Stolt-Nielsen Limited

Thank you. Good afternoon, good morning.

Thank you for joining us for the third quarter earnings presentation here in Oslo. Together with me, as always, Jens Grüner-Hegge, CFO of Stolt-Nielsen.

We will be going through the normal presentation, which is on our website, and the agenda. We will give an update on the Stolt Groenland, then we will go through the third quarter highlights.

I will go through each of the businesses, Jens will take you through the financials, and then we will open it up for questions and answers at the end. On September 28, on Saturday an explosion occurred on the--followed by a fire on the Stolt-Groenland that was berthed in Ulsan, South Korea.

I’m very happy to say that all crew are accounted for and are safe. As far as we know, there has been no external pollution, no cargo has been released into the ocean.

Safety is the top priority in our company and it always has been and will continue to be. We will not be able to pursue or succeed with our strategy unless we can operate safely, and we will do everything possible to continuously operate safely.

We are actively cooperating with the investigations to determine the cause of the accident. At this time, it is unknown what happened.

The ship is fully insured. Stolt-Nielsen highlights - I believe the chemical tanker market has bottomed out, and we are at Stolt Tankers well positioned for the recovery, and we have done all preparations necessary to make a swift and quick decision or go for an IPO once the market conditions are right.

Stolthaven Terminals - with the infrastructure investments made over the recent years, we are positioned to significantly grow the free cash flow without any further capacity expansion. STC keeps delivering solid results despite the challenging market and is well positioned for growth as it maintains its leadership position.

At Stolt Sea Farm, the market outlook for turbot and sole is very positive and the two new farms that we’re building in Spain and Portugal for the sole will further support growth in that segment. We are pursuing an exciting project in Avenir LNG, where we are a 45% shareholder, as the business plan is put into effect in a growing LNG – small-scale LNG market.

The Stolt-Nielsen balance sheet and liquidity is strong. Following the refinancing exercise that we have been through, we have raised over $850 million, allowing us to repay more expensive debt and push out our maturity profile.

All of our businesses will generate free cash flow by the end of 2020, so the debt will be coming down, or it is coming down. Then moving on to Slide No.

6, third quarter 2019 highlights, Stolt Tankers operating profit was $15 million, and that’s up from $12.8 million mainly due to a 1.6% decrease in operating expenses. Stolthaven Terminals operating profit of $19.5 million, slightly down from $19.7 million in the previous quarter.

Utilization was unchanged at around 91%, while the product handle was marginally down. Stolt Tank Containers operating profit was $12.1 million, and that’s down from $12.6 million due to the market softness and price competition.

Shipments decreased approximately 1.2%. In Stolt Sea Farm, the operating profit before the fair value adjustment of inventories was 2.1%, and that’s slightly up from the second quarter.

Stolt-Nielsen Gas, the operating loss of $1.1 million, down from a loss of $1.4 million in the previous quarter, reflecting our share of the development expenses in Avenir. Corporate and Other, an operating loss of $2 million versus $2.1 million in previous quarter.

That gives us a meager $3.7 million profit for the quarter, slightly up or basically the same as previous quarter, far from where we need to be but still it is in the positive side--still positive. Moving now on to Slide 7, which is the net profit variance analysis between the second and the first quarter, we delivered a $3.6 million net profit in the last quarter.

We had $2.1 million higher operating profit in Stolt Tankers, slight $200,000 down Stolt offshore, $500,000 in Stolt Tank Containers, and then after the fair valuation of the biomass and Stolt Sea Farm of negative $1.2 million, and lower SNG operating loss of $0.3 million positive, that’s from the operating profit divisions. Then, we had financing expenses of $1.9 million higher than previous quarter, and $1.4 million lower tax, bringing it to net profit of $3.7 million for the quarter.

Then moving on to Page 8, Stolt Tankers highlights, the third quarter revenue was marginally down compared to the second quarter. The deep sea revenue increased 2.2% and the regional fleet decreased by 8.5%.

The decrease in the regional is not driven by--is more driven by positioning of ships that were going for drydock. Owning expenses decreased 3.9% compared to the second quarter, driven mainly by cost efficiencies programs that we’re working on.

The freight rates COA renewals in the quarter were down 1.5% compared to a decrease of 2.5% in the previous quarter; however, the majority of the contracts that we renewed in the third quarter was with an increase, so in reality only two of the contracts, they were big contracts and they are well priced, there they got a reduction but all other contracts that we renewed were with an increase, so we lost some contracts and we won some contracts, but overall the majority of the contracts that we renewed in the third quarter were up. Moving on then to Page 9, tanker market has bottomed out, the revenue slightly up, gross profit slightly up, not much to say here.

Then moving on to Page 10, which is the variance analysis in operating profit between first and second quarter--second and third quarter, so slightly lower operating revenue but better operating expenses, so lower operating expenses of $1.3 million, slightly higher depreciation, higher income from our joint venture, A&G expenses, etc. bringing us from $19.7 million to $19.5 million.

The bunker cost hedges, the average price for IFO consumed decreased to $407 per ton in the third quarter, and that’s down from $417 per ton in the second quarter. Year to date COA bunker clause covers 65% of our total volume, so the bunker hedges that we have through our bunker clauses cover 64% of total volume.

The $1.3 million loss on the third quarter bunker hedge compared to the second quarter loss of $0.7 million reflects the lower price and increasingly negative forward curve for the HFO, the heavy fuel oil. IMO 2020, effective as you know on January 1, 2020, all ships must consume low sulfur fuel, 0.5% down from 3.5%.

Stolt Tankers’ plan is a mix of ships with scrubbers and to buy marine gas oil of 0.1% or new fuels of 0.5% when it becomes available. We have a detailed changeover plan for 104 ships, including a tank-by-tank inventory of steps.

Transition time is probably six weeks in service with cleaning plan, target changeover date to ensure full consumption of high sulfur fuel, so of course we’d like to use up the high--it’s quite complex planning to make certain that you consume all of the heavy fuel oil that you have on board before the end of 2020, but at the same time that you have only the right fuel on board when 2020 occurs. Good progress is being made in passing cost increments to our customers, so of the contracts that have been renewed into 2020, 50% of them have a full pass-through of cost.

The remaining are to be renewed for the rest of the year. In other words, we have full success in passing on the increased bunker costs to our customers in the COAs.

There are still some that we renewed earlier in the year where we decided that we were going to meet up in October to agree upon a bunker clause, and that is in progress; but whatever we have renewed into and if we don’t come to an agreement, we can move out of that contract, so both parties can walk away. But whatever we have committed to into 2020 has a full pass-through.

Page 13, this is the Stolt Tankers joint services sailed-in time charter index and sensitivity, and here you can see--if you put on your glasses, you can see that there is a small uptick. Let’s hope that that is the beginning of the turnaround, and I actually believe it is.

I don’t think it’s going to--the question is, of course, how fast it will be going, but I don’t think that we will see further deterioration. Here, you can also see a 5% increase in time charter index, gives a 5.3% impact on net profit.

On Page 14, chemical tanker fleet and order book for the third quarter of 2019, unfortunately the order book went from 7.2 to 8.1, and there was a Japanese tonnage provider that ordered some Japanese newbuild, 33,000 dead weight, so the order book stands at 8.1, up from 7.2. Supply growth will ease to an estimated 2% per annum in 2020, its lowest level since 2014 and less in 2021 as the order book continues to shrink.

I must say that with this order book and the slowing of new tonnage coming into our segment, and as you can see that the bottom has--you know, from the contract negotiations and now from our results, you can see that I sincerely believe that we have reached the bottom. Now, how quick this market will turn around is--how quickly we will see a strong market is difficult to say with so much uncertainty going on with the trade war and the impacts that trade, I would say it’s more a political recession that is looming rather than a fundamental.

What we’re seeing, IMF is predicting that the updated estimate for 2019 growth is lower from 3.2 a year ago down to 2.9, and in 2021 2.7, 2.8 respectively, so still a global GDP and as long as there’s a global GDP, and as you know the slowing down and supply of new ships coming into the market, I think we will continue to see a strengthening of our segment. For the chemical market forecast, we predict a wider range of outcomes than in recent years.

Stolt Tankers see a 2% to 4% demand growth for 2020 as a reasonable assumption, so as long as there is growth, I think that we will see improvements in our markets. The product tanker operators expect supply and demand balance in 2020 and IMO 2020 regulations starting on January 1.

Here are these slides, I believe they’re from Clarkson, so also their predictions about the growth in trade of the various products that we carry. Moving onto Stolthaven Terminals, Page 16, the operating revenue was flat compared to the second quarter while our expenses decreased by $1.3 million, resulting in a $0.8 million improvement in gross profit.

Equity income from our joint venture increased by 7.7% to $5.8 million due to higher utilization at our joint venture terminal in Antwerp. Utilization for the wholly owned terminals remained at 91% while the total product handled decreased 0.8% compared to the second quarter.

Non-strategic Stolthaven terminal in Altona, Australia was sold at the end of July for AUS $10 million. Here you can see steady, as we like it, and it’s steady moving in the right direction, both the revenue, the gross operating profits, and also the operating profit.

Quickly going through the variance analysis and the operating profit between the third and fourth quarter on Page 18, slightly lower operating revenue of $0.2 million. $1.3 million of lower operating expense, slightly higher depreciation, slightly higher income from our joint venture of $400,000, lower A&G expense of $700,000 and others of $0.6 million, bringing us $19.5 million.

But more importantly on Page 19, the team at Stolthaven has really delivered a turnaround, as we have talked about for quite a while. The compound annual growth rate of EBITDA since 2015 has been 11%.

We estimate that--these are the wholly owned, there $111 million at the end of the year. If we combine it with the joint venture, we will be at $130 million.

Without doing anything further, without spending any more additional money, based on the capacity that we have and based on the contracts that we currently have and also that are in the pipeline, we estimate that the EBITDA from this business in 2023 should be $160 million. That is $130 million from the wholly owned and around $30 million from the joint ventures, and the joint venture is not EBITDA, that’s equity income.

The market for Stolthaven, the U.S. market is slightly weaker, reflecting the impact on the ongoing U.S.-China disputes and a general slowdown in the economy.

Europe, demand remains stable for chemicals. The CPP market continues to see storage demand for IMO bunkers and jet fuel, although overall market remains weak with rates reflecting the situation.

The Asian market, the Chinese market is generally weak; however, our terminal in Lingang, which was the location where we had the explosion, I’m pleased to say that the utilization there has now reached 75%, which is a great improvement. Also, because of the ongoing slowdown in the economy that we also see, so both the U.S.-China trade dispute and the slowdown in the Chinese economy, we are seeing a general slowdown in the area.

The Korean market remains stable for chemicals. Also, the Brazil market remains generally stable for petroleum and chemicals.

Then moving on Stolt Tank Containers, STC’s operating revenue was unchanged from the second quarter as a 3.9% decrease in transportation revenue was mostly offset by increase in demurrage and other revenues. The third quarter showed a 1.2% decrease in the shipments due to the increase competition in some of the regions, the ongoing trade war between the U.S.

and China, and general economic softness. During the quarter operating expenses increased by 0.9%, reflecting high repositioning and move-related expenses.

The transportation margin per shipment decreased 14.4% from the second quarter, reflecting tougher competitive environment. Utilization decreased to 67% and that’s down from 69% in the second quarter, reflecting an increase in intraregional trade with shorter shipments, change in trading patterns as we see it.

Still, the revenue was marginally down, our gross profit went from $29.7 million up to $28.3 million, and the operating profit, as I reported earlier, $12.6 million down to $12.1 million. The variance analysis, quickly going through from second to third, from $12.6 million, lower revenue of $0.6 million, lower freight costs of $0.9 million positive, increase in tank rental cost of $0.9 million, higher equity income from our joint venture of $0.5 million and others of $0.4 million, gives us $12.1 million.

The market development - global slowdown of activity in main markets is putting pressure on margins, no doubt. The trade war between the USA and China is not affecting trade volumes overall, but we have seen a change in trade flows.

Just to give you an example, year-on-year we have seen a drop of 65% reduction of shipments from China to U.S., and a 35% reduction from the U.S. to China - huge, and that has caused an imbalance of the fleet not only for us but for everyone.

You have a build-up of tank containers in both China and the United States because of the different trade flows, and that has resulted in huge competition of whatever business is available to reposition those tanks. One of the reasons that there’s been high competition is because overall shipments are pretty much the same, but it’s the build-up of inventory of tanks in these regions that have caused enormous competition to get whatever cargo is available to reposition the tanker.

You also see that we have spent much more on empty repositioning than the last quarter. That’s the negative side.

The positive side is that if the market--if this trade war changes or stops, or they come to some sort of agreement, this can change very quickly. I don’t see an underlying fundamental--I’m not worried about the tank container market, that will quickly pick up again as long as--well, I don’t know how long this dispute is going to last, but basically the demand is there.

Yes, there’s a lot of supply and a lot of competition, but we will be able to make a proper return even with strong competition, but this imbalance is making a disruption and making it very difficult to plan. The shift in trade flows is adding margin pressure in some markets where inventory is built up, as I just said, and ocean freight rates are expected to increase due to the 2020 for the steam liners and also tighter ocean freight market in certain--tighter ocean freight capacity in certain markets.

Sea Farm on Page 25, the turbot revenue increased to 24.3% from 21.5%, driven by a 21.6% increase in volumes sold. We had much better growth than expected, partly offset by lower average price as part of the sales promotion.

The sole revenue decreased $2.7 million from $3 million, driven by 13.8% decrease in volumes sold, while prices increased 3.2%. The fair value adjustment had a negative impact of $2.5 million compared with a negative impact of $1.2 million in the previous quarter.

The new state-of-the-art sole farm under construction in Spain and Portugal using [indiscernible] from recirculation technology, the operation Spain, this is the picture of the one in Spain . It’s almost complete.

You can see that we have solar panels to help us heat the water. It’s total recirculation and will be stocked with fish at the end--towards the end of this year, beginning of next year.

If you look at Stolt Sea Farm, it’s a little disturbance in the whole picture, but Stolt Sea Farm, the turbot business makes around 11--between $10 million and $12 million per year net profit. The sole, development cost of sole is around $4.5 million per year and then you have caviar, which is having an extremely tough time that is affecting, which we are working on solving.

But the two main businesses within Stolt Sea Farm, $10 million to $12 million net profit for sole and the development cost of the sole until we get these new farms up and running is around $4.5 million. Next year will be the same thing because we will stack up and we will build up the biomass in the sole farm, but then from end of 2020 and beginning of 2021, we should see the revenue coming out of that business too.

Stolt-Nielsen Avenir, as you know, we are 45% shareholder in Avenir LNG. Ship’s on order.

We have four 7,500 cubic meter and two 60,000, as well as building a terminal in Sardinia. The first of the ships that are being delivered, hopefully in January of next year, is going on a three-year charter to Petronas.

We are working on the second ship also to be going on time charter or bare boat at similar terms once that ship is delivered, very close to fixing that, so then we have two ships on bare boat. Now, the strategy in Avenir is not to be a per tonnage provider - we don’t want to be a shipping company.

We would like to be a supplier of small scale LNG, so we would like to ship it, we would like to source it, ship it, store it, distribute it and sell it, making margin on the gas But before you can make margin on the gas, you need to build up necessary offtake, and until--which we are doing in Sardinia now, but until you have that offtake, we would like to time charter or bare boat out the ships to finance this whole operation. With those two time charters or these two bare boats, I think actually the company will be making money next year.

The terminal in Sardinia, high gas terminal in construction and progressing well, and the operation is expected to commence in August of next year. We’re negotiating a term sheet with a major industrial offtake customer in Sardinia which will be the largest single customer of 200,000 tons-plus.

That will be good business. Some nice pictures.

Unfortunately we had the fire on the second ship, so not the one that is going to be delivered to Petronas, but the second ship might be delivered, so instead of being delivered in March, they’re looking at somewhere during the summer. That brings us to the financial statements.

I’ll give the word to Jens.

Okay, thank you Niels. Good afternoon to everyone here in Oslo and good morning to those of you listening in from the United States.

As normal, I will provide some details about the financial results for the third quarter 2019 that were released this morning, and I’ll also give some further guidance on certain specific P&L items for the next quarter. I also want to remind you that we have filed the press release for the interim financial statements with the Oslo Stock Exchange and you will also find this on our webpage at www.stolt-nielsen.com under Investor Relations, the investor section there.

Moving onto the net profit, operating profit, if you look at the top line there, operating profit before one-offs for the third quarter was $41 million, that’s slightly down from $41.5 million in the prior quarter. The higher operating profit at Tankers as a result of the lower operating expenses were unfortunately more than offset by the higher negative fair value adjustment that we had at Stolt Sea Farm that Niels mentioned and lower profits at STC.

Stolt Tank Containers’ decrease was a result of 1.2% fewer shipments and lower transportation margin, as mentioned by Niels. During the quarter, we recorded a gain on sale on two assets.

One was the Stolt Kilauea where we had a gain of $1.4 million, and then we also sold the Altona terminal down in Australia with a gain of $0.7 million. The reported operating profit then was $43.1 million, that’s slightly up from the prior quarter.

Net interest expense was $34.7 million, that’s up from the prior quarter. It was mostly due to a partial write-off of some debt issuance cost as we had been refinancing some of our debt and had to expense this.

FX losses, you see there at minus $1.9 million, was consistent with the prior quarter and that’s really reflecting a continued strong dollar, and income taxes were lower and that’s really driven by the poor results that we had at Stolt Sea Farm. Net, we came in a $3.4 million or $3.7 million for those [indiscernible] equity holders of SNL, and if you look at the EBITDA, that’s at $106 million and also this is before fair value of biological assets, insurance reimbursements, and other one-time non-cash items.

Going over to the next slide, the balance sheet, you will see that the debt at quarter end was $2.37 billion, that’s a reduction of $56 million from the prior quarter as we had excess free cash flow from operations after capital expenditures, and I think that’s quite significant to note that even with the market that we’re operating in now, we’re able to produce positive free cash flow. Our liquidity position also improved by some $189 million to about almost $600 million, $599 million to be exact, following the long-term debt issuance that I will touch on later.

The current maturity of debt, if you look at the liability side of the balance sheet, that was at $434 million. Of this, $147 million related to the bond that matured on September 4 just after the quarter end and that has been repaid in cash.

Other debt that we had maturing within the next 12 months includes the April bond worth $160 million, maturing in April 2020, as well as Australasia terminal loan of some $52 million, maturing in the second quarter next year. Moving over to the covenants then, we had debt to tangible net--if you look at the tangible net worth, that held steady at $1.6 billion ,and consequently the debt to tangible to tangible net worth went down, so it was at $1.52 billion last quarter and it’s now down to $1.48 billion.

The EBITDA to interest expense, however, that was down from 3.2 in the prior quarter to 3.05 in this quarter, and that is really reflecting the weakening EBITDA, and I’ll comment a little bit back on how the impact of past EBITDA quarters is impacting the covenants. Likewise if you look down in the bullet points, you will see that we had the net debt to EBITDA of 5.27, and that was up from 5.22 in the prior quarter.

We do expect probably slightly higher interest expense for the next quarter, and that is again driven by the need to write off debt issuance cost as we continue to draw down on the new financing to replace existing financing. Going over to the cash flow, cash flow from operations was a positive $84.9 million, as you see that’s up from $48.5 million in the previous quarter, and $20 million of this improvement is due to the timing of interest payments.

The way the debt is structured, we have a heavy payment of interest in the second and the fourth quarter and also some principal payments, as you will see further down. In addition, we had working capital improvements, and that’s really also because of the timing of accounts payable and voyage expenses and some insurance payments between the quarters.

If you look down to the next section, you see the capital expenditures, and they reflected the terminal investments of $90 million, $9 million on drydocking of ships, $12 million on regulatory tanker capital expenditures, and $6 million on Stolt Sea Farm, so in total we were about $48.6 million in capital expenditures. We also had a positive cash flow impact from the sale of the Stolt Kilauea and the Altona terminal of $11.4 million, as you see there, so net cash used in investing activities was then net $35.2 million negative.

During the third quarter, you see we repaid some $104 million of long and short-term debt, and we also repaid the full outstanding balance on our revolving credit line that was some $340 million, and this was done with the $409 million that we raised in new debt as well as from free cash flow. Looking at the net, the cash flow for the quarter was a positive $9.4 million after all this, and that resulted in a cash balance at the end of the quarter of $143 million, very high compared to our historic averages but a lot of that was because we had the bond maturing in September, four days after the quarter end.

As a reminder, when you look at the EBITDA on this next slide, this is--again, it’s presented excluding any impact of the IFRS fair value of the biological assets, insurance reimbursements, and other one-time non-cash items. You see here the tankers EBITDA was up slightly but really not much different from the last four quarters, and that’s really due to the lower sublet and MNR expenses which offset the lower regional revenue that Niels mentioned earlier.

Terminals EBITDA was up and was consistent with the trend that we have seen for a while now, and STC’s EBITDA decreased due to the continued pressure on margins and the lower shipment volume. As a result, SNL’s EBITDA for the quarter was $106 million, as you will see in the bottom right quadrant, not much changed really from the previous three quarters.

But coming back to the covenants, the two EBITDA covenants, and you will see the impact here more clearly in that in this last calculation, we have had--which quarter was that? The third quarter of ’18 dropping off and the prior quarter, the second quarter of ’18 dropping off, those were two high quarter--high EBITDA quarters, and that has caused the deterioration of those two covenants.

Going forward, you will see next quarter, the quarter that will drop off, will be the $103 million, so we should not--we actually expect to see an improvement going forward on those covenants. Going over to the capital expenditures program, note that this excludes the drydocking of ships, but capital expenditures for the quarter were $40 million, so year-to-date we have spent $100 million.

This was, as I mentioned, split between terminals with $90 million and tankers $12 million for regulatory capex, and in addition we have spent year-to-date through the third quarter, we spent $21 million on drydocking. As of August 31, you also see that the remaining capital expenditures were $117 million.

That’s a lot to spend in one quarter only, so our expectation is really that a good portion of that $117 million will be pushed out to the first quarter of 2020. Looking at what we expect to come over the next subsequent four years, we have about $258 million that’s on schedule to be spent between 2020 and 2023, and just a few key items there, about $23 million is expected for ballast water treatment systems.

We have some $20 million that is for ongoing terminal investments, for tank containers we have some $10 million that’s related to a Houston facility and wastewater treatment there, and then we have the new farms in Spain and Portugal for Stolt Sea Farm. There’s also one item there, the $36 million that is estimated for the remainder of the year that is related to our investment in Avenir, where the three main owners have committed to inject a further $72 million, and $36 million is our share of that.

If we can go to the debt maturity profile on the next slide, as mentioned earlier, there’s been a lot of financing activity that Julian has been very busy with. First of all, we closed during the quarter on the USD $200 million private placement, drew down on that on September 17.

We also concluded a $416 million sale-leaseback with China Merchant Bank Financial Leasing, and we drew down $232 million on that prior to the quarter end. That will continue to--we continue to receive funds from that.

I think $141 million was received now mid-September and then we have a further $43 million that will be drawn down in mid-October. So with these two new financings, that gave us liquidity to repay the $148 million bond that matured on September 4, and we still have available liquidity to pay off the $160 million bond in April 2020 and the $52 million terminal facility in Australasia without having to go back to the bond market.

Even after this, the aim is that we still sit with $200 million in available liquidity, so all in all a very strong debt profile and liquidity position for the company going forward. Addressing the ’21 and ’22 bond maturities, we do have unencumbered assets that should the bond market not be favorable at the time, that we can also lean on those.

Looking at some of the key metrics that I’ve talked about earlier in more graphic form, the board has really a self-imposed limit on the debt to tangible net worth of 1.5 to 1, and you can see that we have adhered to that more or less as we’ve stuck to about 1.5 to 1 and been diligent in keeping that where it is. The aim is to, of course, get that down.

EBITDA to interest expense has been on a declining trend line, as explained earlier, due to the declining EBITDA. Likewise, the net debt to EBITDA will possibly now flatten out and we should hopefully see that starts decreasing.

On the bottom right, you have our free cash flow. In 2018, we had some $300 million in free cash flow before interest but after capital expenditures.

That’s come down a little bit this year because of partly the weaker market but also because of some more capital expenditures. We expect that to end up around maybe $200 million at the end of the year, and that really depends on how much of the capex we’re able to do, but it also gives us liquidity to repay--after interest, to repay on debt, and we would say even if we don’t see a recovery in the market, we are still in a position where we will generate sufficient cash to be able to continue to reduce our debt load in 2020.

Moving over to the A&G, for the quarter we’re at $51.9 million, and that’s down from $52.8 million in the second quarter. Our guidance for the third quarter was $55 million, so we ended up well below that, much due to also the continued weak dollar.

Our guidance for the fourth quarter of this year is a slight increase to $52.7 million, as you see. Moving to depreciation and amortization, for the third quarter this was $64.3 million, slightly up from the $63.8 million that we had in the prior quarter, and that was against the guidance of $65.1 million.

The high depreciation from the prior quarter was really driven by an increase in the terminals depreciation, and that was because additional capacity was brought online. This was a conclusion of the expansion that we did in Santos, Brazil, so hence we had to start depreciating that.

Our guidance for the next--for this quarter, the fourth quarter, is $64.7 million, and that’s because we expect slightly higher depreciation in takers due to the hefty drydocking program that we’ve had and that will be written off until the next drydock. Moving over to share of profit of JVs and tax, our share of profit from JVs was $6.6 million this quarter and that was up from $5.3 million in the previous quarter as really all JV results improved, which is encouraging.

The two deep sea tanker JVs, they improved with higher revenues from the joint service as well as some better--lower ship owning costs and also for our joint venture with NYK. NYK Stolt Tankers, we also saw more operating days .

At Stolthaven, the increase reflects the higher utilization that we saw at our joint venture terminal in Belgium, in Antwerp, Belgium. Our guidance for the next quarter is $7 million STC, and that’s reflecting a bit of optimism in the tanker markets and continued improvements in terminals, and steady going in [indiscernible] and STC.

Tax expense for the quarter was $3.2 million, that’s down from $4.3 million and that really reflects the lower income that we saw in--the decrease was driven by the lower income in Stolt Sea Farm. Just briefly, and this is a repeat of what we said last quarter, but first of all, IFRS 16 does not apply to us yet.

It will not apply to us until the quarter starting December 1 of this year. There is no cash impact from the changeover to IFRS 16.

It will impact our balance sheet by some $189 million on the asset and debt side. EBITDA is estimated, and this will change by the time we actually get there, but it’s estimated to have a positive impact on EBITDA of some $47 million.

The covenants will be impacted slightly, as you see at the bottom right of this slide, but more importantly in all our bank facilities, we have agreement that we can continue with the old covenant measurement until we reach a mutual agreement on the revision of those bank covenants--on the financial covenants. With that, I’d like to hand it back to you, Niels.

The key takeaways, as Jens showed you, $3.4 million net profit for the quarter with EBITDA of $106 million. We started off and we will end by saying that we believe the tanker market has bottomed out and that we are well positioned with our fleet for recovery, and we have prepared ourselves for an IPO.

Stolthaven Terminals is stable and with a promising outlook - again, the free cash flow coming from that business based on the assets that we have should give us $100 million-plus of free cash flow. Stolt Tank Containers is seeing increased competition, a change in trade flow and the slower economic growth causing pressure on the margin, but still delivering solid results.

I am--yes, it’s a challenging market condition now, but I think the fundamentals in that business in the long run are healthy. Stolt Sea Farm continues to be--show underlying improvements or promise in both the turbot and the sole business.

As Jens showed you, he has done a tremendous job in financing our business, which has given us ample cash and competitively priced debt, and we’re well positioned for the next two years. Thank you, Jens.

That completes our presentation, and we will then open up for questions. We’ll start here in Oslo for anyone that has any questions.

Hi. I was wondering about Stolt Groenland.

She’s one of your advanced ships and there isn’t that many of them around. Is that going to create any issues for you operationally that she’s going to be out of service for a while?

No, it’s going to create less supply and probably hopefully higher demand. Let’s see what happens.

No, we will be able to service our contracts with our fleet without the Stolt Groenland without any problems. You remember we used to have 80% COA rate coverage; now, we are at 70%.

We have lost some, but we’re also hopefully opening up more spot space for the recovering market. So, we do have enough tonnage to be able to service the contracts that we are committed for.

She is one of the ones that we call the N-43s - they’re built in Norway, 43,000 deadweight, partly stainless steel but also some coated tanks, because at that time the stainless steel prices were high, so she’s not the most sophisticated but up there. To answer your question, we will be able to handle our sailing schedule and our contract commitments without the ship while she’s out of service.

Secondly in terms of scrubbers, you mentioned that you had a mixed program. How many ships are you going to install them on, and how many are left in terms of installation?

We have usually not stated, but we will say it’s a total of--14, is it? Sorry, 20, but 14 new ones and then six on the new buildings.

We have--I’ll have to come back to you how many are--have been already installed, how many will be installed by the end of ’19, and how much--so I’ll come back to you with the exact timing of the installation of the scrubbers. Out of a fleet, large fleet, 14, that’s it.

Petter Haugen, Kepler Cheuvreux. Just a quick follow-up on the last one.

The 20 vessels, at what sort of relative to your total bunker consumption, how much will be scrubbed and how much will be retained in the compliant fuel?

Jens, will you do the math, please?

That’s a tricky question to answer because it also depends on when the conversion will be concluded, but we don’t have that exact answer now.

In the presentation, Niels, you said that 0.5% wasn’t available as of yet. At what point do you think you will actually start to do sea trials with --

We have started sea trials with the --

Okay.

Sea trials, yes.

Thank you.

If there is no further questions in Oslo, Operator, can you ask if there is anybody on the phone that would like to ask any questions? Operator?

If there’s no further questions in Oslo, that completes our presentation. Thank you for taking the time to come.

Thank you.