been another strong year. Tankers, terminals and seafarm all delivered improved EBITDA performance year over year, offset by softer FTC performance due to the competitive freight market. These numbers show our underlying performance as we compare to prior year figures that exclude the significant one-off items we experienced last year as a result of Flaminia. I am proud of the team at Stolt Nielsen for navigating these volatile markets. You can see how our simply the best strategy and focused execution is allowing us to capitalize on varying market conditions and deliver exceptional underlying performance. Sustainability is important to us and we continue to make good progress in this area during the 2024 financial year. In fact, we are delighted that our achievements and efforts in sustainability were recognized externally as we awarded gold ratings for all three of our liquid logistics businesses during 2024. Stoll Tankers continues to work on emissions reduction, achieving an AER for the year of 10.3, good progress compared to last year's 10.7, which is another step towards the IMO targets and our own 2030 ambition. The pace of change in the regulatory landscape on sustainability is swift, and we are currently focused on EU ETS implementation and setting ourselves up for CSRD compliance, which is relevant for our 2025 financial year. Now I will walk you through some key areas of our 2025 outlook. On the one hand, geopolitics is a driver of uncertainty. But the supply and demand fundamentals in our markets remain strong. On the demand side, we expect modest growth of global chemical production and ton miles of around 2%. On the supply side, the order book remains manageable with 2% net fleet growth expected in the coming 2-3 years. The big unknown we continue to monitor is the potential for swing tonnage to return to our market in a more meaningful way, so we see limited scrapping as a natural pressure valve to manage the supply side. While the outlook continues to be shaped by trade flow disruption and geopolitical uncertainty, we are confident that our fundamentals are in place across our businesses, such that we are well positioned for the coming year. I'll now hand over to Jens for the financials.

Thank you very much, Udo. And thank you very much for showing up to Full House in Oslo. Good afternoon to everyone and good morning to those who are joining us from the United States. And just as a reminder, as I always do, that our quarters are a little bit skewed. So this fourth quarter runs from September 1st through November 30th. I will compare the fourth quarter 24 against the fourth quarter 23. And also to reiterate what Udo emphasizes, that this was a very strong quarter and a fantastic year that we have kept off now. And also this was our sixth consecutive quarter with EBITDA in excess of $200 million. The company is in a very strong position. And we have a strong balance sheet with a smooth debt maturity profile that I'll talk about a little bit later. And significant further borrowing capacity, which is good because we also have ambitions for growth and are investing accordingly. So let's dive into the numbers. As mentioned earlier, both revenue and OPEX were up compared to last year. The higher revenue was driven by a steady increase in revenue in both in terminals, in STC and installed seafarm. And this was partly offset by lower tanker revenue. If you take a closer look at the tanker revenue, deep sea revenue, as you will note on the bullets there, was down due to longer voyages, causing a reduction in the overall volume. even though we saw that freight rates were up fourth quarter versus fourth quarter last year. And also, if you remember, back in the fourth quarter of 2023, we announced the establishment of the SNAPS Eneos pool. And as part of that pool, we are then recognizing the full revenue and the full OPEX of that pool as part of the accounting treatment. And that had an impact on the fourth quarter this year over last year of 17.4 billion. And it had also a similar impact on the operating expense. So net-net, this is pretty much in balance. Also, if you look at other things that impact operating expenses, there was an increase in the tankers' pullout expense, as we added pool partners in the prior year. And also notable, when you compare the fourth quarter, 23 versus 24, is that you note that we had a 4.7 million freight tax credit in 23, which was an income, which we don't have this quarter. Depreciation was down 1.1 million, driven by sales of two ships, the Stolzis and Stolfakto, during 24, and it was partly offset by capitalisation of additional time charter ships, and that's as per the IFRS 16 rules, and further investments that we had in other divisions. Moving to equity income, equity income from joint ventures was down due to impairment that we noted at Highgas in Sardinia. This is a terminal we're operating there under the LNG business and losses that we had in Avenir and Highgas. ANG expense was down. That's due to a reduction in profit sharing accruals, as well as lower ANG cost, and that's driven by cost control measures that were taken. Plus, we also had the benefit of FX in that the dollar was stronger and we have a lot of ANG expenses in other currencies. For modeling purposes, if you look at the ANG run rate, because I got a question from one of the analysts earlier today, there's been a lot of volatility in ANG, but for modeling purposes, you can assume that we will have a run rate of about $70 million a quarter. Operating profit for the quarter was down by approximately 10 million, with increases in Stolthaven terminals, Stolt tank containers, and Stolt seafarm offset by the impairment at high gas and lower tanker operating profit. So just to further explain the tanker reduction, whereas the time starter equivalent per operating day was pretty much flat at just over $30,000 per day, at 30,185 to be exact, compared to the same quarter last year, The reduction in operating profit for tankers was due to an increase in OPEX caused by the higher fleet costs driven by more expensive time charters and the freight tax credit received in the fourth quarter last year. So this explains why TCE was the same, but operating profit was lower. Net interest expense was marginally up, mostly reflecting increased average interest rates, and other non-operating income was 8.9 million, and that reflects dividends that we received from Oddfjell and Goldar. Also, income tax expense was 16.5 million, and that's up from 13.6, also reflecting the higher results in the other divisions. So that brings us to the net profit, which for the quarter was 91.4 million, with EBITDA of 213.7 million. And that's only marginally down from last year, while the full year ended up with a net profit of 394.8 and EBITDA of 842.3. So quite a strong year. Let's have a look at the cash flow. It was another strong cash flow generating quarter, but let me first highlight when you compare the fourth quarter 24 with fourth quarter 23, 23 reflects the receipt of $133 million in insurance receipts, and that was related to the settlement of the MSC Flaminia incident, which hopefully we don't have to talk more about. Net of this, the reduction of operating cash flow was only 6.1 million, reflecting the reduction in operating results. Net cash generated from operations was down a further 2.4 million, driven by an increase in taxes paid, which is in line with the increase that we also saw in the tax expense. Capital expenditures were $97.7 million as we exercise a purchase option for the regional Brovik ships and continue to invest in both Stolthaven terminals and Stolthang containers. And the capital expenditures also include about $9 million spent on dry docking of ships. And just keep that in mind because when I show you the CAPEX schedule on the subsequent slide, that $9 million is not in there. So it's not a mistake. In addition, we invested about $7 million into our joint ventures. That went to a terminal company in Turkey where we're developing a terminal together with a partner. So total cash spent on investing activities was just over $100 million. We didn't raise any financings during the quarter. If you recall, we did a significant financing as led by Julian. in this third quarter of the year, where we raised $450 million on the US private placement, has put us in a good position. So if you look at the total cash flow for the quarter was therefore flat, but for the impact of FX of about $2 million. And we ended the quarter and year with a cash equivalent balance of $334.7 million. That comes in addition on top of our committed credit lines. And that ties in with what Udo mentioned of total liquidity of $753 million available as of November 30th. If you look and you see that at the bottom right, so it's good to have that. You might question why we're sitting with so much liquidity, but also, as we will talk about, we do have significant investment plans. And here you see our capital expenditures, the first four columns looking back by quarter of 2024, then you have the full year for 2024. The fourth quarter we spent 87 million dollars, slightly below our earlier guidance of 102 million dollars, and the full year expenditure was therefore 245 million, with the bulk of those investments falling into tankers and Stolthaven terminals. We have a few significant investments scheduled for the first quarter this year. As announced, we will be spending about $80 million on buying out our partners in Avenir. and a potential further $10 million to buy out the remaining shareholders in Avenir, and that will then potentially bring us up to 100%. Furthermore, as earlier announced, we're buying out our partner in Hustle Shipping 4, scheduled to happen quite soon, and we will make an announcement when that has been completed. Moving to the balance sheet, here's a debt maturity profile with the refinancing of the major USPP facility that I mentioned. We have quite a steady profile going forward without any significant bumps in it. There's no significant balloon payments until we get out to 2028 and that's when the bond SNI 10 matures, that's with 138 million. And then thereafter, in 29, we have $155 million on the U.S. private placements secured by our New Orleans terminal. Also worth noting is that at the end of December 24, so actually in the 25 fiscal year, and that is reflected here, we repaid $103 million of floating rate debt, which was very expensive. And that has also contributed to bring down our debt levels further beyond what we are presenting here. And Julian had also been working hard at taking our existing credit facilities and extending them out because the market is willing to sort of look at long maturities. And that will help us also push out maturities, increase our borrowing capacity, as well as reduce our financing cash flow. So all of that is going to help us going forward. If you look at the bottom left graph, you can see that the debt at the end of fourth quarter was slightly down. That reflects the 58 million that I mentioned earlier. And then we have a further reduction of the 103 million. And average interest expense were pretty much flat. So going over to the covenants, the continuous strong performance of the company has translated into good performance on the covenants. The top two are actually bank debt covenants. The top left showing a debt to tangible net worth with debt down at 2.19 and equity or tangible net worth at 2.3, which improved the ratio to 0.94. The bottom right, you have our EBITDA, and it's a nice graph to show with all quarters above $200 million, ending at 842. By the way, the difference between that number and the other number is the fish farms fair value of biomass was $1 million. So again, it's just a slight different way of treating EBITDA in the covenants. But that has helped drive down the net debt to EBITDA to 2.2 as Udo mentioned, and EBITDA to interest expense to 6.68. And with that, I would like to hand it back to Udo for the segment analysis of our businesses.