Stolt-Nielsen Ltd Ord

Good afternoon and welcome to Stolt Nilsson's earnings call for the final quarter of 2025. As always, the earnings release and related materials are available on our website. We'll be recording this session and playback will be available on our website 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 Ong, Vice President of Corporate Development and Strategy. Joining me today are Udo Lange, our CEO, and Jens Grunerheger, our CFO. At the end of our presentation, there'll be a Q&A session where we'll be taking questions 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.

Yeah, thank you so much, Alex, and welcome everyone here in London, and of course on the call as well, and thanks for joining us today for our fourth quarter results. The presentation will follow the usual format. I will begin with an overview of the group's results for the quarter and the full year. And then Jens will cover the financials before handing back to me to run through the performance of our divisions, our view of the market outlook, and a few concluding remarks. In an unpredictable and challenging market context, I'm really pleased that overall Stolt Nielsen has delivered a solid finish to 2025, achieving EBITDA of 186 million for Q4. This completes the year with $776 million in EBITDA, which was at the upper end of our guidance and the second highest EBITDA result achieved in our history. We can continue to communicate that Stolz Nielsen is not a shipping company, but a logistics business. Non-stole tanker operations account for 57% of our asset base and 45% of our EBITDA. We are building our non-tanker earnings base through our capital investment program to continue to grow long-term sustainable cash flow for our shareholders. For this quarter, while Stoltenka's EBITDA fell 18% from the same quarter last year, the resilience of the other areas of our business resulted in a 13% drop for the group overall. Optimizing value creation from our portfolio is the driver of our M&A activities. In the period, we acquired 100% of Suttons, a UK-based IsoTank operator, through which we can leverage the scale and flexibility of Stoll Tank Containers' global platform to expand our service offering for our customers. Aligned to our strategy to grow Avenir whilst preserving balance sheet flexibility, we have also very recently announced that we are in discussions to sell down a portion of our equity in Avenir. We also issued a new Norwegian bond. It was one of the tightest spreads for a logistics company achieved in the Norwegian bond market, showing our good access to markets and that credit investors appreciate our portfolio. And the master of the bond is in the room, Julian. Thanks for the outstanding work there. You'll remember that last year we evolved how we communicate our earnings potential, aligning our EBITDA guidance with our business model for the full year. In 2025, we came in towards the top of our range, and we hope you find our transparency in this regard helpful, and we are committed to continuing with this approach. Based on what we know today, we expect that our 2026 EBITDA will be in a range of 600 to 750 million dollars. Jens will elaborate on this more a bit later, but I wanted to flag a couple of key points here. We are excited about integrating Suttons into our core business. However, there will be some integration costs this year, and positive EBITDA impact from the Suttons business is not expected until 2027. This also assumes that the deconciliation of INEA is completed in line with our announcement on Monday, and that is of course relevant for the like-for-like year-over-year comparison. And we expect to be able to refine this range as the year progresses. Let's now turn the page to review our financial highlights. I'm really pleased with the results achieved in the quarter in a complex market backdrop. Operating revenue was down 4% or 29 million year-on-year, which is predominantly on account of weaker freight rates installed tankers. EBITDA before the adjustment for fair value came in at 186 million, down 27 million on last year due to lower rates, installed tanker and in tank containers partially offset by performance in our gas operations. Operating profit was down year over year by 35 million, mainly due to the performance in tankers and tank containers, plus additional depreciation from the consolidation of the Hessel 4 ships and Avenir. Net profit was also down, driven by the same factors as well as higher interest expenses. Free cash flow was down 38 million year-over-year, driven by higher capex including from the acquisition of Suttons International and new building deposits in our NST joint venture. Net debt to EBITDA has increased to 3.12 times as a result of the investments we have made over the year. I will talk more about how we are investing for long-term growth a bit more later. Over the page, we look at some of the key drivers of performance. Looking at the snapshot of the whole year, we have delivered a solid performance with the second highest EBITDA result in the company's history, despite demand headwinds from a weak global chemical market, as well as geopolitical uncertainty and tariffs impacting sentiment. We have remained focused on our strategy and on supporting our businesses to maintain their leading market positions. Stoltanker's earnings were impacted by ongoing geopolitical uncertainty, with lower freight rates weighing on performance whilst volumes remained stable. Over the last 18 months at Stolthaven, we have focused on optimizing for higher-margin business. This strategy has delivered success in certain markets, and we end the year with average utilization for the year up slightly, a positive outcome in a difficult market. Tank containers have also been navigating a highly competitive market, and performance here has been impacted mainly by lower transport margins. For the year overall, the mix of EBITDA generated outside of Stoll tankers increased to 43% from 35% last year. This is 40 million more than last year as investments across our portfolio help diversify our earnings. Our global teams are doing a fantastic job of working together to help our customers keep their supply chains moving in a safe and reliable way. And I want to thank all our people for their dedication across the year. They truly live our purpose of moving today's products for tomorrow's possibilities. In November, we announced the acquisition of Suttons International, a UK-based ISO tank operator. I wanted to give you a bit of additional color on the rationale for the acquisition and how it supports the tank container strategy. We acquired Suttons in November, adding over 11,000 ISO tank containers to the fleet, glowing our fleet by around 20%. The acquisition is aligned with our corporate strategy to accelerate growth in one of our asset light businesses. Leveraging sterile tank containers global platform to support customers with efficiency, reliability and flexibility across their supply chains. We have been investing in creating a scalable global platform for Stoll tank containers, driven by a strong focus on digitalization and efficiency, and we aim to drive sustainable growth, operational consistency, and improve customer outcomes by leveraging this platform to successfully embed Suttons within our business. Suttons not only brings tank capacity but also enhances our customer offering as we bring in specific expertise in gas distribution, domestic short-sea and China domestic services. With an expanded fleet, global reach, a more comprehensive service offering and an improved digital experience, customers will benefit from our scale, efficiency and global network. As we talked about it on our Capital Markets Day, the iso-tank container market is highly fragmented. As you can see here on the chart, this transaction cements Stoll Tank Container's position as a leading iso-tank operator and gives us potential for further profit margin growth. Elsewhere in this market we see low levels of new tank production and ongoing capacity rationalization, which we expect to lay the foundation for an eventual market recovery. Instead, tank containers will be well positioned to take advantage of a potential upturn. Our strategy puts our three most important stakeholders at the heart of everything we do. Our shareholders, our customers and our people. We focus on developing our people to continuously improve our customer experience and on value creation for shareholders through our unique market leadership across liquid logistics and other business investments. We paid an interim dividend of $1 per share in December, which takes shareholder distributions since 2005 to over $1.4 billion. Our commitment to balancing distributions, conservative balance sheet and investing into our business is key to delivering long-term shareholder returns. Our unique position in liquid logistics benefits customers as they build and optimize robust supply chains in uncertain and demanding markets. 70% of our top 50 customers use more than one of our servers and we continue to outperform industry norms with respect to Net Promoter Scores. This year, the average net promoter score of our logistics businesses was 52, up from 40 in 2024. Our people are the beating heart of our business and their passion and commitment drive our success. This year, employee engagement remained strong. Our employee engagement survey showed a sustainable engagement score of 86%, outperforming industry peers in all benchmark categories, with also a record response rate of 91%. We have created a workplace where our people want to stay, and the average tenure for a Stuhl Diesel employee is over nine years. To support our strategy, we have been making targeted investments to position our business for long-term growth and to ensure our liquid logistics solutions remain compelling for the future. We spent approximately 500 million in 2025 and increased our asset base to 5.8 billion. In 2026, we have plans to extend this further by around 380 million investments. We strengthen our market position on customer value proposition in all three logistics businesses. Installed tank containers, we continue to invest in assets to maintain our network, acquiring the remaining 50% in the hassle shipping for joint venture and ordering two additional modern fuel-efficient 38,000 deadweight new builds with our joint venture partner, NYK. At Solthofen Terminals, we started construction of a new terminal in Turkey, while our terminal in Taiwan advanced towards operational status. And we invested to expand capacity in the US, Korea, and New Zealand. I touched upon the rationale for the Suttons acquisition, and that investment sits in the FY25 tank container figures, in addition to new tanks in our core business. We also acquired the remaining shares of Avenir in 2025, reflecting our excitement in continuing to capitalize on the growing need for LNG bunkering. As announced this week, we are now exploring a partial sell-down of this holding for an additional value creation opportunity while still having commitment to grow Avenir's fleet in the future. Based on project approved to date, we will reduce our CAPEX spend by around 130 million year-on-year, while both sustaining our current operations and driving future growth opportunities and innovations. We will see the full impact of these investments over the coming months and years. And I'll now pass on to Jens for the financials.

Thank you, Udo. And great to see everyone. Good morning to those of you calling in from the United States and good afternoon to everyone here. As Udo did, I will compare fourth quarter of 25 with fourth quarter of 2024. And just as a reminder, our fourth quarter runs from September 1st through November 30th every year. To reiterate what Udo has talked about, the company's performance is resilient in a challenging environment. But let's dive into the numbers. Now we talked about a lot of transactions that happened in the last 12 months, so since I'm comparing fourth quarter 24 with fourth quarter 25, we have added a column here to take out the impact, or to normalize the impact of the three major transactions, which was the acquisition of 100% of Hustle Shipping 4, 100% of Avenir, and now lately also the Suttons acquisition. So comparing those two, the normalized with the last quarter of last year, the drop in revenue was driven by tankers, reflecting the lower freight rates, which were partly offset by a 6.9% increase in volume, following additions to the fleet over the last 12 months. Terminals revenue was flat, and STCs was down by about 5 million, excluding the Sutton's impact, whilst Dolce Farms' revenue was marginally up. The reduction in operating expenses partly offset the reduction in revenue and was driven by lower TC hire cost and lower owning cost in tankers. Excluding the impact of Hustle Shipping 4 and Avenir, depreciation expense was only marginally up and that was reflecting really additional leases that we've taken on and additional terminal capacity that has been delivered and become operational. The equity income from our joint ventures was up substantially, and that was driven by a prior year impairment that we took at Heilgas of about $5 million, and past operating losses at Avenir that have since now seen significant improvement in the operations in the last quarter. ANG expense was up compared to last year, mostly reflecting annual inflation adjustments, as well as a consequence of the weaker US dollar, because a lot of our ANG expenses are in non-dollar, euros, pounds, and Asian currencies. Also, last year, we reversed an over-recrual for profit sharing in the fourth quarter of last year, which had a negative impact of about 11 million. So when you normalize for that, the increase is more normal. Adjusted operating profit for the quarter was therefore $88.5 million. That's down from $130.4 million in the fourth quarter last year. And as you can see from the difference between the reported numbers and the adjusted numbers, the acquisition that we talked about contributed about $7 million to that operating profit. And as you can also see, about 40% of the increase in the reported net interest expense was due to an increase in the net debt related to the acquisitions and other capital expenditures that we had during the year. While the rest was due to lower interest income as we reduced the holding of cash on hand compared to last year, and you will see that on the subsequent slide. Other relates to dividends from our equity instruments, so dividends that we have received on investments. An income tax was down, reflecting an insurance-related tax provision taken in the fourth quarter of 24, as well as prior year tax adjustment at terminals offset by higher taxes at corporate due to improved profitability that we've seen at Avenir and Stoltz Seafarm. And consequently, the net profit for the quarter ended up at 59.6 million, as Udo said, with EBITDA of $186 million. Let's take a look at the cash flow. So cash flow operations was down this last quarter, predominantly reflecting the weaker earnings, but still at healthy levels, if you compare to previous years, still a very strong cash-generating quarter. Dividends from JVs were down, but this was offset by positive working capital from the prior year, and cash spent on capital expenditure was substantially up, reflecting the acquisition of Suttons, as well as increased progress payments on our new buildings, and as well terminal capital expenditures for the ongoing expansions that we have. Offsetting this was the net cash receipts for repayments of advances from our joint ventures, as you can see. There was a lot of debt activity, funding activity, and Julian has done a tremendous job in keeping the company with a very strong liquidity position. During the fourth quarter, we raised $297 million in new debt, and that was to refinance expiring facilities and as well to fund the capital expenditures that we have ongoing. And I'm tremendously grateful both to Julian, his team, to the rest of the company that's been working hard on making this possible, as well as to all our banks and financiers. After adjusting for FX, we had reduction in cash of $16.1 million, and we ended the quarter with cash equivalents of $144.6 million. If you look at the bottom right of this slide, You see our total liquidity position, which at the end of the fourth quarter was $477 million. That includes revolving credit lines of $332 million, committed lines, that is. And slightly up from last quarter, I mentioned the significant reduction in cash on hand. Last of the fourth quarter of 24, we had $335 million in cash. which of course generated a lot of interest income, and that's why you see sort of half of the interest expense increase that we saw in the last 12 months. Talking about capital expenditures, during the quarter it totaled 138 million, and that was of course led by the SDC acquisition of Sutton's. Also the ongoing terminal expansions and as well progress payments that we have ongoing on the new buildings that we have. And therefore, overall for 25, we spent $511 million on CapEx, slightly below what we had indicated at the previous quarterly earnings release, as some of it has been pushed out to 2026. For this year, we expect to spend $383 million, with the focus being on tanker new buildings, terminal expansions, avenir new buildings, and still sea farmers expansions. Now, expect this to probably change somewhat as the year progresses, as it normally does as we commit to new projects. but this should be a good indication of what we expect to spend. And it's slightly down from last year, but we're also coming out of two years, 24 and 25, where we had significant capital expenditures. And whereas we intend to continue to invest strategically in our businesses, we also need to focus on integrating our added capacity into our operations for maximized long-term benefit, not only for our shareholders, but also for our customers. Moving over to our debt profile, it here reflects the refinance debt that is mentioned in the bullet at the bottom right. So there's about $86 million that we have repaid since the end of the fourth quarter. So our current balance for 2026 then remains at $351 million. As part of this financing, we also, since quarter end, since what I showed you here in the financials, we also added $145 million in additional liquidity, which is available for further debt reductions, progress payments, and other capital expenditures. So we continue having a very strong liquidity position going forward. You see the two orange blocks, those are the two bonds that we have, one maturing in 28 and $150 million, the one that we just did in September maturing in 2030. And if you look at the bottom left of this slide, you can see the increase in growth in the first quarter reflects the consolidation of Hustle Shipping 4 and Avenir, and then again a slight increase in the fourth quarter of 25 reflecting the Sutton's acquisition. And on average, our interest rates have come slightly down from 5.6% in the previous quarter to 5.39% in this quarter, reflecting general interest movements as well as tightening of margins that we have achieved on new financing. The continued steady performance of the company supports our covenants and covenant compliance. The increase in debt, and therefore net debt to tangible net worth, as well as a net debt to EBITDA, seen in the first quarter was really, in the fourth quarter was really due to the hustle shipping, sorry, in the first quarter was due to the hustle shipping for acquisition and Avenir. And in the fourth quarter, you can see that same impact from the Suttons acquisition. Debt to tangible net worth is now at 1.04. That's well below our covenant limit, which is 2.25, so we have plenty of headroom. Slightly up from the prior quarter, where we were at 1.01. With the lower EBITDA that we have seen in this last quarter compared to previous quarters, the EBITDA fell slightly to 788 million. And with that, we have seen the EBITDA to interest expense go slightly up to 5.6. And the net debt to EBITDA increased from 294 to 312 million. No, 3.12, sorry, as you can see at the bottom left graph here. So overall, we're in very comfortable position relative to our covenants, a good liquidity position, a good balance sheet position. So the company is well prepared for what lies ahead. We gave today guidance of $600 million to $750 million and wanted to talk a little bit more about what that entails. So why are we doing this? Firstly, we want to offer insight into our outlook for the year, what we see ahead. We believe it is aligned to the nature of our businesses. and our business model to promote as longer term view of the company, not a short term quarter to quarter, but really give you the longer term view that we work towards. We also want to facilitate fair pricing of the company as a diverse logistics business rather than as a shipping company. So taking into account everything that we know today, what we believe will happen over the next 12 months, we expect EBITDA for the full year 2026 to be within the range of $600 to $750 million. Now, this guidance is underpinned by a number of key assumptions, as you can see some of them here on the slide, relating both to global macroeconomic picture generally, and specific factors affecting the liquid logistics market. In particular, that there are no substantial geopolitical changes versus what we see today, so we're expecting this to continue. More specifically, the guidance is before fair value of the biological assets, before any gains or losses on sales of assets and other one-time non-cash items. And it also excludes any 2026 EBITDA contribution from our near LNG. We've taken that out because of the announcement that we made earlier in the week and the consequential deconsolidation that that will have. So I just want to make sure that everyone understands the basis for our guidance. It does include, however, the potential sentence integration costs that will be incurred during 26. As such, the guidance that we have provided is subject to some uncertainty beyond our control due to the current operating environment that we're in. And with that, I would like to hand it over to Udo, and he will cover the segment highlights as well as the market outlook. Many thanks.