Stolt-Nielsen Limited

Niels Stolt-Nielsen - CEO Jan Chr. Engelhardtsen - CFO

[Abrupt Start] …2017 and Full Year Results Presentation and Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Mr. Niels Stolt-Nielsen, CEO.

Please go ahead, sir.

Good afternoon, good morning. Thank you for joining us here as well for the fourth quarter 2017 results presentation.

I will be referring to a slide presentation which you can find on our website. Together with me is Jan Christian Engelhardtsen, our Chief Financial Officer.

If we go to Page 4, the normal agenda where I will go through the highlights for the quarter, go to each of the businesses and Jan will take you to the financial and at the end we will open up for question and answers. On Page 5 highlights.

I guess the big surprise is off course is the decline in the performance or so tankers reported operating profit $20.4 down from 34.4 reflecting impact of lower volumes and fright rates and also the negative impact of hurricane Harvey and it was estimated to be $7 million. Now going into more details.

The terminals operating profit 5.4 down from '16 in the third quarter, we did impairments of assets in the season of 8.4. Stolt Tank Containers, positive development.

Operating profit was up reported 17 million and that’s up from 14.8 and that was driven by affirming markets. Increased emerge revenue and improved margins on our shipments.

So, from operating profit fair value adjustment of inventories was 0.1 compared to 0.4 positive $4.8 million impairment positive very valuation impact. There was some negative 2.9 in the prior quarter.

Corporate and other and operating loss of 9.4 compared an operating loss of 6.7 in the prior quarter, reflecting a 6.9 million impairment of assets of business assets and a gain of 7.2 million rated that the changes that we did in the U.S. retire healthcare benefit plan.

So that gives us a quarterly result of 1.1 million just about breakeven and a full year result of $50.3 million. So, if we then go through the various analysis of net third quarter 2017 to compared to fourth quarter 2017.

We had a $18.5 million net profit in the previous quarter, 7 million lower operating profit from tankers, $7 million impact from Harvey, 2.2 million lower from terminals operating profit, very much also driven by the impact of Harvey. Higher tax impairment of 2.2, higher see from operating profit of to the fair value adjustment of 7.4 again the 4.5 million benefits from the retirement change in the medical plant and then one-time impairment of our term loan in New Zealand and also write down of the assets in Stolt Bitumen giving us 1.1 million.

On Page 7, I just want to talk a little more about Harvey because we underestimated the impact from Harvey, and I just want to remind you that the Houston ship channel was closed on all activities on August 25th, and then opened again until -- on the 25th of August -- and didn't open again until the 1st of September so the whole ship channel in Houston was closed down. Stolhaven Houston was one of the first terminals to become 100% operational on September 1st, other terminals resumed operations gradually depending on the extent of damage and flooding and then of course many of our customers terminals weren't operational, so we weren't then able to call, and had to wait.

Stolt Tankers at that time, we had 17 ships in the region when the hurricane hit and made landfall. As a consequence, the port closure ships -- the ports -- the ships that were in port had to go out to sea following the reopening of the ship channel, the ships suffered severe delays due to congestion and unavailability of cargoes.

So, they didn't want the ships to be in port when the hurricane hit, so we had the sail outs, and then when we came back of course took time before the terminals opened up. And a number of customers declared Force Majeure due to the flooding and 54,000 tons that were booked were cancelled or delayed requiring replacement to be found in the spot market.

So, if we then move onto Stolt Tankers, the deep-sea revenue for the quarter decreased by 5.4 million -- sorry 5.4%, reflecting a decrease in average COA rates. Regional fleets revenue also declined by 6.7% during the quarter.

Our two regional fleets, the market didn't decline but we had less operating days because we sold the ship and [ships] into Caribbean service were impacted by Harvey. Total volume shipped in the quarter decreased 3.1%, COA cargo volume dropped 6.8% while spot volume increased 5.7%, again this is very much driven by Harvey where the nominations that were received were cancelled because of Force Majeure and then we had to replace all of that volume and that's why the spot volume increased by 5.7%.

The COA rate renewals for the quarter were on average down 1.1%, compared with the decrease of 0.4% in the previous quarter. So, the contracts that we renewed during the quarter on average of the ones that we retained on average was renewed at 1.1% decline.

So, if you then go to Page 9, the Tankers third quarter to fourth quarter operating profit variance, and you see that we had an operating profit of 34.4 in the third quarter, lower trading results of $12 million, estimated impact of 7 million from Harvey, we had slightly higher bunker costs, but the bunker surcharge improvements was 2.5, so actually the surcharge improvement is that’s actually that we gave back less to our customers, because of their higher bunker price and the bunker hedge variants because of the paper hedge that we have in place an improvement of 3.6 compared to previous quarter, slightly higher shipping expenses and slightly higher equity income from the joint venture bringing us to 20.4. If you then go to page 10, bunker costs net of bunker surcharge but excluding the paper hedges decreased by $1.4 million, so actually the bunker prices went up but because we have to give back and less to the customer under the bunker clause, actually our total bunker cost decreased by 1.4.

The average price for IFO consumed increased to $327 per ton from $307 in the third quarter. The average price of the bunkers purchased increase to $346 from $306 in the third quarter and the COA bunkers surcharge cost, covered an average 69% of total volume in 2017.

And here you can see also then that we have still paper hedge on the bottom right, but we still had paper hedging in place for 2018 and beyond. Moving then to Page 11.

The order book it now stands at 15 of the feet that we consider competitors or operators, the order book now stands at 15% all which is staying in this deal. And here you can see that there is a significant amount of tonnage into '18 and during of '19 and '20.

But as we stated earlier in previous quarters we believe that 2018 will remain a challenge because of this delivery, the increase. At Stolt, we have now finally taken delivery of all of our ships so our building delivery has now been completed.

Market development, the Hurricane Harvey and resulting Houston Ship Channel closure severely operations we really talked about, this book market actually at the end of December and December which is again in the New Year, started to improve and its carried on into the new year. So that is of course a good sign, however the COA competition continues quite significantly.

Our main competitor Odfjell has taken on as you probably have seen on their 100 ships strategy taken a quiet a bit of new year tonnage which they don’t have contract coverage on, so they are aggressively going after all or many of our COA just to say we have currently then go, so we do expect that there will be continued competitions for these contracts which unfortunately may affect -- yes, the renewals going forward, and question that, we've said hopefully by the second half of 2018 that there'll be signs of recovering but I am afraid that '18 will be a challenging year and I am hoping that '19, the newbuilding have been -- most of the newbuilding have been delivered and the market has absorbed that all of the existing tonnage. On the positive side 80% of the COAs volume that we'll carry in 2018 has been renewed.

And if you look through the various presentations of the last previous quarters we've shown you basically on average how the COA contract renewal have been. So, we've secured a lot of the COA business but however there's continued -- continuously every quarter; there are contracts coming up, and, yes, we expect significant competition in that renewal but we will of course defend the complex.

The MR market was up at the yearend but has retreated again to the low 10,000 and of course that also has a slight negative impact in our segment. So, higher fuel prices in excess shipped newbuilding supply will limit gain for improving stock markets.

So, again when you see that even though the market -- the stock market improved towards the end of the year and beginning of this year, I believe there's going to be limited kind of improvement because of this supply of new ships coming in. Then moving onto Page 13, terminals, revenue remained unchanged for the last quarter, global utilization went -- that of, our wholly owned terminals went from 85.6 in previous up to 87.6 so we improved our wholly owned utilization.

If you look at the total utilization including the joint venture terminal remained basically unchanged at 91.4%. And again, we did an impairment of the asset in New Zealand of 8.4 I believe we're now taking the impairment that are necessary there.

So, if we then go to Page 14 and compare the operating profit between the two quarters 16 million last quarter, lower operating income from own terminals, primarily driven by Harvey, and that's through as a result of ships volume not being able to close the terminal during the closure of the ship channel. We had also lower equity pickup from the joint venture, not reflecting the performance but we had a one-off in the previous quarter which we didn't have in this quarter from our joint venture in Antwerp.

And again, the write down of New Zealand bringing it on to 5.4. Stolt -- on Page 15, Stolthaven terminal market update and key initiatives, Harvey didn’t -- which is a -- very proud to say that the terminal didn't sustain any material damage, all people were safe and no contamination or no pollution as a result of this unbelievable amount of rainfall that came in such a short period of time.

The Houston market remains I would say strong, U.S. Gulf Market remained strong both in Houston and New Orleans, we see optimism in the market, we see lot of enquires we're positive about the U.S.

goal terminal market. Singapore markets remains challenging.

I would say small kinds of improvement there are more enquiries coming out way but we're not at the utilization we want to be. The Korean market is stable, Europe remains stable for chemicals but we for CPP.

We continue to pursue the development of long-term contracts with potential pipeline, connected industrial customers. We focus on ship to shore interface these generate synergies between our ships and our terminals and through the construction of new ship dock in Houston, which we announced earlier, which is expected to be completed in the first quarter of 2019.

And not only will that give opportunities to develop the east property but of course when we have adjusted capacity means less waiting times for our ships. Moving on to tank containers, once again a star performer.

As you may remember the market in '16 and '16 declined, the margins increased competition, but we've seen a significant nice pick up again, lot of activity. There is still a lot of new operators, new competitors but the amount of product being moved in tank containers continues to grow.

So, we've seen that we have been able to get margins improvement, utilization improvement and as result we've seen improved earnings from the tank container business. And I think we will continue to do so, going forward.

Page 17 on the operating profit variance, 14.8 million in the previous quarter, 3.3 of additional demurrage revenue, higher A&G expenses and all those bring to 17 million. On Page 18, strong market demand in most regions focused on increasing both utilization and terms for tank, so at the top of the market utilization we're approaching 80% I don’t think it's possible to get I think 75% is kind of a realistic utilization of tank container and we are 73 now.

So, we’re seeing nice improvement in our utilization and then of course, it's not only the market but it's also the way you operate a tank container that you have the systems and you have the pricing mechanisms to make certain that you send the tank containers in the right direction. You have depots in key locations so you can turn them around quickly as results you’re able to both get the utilization for tank up.

Margins improved despite strong competition, controlling operating expense off course and we continue to focus on developing our systems and implementation of global platforms to increase efficiency of scale while reducing overhead. So, becoming more productive.

Digitalization they call it, and it’s the reason we're really focusing and have always focused on but now more than ever knowing that the competition is there that you need to be able to do more with that. We opened two new depots in 2017, Laem Chabang in Thailand and Vado in Italy.

And we've two depots on the construction one in Saudi and one in the United -- Emirates aimed at all improving turnaround times. Stolt Sea Farm volume of turbot sold increased to 21%, and that is mainly reflecting the additional consignment sales that we're doing for one of the other big farmers.

The prices increased during the quarter 6.7%, volume of sole sold increased by 3% while prices decreased just around 1%, caviar volume stayed flat against prior quarter and prices increased 4%. Quickly going through the -- on Page 13, the variant analysis, negative 2.5, slightly lower turbot prices, lower -- sorry, lower turbot gross profit and lower sole gross profit, and lower caviar gross profit is all offset by the fair value revaluation of the turbot and also of the caviar inventory bringing it up to 4.9 for the quarter.

That brings us to the financial presentation and then we'll come back for questions. Thank you.

Thank you very much Niels and good afternoon and good morning to those of you in United States on the line. In this earnings release presentation which is my number 100th presentation that I have done I will go through and provide you with some more background information to some of the status we have presented today and also give you some guidance which I also done in the past to somehow the P&L line items.

Before we start I wanted to just say that we have today filed with the Oslo Stock Exchange our interim financial statements, again they cover the fourth and also the full year 2017, and as before the press release the interim and this presentation you'll find on our website. Now going through Page 22, if we look at the net profit and this is before what we call the one-offs, you can see it's down from 55.2 million down to 47 million in the fourth quarter and again while we have [gotten] lot of benefits in both of these two quarters from the bunker hedges and that's because the increase in bunker costs, needless to say as Niels has pointed out the underlying tanker market has continued to be very challenging.

And of course, impacting in a significant way and I think we all have underestimated the impact on Harvey in the quarter in which Niels mentioned was $7 million for Tankers. If you also look at some of the other one-offs we have the impairment on the Stolt -- on our Stolthaven New Zealand terminals, this is before tax, 8.4 million, we had impairment of some bitumen accounts of 1.5 and also as we have impairments on some other bitumen assets, one was the ship and also on terminal in Vietnam, and there was 6.9 million.

Of course, all of this also pension and we made a change in the U.S. medical insurance plan and tighten that up and that is resulting in $7.2 million going through the P&L in the quarter.

So, you can see here it's basically $17.7 million operating profit as reported that we're down for the fourth quarter. Next the interest is up that is reflecting the $175 million bond issue that we closed in September that was done at interest 6.375% and that has caused the interest right to a lot.

So overall here that you can see net profit was just under $1 million reflecting the impact of Harvey, the deterioration in tankers as well as the impairments we’ve taken. Again, if you just look for the full year, you can see that 113 million was the net profit in '16 compares to 50, so this is a significant drop in the profitability and if you want to look at the variants is really half of that variant is coming from the declining earnings in the tanker business and the other half is coming from the increase in interest which is direct result of the acquisition of tankers.

That we get at the end, very end last few days in 2016. But again, the EBITDA for the quarter 111 versus 122, so in terms of the cash is on $11 million impact and we’re just under at 468 million for the year is still up from the previous year so there is an increase in the cash flow.

Now if you go to Page 23, balance sheet we tried very hard to watch the balance sheet and of course our liquidity. The debt at the end of the quarter, at the end of the year to 470 million looks high but it's still $50 million down from where it was at the end of the third quarter.

And the debt tangible network, we have a two to one max there with the bank, it had 1.65 to 1 but if you take out the cash and make it net debt to tangible network it’s at 1.5 one which is just about the self-impost limit that we have do it on ourselves and we have told you about that before. EBITDA to interest expense increase [3.16 down 0.3, 65] again ties with the reduction in the EBITDA, we've cash flow 58 unused committed lines of 449 and we have uncommitted lines in place of 65 million, so we're right there at above $0.5 billion in liquidity.

Good news, 77% of the debt is fixed going forward, average interest rate is 485, it did go up a little bit in connection with us doing the bond offering in September and the -- for the first quarter of '18 we expect roughly $34 million to be the interest cost. Next Page 24, the cash flow, you can see here, 62 is the cash from operating activities down from 104, you can see here that the biggest variant here is the change from one quarter to the other in the working capital and that's really only in internal transaction and it ties to what we've mentioned before it's the closing down of our joint venture with Gulf Navigation and that’s closing down -- that transaction where we each partner purchased two ships each and took delivery of those and we've repaid the debt in the JV, and that transaction spanned both quarters, so most of the variants from one quarter to the other quarter is actually directly linked to that transaction.

So, there's not really been underlying, there's no change in any of the cash trends here other than the weakening if you will that we've seen in the Tanker business. Capital expenditures $80 million is the last payment towards the last ship that we're taking ourselves from Hudong, from China, 38,000 deadweight and it also is the second ship of the two that I just mentioned that we are buying from -- when we are closing out the joint venture with GST, that's sole factor.

If we go down look at the financing activities. I mentioned already the bond issue.

We raised 175, this was really as the market was available for us in September, maybe a little bit too early, but anyway the market was there, we went in, did it, and then we used the proceeds to pay down on the revolver so that we now have capacity without really having to go the market again to pay SNI03 which is due in March of this year. So, altogether that means the ending cash here is 58 million and that's down from 86 million in the previous quarter.

And cash flow priorities just to say that again reduced debt, we view CapEx and we're going to do an exercise now where we're actually reviewing very hard the outstanding commitments that we have and we also work on reducing the offering expenses. Then this is slide 25% of the EBITDA, here of course this is -- we take out all the noise that we get is from the fair value adjustments in Sea Farm and also other non-cash one of items that been removed from this calculation but you clearly see here the impact of tankers, which is down $50 million from the previous quarters, terminals obviously pretty much flat.

[Tanker] you can see here the whole nice progression and the improvement that we’ve had all through the year, we just talking about it, if the season has come up and the margins have come up there is very nice sign and I think actually the fourth quarter 2017 has been the one of the better quarter we had in STC for long-time. So, for Stolt-Nielsen 12 million for the quarter and that it down 10 million from the previous quarter as we round off the saving.

Going on to the next slide, which is the A&G admin and general expenses. 52 million, 52.1 million and that is done from 54.1 million in the previous quarter, I think we guided at 54.1 objective of 4.2.

The main difference why we’re down is of course the impact of the changes that we did to the U.S. health care insurance plan but by now you've seen lot of different figures, you heard upfront it was 7.2 but out of the 7.2 million 3.9 million actually went through the A&G line and 3.3 million went through the operating line, so that’s why on the 3.9 actually shows off here us a reduction but the overall, the total amount was 7.2.

When we look at the quarterly guidance here of $57 million which is of course we has the same benefit on the healthcare gain of the same size, of course there will be a benefit going forward but, not that gives proportion and we also expect to have an increase in the property and entity provisions that we do for the quarter. So, 57 million is where we believe we’re going to end up.

Depreciation and amortization, you can see here that 68.6 million versus 66.8, the main this is pretty close but we did make an adjustment to a group of tanks in STC, this was specifically bitumen tanks that we shorten the use for life on those and that had the impact of around $1 million. Now you can see here the guidance is 69 million and of course we don’t expect to do any more impairments but you see that listed here at the bottom of the table.

Share of profits of joint ventures again pretty much in line with last quarter, Tankers little bit better, terminals little bit worse, Tank Containers basically the same, and we expect for next quarter 5 million as guidance. Taxes also not really much to talk about here in terms of what we've recorded in the fourth quarter, and terminals little bit -- the terminals, tank containers, and tankers you can see here little bit down for the quarter but that ties in through the tax impact if you will the reduction in the tax, and that's tied to the impairment that we did on the New Zealand terminals.

Then Sea Farm of course tax up of course because we had a fairly large write off from the fair value adjustment to the inventory. And -- so that basically left us at 3.4 million and for the full year 12.2 million versus 15.7 million the previous year.

I think here, by far the most important thing or takeaway is really the impact of the tax cuts that Donald Trump has introduced, that will become effective in January of this year and for us that will lead to $25 million adjustment to our deferred tax liabilities and that will go straight to the bottom line and the P&L that will be recorded and reported in our first quarter of '18. So, in addition of course going forward there'll be a small impact in terms of -- for our U.S.

operations terminals and also our other operations in the U.S. because the tax rate is coming down.

The other takeaway which also is very important is the capital expenditure program, that we have going forward, this is our commitment that we have made if you will commitments by the Board, by management and the Board, it's not necessarily what we've committed to if you will the contractors and third parties, but this is the CapEx program that we're working on going forward, and you can -- in 2016 you may recall we did the JLT acquisition in November that was $575 million, and that on -- was on top on another almost four -- about $300 million CapEx. So, very heavy in '16.

The '17 was just under 400 million and now in '18 it's 269 million and then you can see it drops off very quickly to 155 etcetera, basically hardly any commitments so that will of course will enable us to reduce the debt very quickly also, as we go forward. Just a couple of comments in the Stolt Tankers, this does not include by the way for Tankers write off, because that's separate, that's just an operating expense, but the 68 million which is if you will, primarily in '18 and '19 reflects the ballast water treatment installation that we need to do to comprise.

Terminals, which has a total of 253 from '18 through '22, the most significant there, the jetty in Houston is going to be extremely important for us for that terminal and also various maintenance capacity improvements in Houston. Also, investments in Santos and, of course another jetty in New Castle, in Australia that we mentioned before.

The Stolt-Nielsen Gas to 65 million there is of course the delivery type of delivery on the two small 7,500 debt rate to LMG carriers. So again, important to here to see the fact that the CapEx program is tempering off.

Debt maturity profile, the blue part this is slide 30. The blue part as I said before, it's just the bank debt, the green payments or facility that will come to maturity and that is primarily the $156 million put in place, in connection with the JLT acquisition and that will be replaced and refinanced later on this year.

Of course, the bond, the top part of the bond, we talked about that’s 0.3 which is in March but we have the money sitting in the overdraft facilities and the 2022 that’s just the repayment if you will of the bond issue that we just add. So back to you on Niels.

Key takeaways on Page 31, net profit 50.3 million for the year. As we saw a little green up the last quarter during some impairments at the end of the year, we continued soft market for tankers as a result of the new buildings and the existing tonnage.

We see strong amount in tanker containers, the fundamentals and terminals are healthy and we also expect to see from the turbot prices will hold up and as we see prices -- readjust prices to hold up or rise. We continue to focus on our debt reduction and cash flow improvement.

So as Jan showed you that will be coming quickly down but until that is happen we will be careful with any further significant investment. Again 25 million gains on this new tax bill that has been passed in the U.S.

We continue to have access to competitor funding and as result we have a sufficient liquidity already secured. That completes our presentation.

So, then we'll open up for questions. I will start with questions here in Oslo.

And then we'll take questions from the [phone]. Yes?

What were you -- like previously, you mentioned like private equity money [indiscernible]. Where are they now...

The question is, if the private -- what are the -- what is in our segment? They coming in, we've not seen any new orders, so that's good, there's no newbuilding orders, so -- and let's hope that continues for a while, I think it's going to take a while for the current order book to be absorbed.

So, it not only that the order book comes down and being delivered but the sloping -- the amount of floating tons job there too much, so the market needs to absorb it, and that will take time. I think that the money that's come in by non-traditional operators, they are defocused so they are waiting, they are looking for consolidation opportunities, and ultimately try to exit through some sort of consolidation, so if anything, I think they're on their way up.

Yes?

You say that you saw decrease in COA cargo volume by [indiscernible]. How much of this would you say is in operations?

No I think that the majority of the reduction of the COA volumes that we saw is driven by Harvey and also slightly less operating base for us but I -- so the volume side of the business, the demand side of the business is healthy and I think there's a bit of optimism because of all things that you know when the U.S. economy is doing well, the global economy is doing well, so there's a bit of optimism, so I think that volume wise it is okay, it is the supply side which is the concern.

And, of course, the main competitor that we have is Odfjell we do expect vicious competition on contract renewal. Any other quick?

Yes, fine.

[Question Inaudible].

In that segment? Well LNG is kind of a new leg that we'd like to develop, and that's why I mentioned -- so the question is what are we doing LNG, and when are we expecting to increase our investment in LNG.

The answer I'll say is okay we have ordered two ships, we've committed to ships, that's $80 million investment, and those two ships will be delivered in the second half of 2019. Our strategy there is really to be an aggregator of demand so that we are -- we are able to utilize these LNG ships better than a supplier can or a consumer can.

So instead of supplier or consumer of LNG takes on a ship from prime chart room, uses to grow of the business only use 30%, I think what we’re trying to do is to connect sea ways or part time charters so that we can offer the people that are developing the LNG business in small scale also then a better logistical cost structure that they can do themselves. And that also includes making investments on land too, so terminals, we can even do containers delivering all the way to the factories if there is not a pipe there.

And the target against small scale remote come in this grounded, not having access to pipe gap and we see lots and lots of enquiries, lot of interest. I think that this is the first, it’s a proof of concept, it’s a lot of work it takes it long time, what we've done from LNG it takes it long-time before people make an FID takes the decision.

So, we're now building up demand for the ship, that’s our main business. Now of course we will also look at the time charter, if somebody comes to us and wants time chart ship, of course yes, we will look at that but that not really the business that we’re in.

We might be lucky with having order at the right time and the shipping fee delivered, frankly you can get a good time charter return but the long-term strategy for us is to actually build up this logistic aggregation of demand build up logistical change for that. Of course, everybody knows about the 2020, where the new self through regulations coming to effect.

And that is quite a bit of expected LNG demand as few for the ships container ships have already announced, some of container owners have already announced ownership, we've seen various so the bulk of market is also of interest. And this is part of it.

So, we could have taken the more aggressive approach as we have more investment capacity but at this time now, it's not because of we don’t believe that this market is going to be [plus]. But it's really looking at start of the year, we want to be disciplined now and get our debt level bond before we make any big jumps.

Of course, the different structures that we think pursue so we also have to be a bit realistic and if you look historically what happens is that the ships come before the gas and both in LPG and LNG you see that owners and speculators have been very aggressive in ordering assets. And when the ship and the because everybody expect that, there is not is going to be there both LNG is going to produce and but it always happens that is too many ships being deliver too early and then you sit around wait runway for the gas.

We also have to be also develop. And as I've mentioned what we will prefer that’s actually build up by portfolios of CEO, so when we have enough of this then we can kind of order more tonnage.

[Question Inaudible]

Yes, so the first one we're looking is in the Mediterranean. And it's a little -- nice little triangular trade there, where there's ferries there, there are cruise ships there, there are power stations there.

The Sardinia is there. So, there's a nice little -- you can't trade those ships long haul, so -- and we're looking at business in Southeast Asia, small regional trade so that's where we're looking.

[Question Inaudible]

We've build up firm offtake commitment, which is not a subject, because we don't want to lift those subjects but until we have -- and we want to build up a -- we're willing to take risk, if we build up COA volume for 50% of the ship, I think okay let's do it, 60% will do, and we'll by 2019 we build that, we have enough -- so what we're doing now is that we're just gradually working on putting this aggregation together.

[Question Inaudible]

Yes. So Sardinia, there is -- we have a piece of land with a jetty with the permit to build an LNG tank in place, the tank's not there, but we've the permits on that, we're now building up our customers, so we're getting close now to being able to take the final investment decision to build the tank, and commit one ship to this project and then -- but the charge there is to get people -- this is small scale, this is not large power companies that are [indiscernible] year account.

These are, I would say, mom-and-pop shops or small industries that are making committed, okay, you need to make a 10-15-year commitment, that's -- even though on paper looks fantastic because of the clean air, prices, et cetera. It's -- you need to convince to make that commitment and that takes time but it's coming.

[Question Inaudible].

But we take the time charter equivalent and then we split up them both and say that a company that is only willing to commit to like 5% of the -- he's going to take -- he's not going to -- he's not going to charge full rate for the ship, so he's taking his portion, so it is priced accordingly and that is of course why we're holding back with making the commitment until we have enough volume and enough confidence that we can do, and the pricing on parceling out their capacity, the numbers look very good. I won't talk too much about it because then -- it takes a lot time, you need to be patient and it takes -- anybody -- we are learning about LNG and the people have been in the LNG business for a very long time but one thing that I have learned is that these targets take time -- long time.

Yes?

[Question Inaudible]. Do you expect that to continue and do you expect continues improve margin?

Yes, to both, utilization in Singapore is a chance where we’re seeing 75% bit highly profitable terminal but the Singapore market has been bit over supplied, but the positive trend there is that we are seeing more inquires coming. Antwerp, our terminal which is the joint venture with Oil tanking, there we’ve seen pressure or the cost of the CPP market.

They should know we are supplied. So, there we're expecting utilization to fall.

When it comes to margins yes, I think all the investments that we're now doing to upgrade maintenance but also modernize, optimize that will also give improved margins. But I think it’s a very steady business.

Of course, there will be quarters -- but I think that the trend will, that we will get utilization up and margins also up, these are investments that we’re doing work that we doing and it takes time.

How of your [indiscernible] Q1?

Q1 is a quite busy, its evenly spread throughout the year each quarter, but I would say if you say that I think Q1, I think first of this is busier than second half of the year.

[Question Inaudible].

I think that there will be further decline in the COA renewals.

[Question Inaudible].

So, I would say, we still expect to make money in '18. If you look at it right now at our market we're slightly do better than break even.

[Question Inaudible].

That because I don’t want to -- and now also we're going to do before the board has decided what to do, but we have for x amount of consecutive quarters paid dividend and it's been $1 per share per year. We have on one earlier occasion in the last 15 years, 2001, 2012 we did the same thing, and when the market recovered we actually paid up.

So, it is our long term -- family it's actually continue with steady $1 dividend, but when we took on JO, which was a strategic acquisition, we want to take on -- we want to do this once-in-a-lifetime deal. I think it was the right deal.

I think it was the right deal, it was a good deal, it was good for the industry and I think that as a result of what that deal, it also triggered other consolidations. So, other people have actually instead of ordering new ships the other operators had actually started to consult us, so I think the positive thing for the market and of course when you take on that debt and the market, is weak, we want to be conservative and protect our balance sheet, you guys know that if we get higher debt level -- when we refinance our existing venture it become more expensive, so we just want to -- we want to hold back on further investments, we want to cut the dividend by half, and offer a last of the interim dividend and hopefully once the market recovers, once our balance sheet has strengthened we'll continue with the $1 and I think that will happen quite quickly because as soon as the debt level will be coming quickly down now based on our budget that we don't announce of course but based on that we'll see a significant reduction in debt this year, and then we will back to pay our normal dividend I believe.

And hopefully in the future growing the system, that's where we head for. So, we have the liquidity to do it, we have the balance sheet to do it but we just want to be conservative and careful in the way we manage it.

Any other questions in Oslo? Operator is there anybody on the phone that would like to ask any questions.

Okay, so unless there's any other questions here, then I would like to thank you for taking the time to come in listen us, and hopefully I'll see you next quarter. Thank you very much.

That completes this presentation.