Stolt-Nielsen Limited

Good afternoon, and welcome to Stolt-Nielsen's Earnings Call for the Second Quarter of 2025. As always, the earnings release and related materials are available on our website.

We will also be recording this session and playback will be available on the 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 Ng, Vice President of Corporate Development and Strategy.

Joining me today are Udo Lange, CEO; and Jens Gruner-Hegge, CFO. At the end of the presentation, there will be a Q&A session where we will be taking questions online.

[Operator Instructions] Thank you. And over to you, Udo.

Thanks, Alex. Welcome, everyone, and thanks for joining us for our Q2 results today.

The presentation will follow the usual format. I will begin with an overview of the group's results for the second quarter of 2025 and share some key highlights.

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. Firstly, I want to thank our 7,000 people around the world.

Every day, they pursue our collective ambition to be simply the best for our shareholders, customers and people, working through new macroeconomic challenges in their markets with positivity and creativity. There is no doubt that our operating environment continues to be marked by uncertainty and volatility.

But our purpose is to move today's products for tomorrow's possibilities. And we are all laser-focused on the quality, reliability and flexibility, which our customers need in order to navigate global supply chain complexities.

In this challenging environment, the company has delivered a strong performance. With EBITDA of $210 million, $2 million higher than the same period last year.

Tanker markets continue to be impacted by shifting geopolitical factors, while the ongoing uncertainty around tariff has also impacted trade flows, creating challenging conditions for Stolt Tankers. This quarter, Stolt Tankers EBITDA fell 16%.

However, overall EBITDA was flat year-over-year, demonstrating the resilience in our diversified business model. Our liquid logistics solutions across tankers, terminals and tank containers is a cornerstone of our portfolio.

Overall, around 50% of our asset base and 42% of our EBITDA this quarter derives from non- Stolt Tankers business. Utilization continues to trend upwards at Stolthaven Terminals with operating profit achieving a record quarterly level.

STC was somehow impacted by volatility in the tank container market, but remains focused on optimizing margin and volume. Sea Farm have been able to sustain relatively higher pricing on protect biomass positioning them well ahead of the summer peak.

These strong results show that the company is clearly more than a chemical tanker business. We are a liquid logistics solution provider with a diversified portfolio.

Last time we met, I spoke about the potential impact of Section 301 from the USTR, which was contemplating port fees on Chinese- operated and Chinese-built vessels. Through our trade bodies, port relationships and customers, we work to make the case for protecting the chemicals industry in and out of the U.S.

The preliminary outcome announced by the USTR in April allows for an exemption to any port fees for chemical tankers, both on ship type and on deadweight. There's another hearing period underway ending on July 7, but if this ground is held, this would be a favorable outcome for our customers.

As you know, we are aiming to simply the best for our shareholders. We have also communicated at our Capital Market Day that we are not a shipping business, but a logistics business.

And we are now taking the next logical step and are sharpening how we communicate our earnings potential by better aligning our guidance approach with our business model and strategy. To simplify our story for the market, we are introducing EBITDA guidance for the full year 2025, which is expected to be in a range of $740 million to $810 million.

This reflects the scope of our operations and clearly shows that at the core, we are a logistics business. Of course, this range is based on what we know today, assumes no substantial geopolitical changes and is subject to a number of uncertainties in a highly volatile operating environment.

As you know, we have recently completed our share buyback program. Overall, the company purchased a total of 403,000 shares for $8.8 million (sic) [ $8.9 million ], which at the market pricing available was truly an effective use of funds for shareholder distributions.

We continue to seek opportunities to invest in our businesses for future growth. This quarter, we announced an agreed partnership to develop a new terminal in Turkey.

We have a strong balance sheet to fund these investments as well as meet debt service obligations and provide dividends with ample headroom. The final dividend of $1.25 per share was approved by shareholders at the AGM in April and paid in May, taking the full dividend to $2.50 per share.

Let's now turn the page to review our financial highlights. I've already said we have achieved a strong result in what has been a difficult operating environment.

Moving along to the top row. Operating revenue was down nearly 4% or $28 million, predominantly driven by lower spot freight rates in Stolt Tankers.

Despite this, we achieved an EBITDA of $210 million level year-over-year as we are now consolidating HS4 and Avenir. This also drives most of the improvements versus Q1 EBITDA.

Operating profit was down year-over-year by $23 million, partly due to the additional depreciation applicable to the HS4 ships and Avenir. Again, versus Q1 operating profit improved by around $6 million.

Net profit went down year-over-year, driven by the same factors as well as higher interest expenses due to the consolidation of acquisition debt. Free cash flow reflects higher capital expenditures during the quarter as well as an increase in working capital, partly offset by lower advance to affiliates.

Net debt-to- EBITDA has increased to 2.96x as a result of the increase in capital expenditures and the payment of the dividend in May. And over the page, we look at some of the key drivers of performance.

We continue to navigate successfully in volatile markets. Average deep-sea TCE revenue for the quarter was $26,220 per operating day, significantly down versus last year.

This was mainly driven by lower spot rates as customer sentiment continued to be impacted by geopolitical uncertainty. Utilization continues to trend upwards at Stolthaven Terminals, now up 2% on the prior year.

We expect utilization to continue to gradually improve over the coming quarters. And with well-controlled costs, we should see ongoing healthy margin levels.

Gross profit per shipment further improved at STC as weaker volumes have been offset by increased spot rates on certain routes. And finally, volumes at Stolt Sea Farm dipped as inventories were tight coming out of a strong Christmas sales period and strong pricing was maintained through Q2 to protect biomass ahead of the summer.

That's all for me now. Jens, over to you for the financials.

Thank you, Udo. Good afternoon, everyone, and good morning to those of you joining us from the United States.

I will compare the second quarter of 2025 with the second quarter of 2024. And as a reminder, our second quarter begins March 1 and ends May 31 every year.

To reiterate what Udo has talked about, the company's performance is resilient and with the investments in Avenir and Hassel Shipping 4, we were able to maintain a strong EBITDA of $210 million for the quarter. Now let's dive into the numbers for this quarter.

As mentioned, our overall performance remains resilient. The dropdown in revenue was driven by the lower tanker revenue, reflecting lower spot rates, and this also caused a reduction in operating expenses with time charter hire down in line with the lower tanker pool results.

Revenue in terminals was up by $2.7 million due to higher storage space and improved utilization, while STC's revenue was marginally down due to a decrease in shipments, albeit at higher margins compared to the same quarter last year and helped by an increase in demerger revenue. As for Sea Farm, we saw a slight decrease due to lower sales volume but at higher prices as focus was on building up the biomass ahead of the normally seasonally stronger summer season.

Depreciation was up by $13 million, mostly driven by the consolidation of Avenir and Hassel Shipping 4 as well as by the capitalization of additional time charter ships as per IFRS 16. Equity income from joint ventures was down compared to the same quarter last year, reflecting the consolidation of Avenir and Hassel Shipping 4 as well as lower earnings in tanker JVs.

A&G expense was down compared to last year, mostly reflecting reduced accruals in line with the lower profits. Operating profit for the quarter was $113.7 million, down from $136.8 million, driven by the weaker tanker results with the other businesses being mostly flat.

And net interest expense was up $9.3 million due to an increase in debt following the consolidation from the 2 acquisitions as well as lower interest income due to an average less cash on hand held through the quarter. FX gain on hedges were significantly up due to the weakening of the U.S.

dollar. And income tax was up, reflecting the improved earnings in Stolthaven Terminals.

And consequently, net profit for the quarter ended up at $75.2 million with EBITDA of $210 million. Net profit is down from the same period last year, but in line with the prior quarter net profit -- prior quarter net profit when excluding the one-off gains.

So let's move to the next slide and have a look at the cash flow. The significant increase in cash generated from operations from the same quarter last year was due to prior year, including the settlement payment for the Flaminia claim.

Excluding that, cash from operations compared to last year's quarter was down $69 million, reflecting the weaker operating results as well as an increase in working capital. The swing in interest paid is due to the change in the composition of our debt, which includes the impact of the $450 million U.S.

private placement concluded last summer, offset by the repayment of $103 million in sale leaseback debt. Taxes paid increased substantially, reflecting improved results in Stolthaven Terminals and Stolt Sea Farm as well as the timing of tax settlements.

The net cash generated from operations ended at $100 million. Capital expenditures were up substantially compared to last year, and I will touch on that a bit further on the next slide.

This was partially offset by an increase in advances to joint ventures related to new building progress payments. We had some debt movements during the quarter as we raised $100 million in new debt and repaid $48 million in regular principal payments, resulting in an increase of just over $50 million in debt.

And during the quarter, we paid a final dividend for 2024 of $1.25 per share, resulting in a full year dividend of $2.50 per share and a dividend yield of about 10% basis yesterday's closing price. During the second quarter, we also completed our $8.8 million share buyback program.

And overall, net cash flow was negative $26 million for the quarter, resulting in cash and cash equivalents at the end of the quarter of $130 million, up from last year's $150 million, but down from last quarter's $156 million. At the bottom right, you see our total liquidity position, which at the end of the second quarter was $445 million, in line with last quarter and the same quarter last year and putting us in a very good liquidity position as we go forward.

Moving over to the capital expenditures. During the quarter, they totaled $71 million, excluding dry dock payments, a significant reduction from the previous quarter.

Remaining for the year, we have approximately $166 million with $46 million for tankers, reflecting progress payments on newbuildings, $64 million for Stolthaven Terminals, reflecting additional organic growth and maintenance CapEx, $11 million in STC for the purchase of additional tanks and expansion of depot capacity and $24 million in growth CapEx at Stolt Sea Farm and finally, progress payments on Avenir's newbuilding program reflected under SNL corporate and other. Overall, for 2025, we now expect to spend around $460 million in CapEx, and that's down from what we estimated at the previous earnings release of about $500 million.

Moving to the debt maturity profile. This now includes the consolidated debt for Hassel Shipping 4 and Avenir, adding in a total of $324 million to what we had prior to the acquisition.

This increased the balloon maturities in '27 and '28, as you will see with those 2 peak pillars. In addition, we have $110 million maturity in '27 under the RCF facility drawn during the first quarter to help with the acquisitions.

Work is now underway to refinance maturing debt and reduce the maturity peak that we have in '27 and '28, so as to extend our maturities. Looking at the bottom left graph, the increase in gross debt in the first quarter reflects the consolidation of the Avenir and Hassel Shipping 4 debt, while the right -- while the slight further increase in the second quarter interest is due to the additional capital expenditures.

During the second quarter, we concluded a $90 million increase in the long-standing debt facility with Danish Ship Finance, which we have had in place now for over 30 years. The top-up financing allowed us to extend the maturity profile further whilst the proceeds were used to partly repay our main revolving credit facility.

The average interest rate remains flat. We don't expect any material swings in the average interest rates over the next quarter as the bulk of our debt is fixed.

Moving to the debt covenants then. You can see at the bottom right, our EBITDA development and with the last quarter at $210 million, that brings our last 12 months EBITDA to $825 million.

On the top left, you can see our debt to tangible net worth. It reflects the increase in debt that we had over the quarter, but also the strong performance that has allowed us to maintain our tangible net worth, but that brought the ratio up to 1.05, slightly above the last quarter.

And the strong EBITDA has allowed us to almost maintain this EBITDA to interest expense, which is slightly down from 6.51 to 6.13. And at the bottom left, you can see our net debt to EBITDA with the increase in debt, increasing the ratio slightly from 2.82 to 2.96.

And at this level, it has now seemingly starting to stabilize. And with that, I would like to hand it over to you, Udo.

Thank you so much, Jens. I'll now take us through the divisional highlights.

Beginning with Stolt Tankers. We have seen a further decline in performance in our Tankers division in this quarter.

The chemical tanker market continues to face uncertainties from trade tariffs and volatility in geopolitics, all of which is impacting customer sentiment. Operating revenue for the quarter was down 10% as we saw some swing into spot bookings and lower spot freight rates.

The average TCE per operating day was down 5% quarter-on- quarter to just over $26,000 per day. Operating days were up 4%.

However, deep sea volume remained level, so utilization dropped 3%. Regional revenue also declined due to lower revenue from the SNAPS pool.

At $70 million, operating profit was significantly down versus Q2 last year. This is primarily due to the impact of the HS 4 acquisition.

Maren and her team are rising to the challenge in these volatile conditions. I'm immensely proud of the tankers team for the effort they are putting in every day to support our customers, and I thank them all for their exceptional efforts.

We now look closer at tanker rate development. The Q2 TCE per operating day was $26,220.

Although a further decline quarter-on- quarter, this remains well above the historical average, as you can see on the chart on the right side. We are not seeing signs of the current volatility and uncertainty abating, but equally, neither are we seeing evidence of swing tonnage impacting our market.

As I mentioned at the start, we are not just the chemical tanker business. We have a number of business lines as part of our diversified portfolio.

Our quarterly TCE forecast can quickly swing in a volatile market and is focused on the near-term outlook. We encourage the market to consider our group performance overall.

And though we have taken the decision to move away from the divisional tanker TCE outlook and focus on group EBITDA guidance for the year, aligned with our diversified liquid logistics business model and strategy. I will cover this in more detail later in the presentation.

Stolthaven Terminal has been relatively protected from the market turmoil. Guy and his team have achieved another record quarter in both revenue and operating profit terms, which is driven by firming storage rates.

I'd like to remind you that Stolthaven Terminals have been focusing on replacing lower-margin contracts to optimize our portfolio, which had impacted utilization to the downside. Following significant effort by the whole team, we are seeing the trend on utilization continue to improve gradually coming in this quarter at 92%.

Volatility in container markets and geopolitics continue to impact the performance of STC, where decline in volumes impacted revenue, although it was partially offset by improving spot rates. The focus is to optimize profitability by balancing volumes and margin improvements.

And finally, we continue to be pleased by Stolt Sea Farm performance. The quarterly comparatives are all red here.

So let me explain. A strong Christmas sales period meant that inventory was tighter, but market demand allowed Jordi and his team to sustain higher sales prices for both turbot and sole while building up biomass levels.

This means that we are heading into the summer sales peak in a strong position. I now want to cover our view of the market and outlook before I wrap up for questions.

Market fundamentals remain supportive despite the current uncertainty. On the demand side, industry expectations for the seaborne chemicals trade continue to be for a modest growth of 1.7% through 2025.

However, we are closely monitoring how GDP levels develop as we see some downside risk based on market indicators and analyst expectations. MR rates seem to be stabilizing at a level that would typically keep them operating in the CPP market, limiting the potential to swing into our market.

Newbuild ordering is now around 18% of the global fleet, and we continue to closely monitor developments on this and the result impact on supply. So we expect muted growth in new build orders in the near term due to high geopolitical uncertainty and high new build prices.

There is still also the opportunity for asset owners to pull back supply in case of a market downturn with around 27% of stainless steel tankers aged 20 years and older in 2027, meaning that a significant percentage of the global fleet could be retired if necessary to manage supply. Looking ahead, as I mentioned earlier, we have decided to raise the guidance we provide to the market as we see this has twofold benefits.

Firstly, we want to offer insight into our outlook for the remainder of the year to promote a longer view of the company rather than focusing on quarterly swings and the seasonality that we all know is inherent in tanker markets. Second, to enhance market understanding of the true shareholder value in as in Stolt-Nielsen, facilitating the fair pricing of the company as a diversified logistics business rather than as a shipping company.

Taking into account everything we know today, we expect EBITDA for the full year 2025 to be in the region of $740 million to $810 million. This guidance is underpinned by a number of key assumptions relating to both the global macroeconomic picture generally and specific factors affecting the liquid logistics market.

And here, in particular, that there are no substantial geopolitical changes in the Middle East and Russia, Ukraine. Our operating environment remains volatile, and so the guidance provided is subject to some uncertainty beyond our control.

To wrap up, I reiterate that while the market environment continues to be challenging, Stolt-Nielsen has delivered another strong quarter with EBITDA of $210 million. The focus remains on delivering long-term sustainable EBITDA.

We continue to make strategic investments to support this. And as you can see the positive impact of our diversified portfolio in the right-hand chart, non- Stolt Tanker business accounted for over 40% of the total EBITDA again this quarter, buffering to an extent, tanker market volatility.

Jens mentioned in his section, but it is worth repeating that our rolling last 12 months EBITDA sits at $825 million, which is level on Q1 and has been sustained at over $800 million for 5 quarters. Our teams globally continue to execute our strategy successfully despite the market headwinds.

We expect tanker markets to remain subject to significant uncertainty for the time being with a knock-on effect on spot rates. Positive signals from the MR market success wind tonnage could -- should be limited.

And the initial announced Section 301 likely exempting our chemical tankers from port fees is a positive. The impact of Stolt Tankers should be balanced by momentum in other areas.

Utilization should continue to gradually improve at Stolthaven Terminals, which is supportive of positive earnings and development. Volatility remains high in the tank container market, but we are seeing strengthening in demand in key geographies for STC, supporting the outlook for spot rates and shipment volumes.

And I really would like to thank Hans and the Stolt Tank Container team for an exceptional performance and creating this wonderful digital and scalable platform to operate in these challenging markets successfully. And Stolt Sea Farm enters the summer season in a strong position, having protected biomass levels through Q2 at sustained higher prices.

We continue to watch the macro situation carefully, particularly trade policies out of the U.S. and factors potentially impacting global supply chain routes by sea.

During these challenging times, our liquid logistics value position of quality, reliability and flexibility is more important to our customers than ever. It also builds resilience into our business model and positions us well to weather the current operating environment.

Stolt-Nielsen is much more than a chemical tanker business. We are a logistics solution provider.

This is reflected in the drivers of our Q2 results and underpins the rationale for the change we have made to the approach to guidance this time. Thank you for your attention, and I will now pass you back to Alex for Q&A.

Thank you, Udo. [Operator Instructions] Okay.

So our first question is related to you, Udo. Could you elaborate on the decision to introduce the full year guidance at this stage?

Consensus estimates currently appear to be near the low end of guided range. So is the move primarily aimed at improving estimate accuracy and by extension, supporting a more appropriate valuation of the stock?

Let me first, of course, hand you over to our expert and guru when it comes to guidance. And that is, of course, Jens, and then Alex and me probably can add some comments there.

Jens, over to you.

Thank you, and thank you for the question. As Udo explained in his slide on the guidance, we really see that the whole company together is contributing to our net profit to our EBITDA.

And therefore, the right thing for us to do is to present guidance on the whole company -- on the performance of the whole company, not just one segment. So this is really in support of your ability to actually do better estimates of -- in your analysis.

Also, in this forecast, we are looking longer term. We're not just looking on a quarter-by-quarter basis, which becomes very short term, but we're actually giving you a view towards the end of the year.

And this should help you get a better feel for the full year impact. As those of you who have followed us for many years knows that there is some seasonality in our earnings.

The summer months tend to be slightly softer for some of the logistics businesses, stronger for Stolt Sea Farm. And then in the fall months, you tend to have a pickup in activity level, et cetera.

And taking that noise out of it gives you a better view of our longer-term performance potential. I hope that helps.

Alex, do you have anything you want to add to that?

I think it's been well covered from that end. I have a connecting question.

Let me just add one thing there, Alex. So I think we say we want to be simply the best for our people, for our customers and for our shareholders.

And what we really -- as part of the shareholder side, we are interested to really deliver total shareholder return to all of you. But what is critical is that all of you really understand the earnings potential, not of a particular segment, but of the whole group.

And that's why through this approach, we simplify the story of Stolt-Nielsen for you. And some of you asked me, well, where are the proof points.

Well, the proof point, of course, is in the numbers. And our EBITDA guidance clearly shows that we are a logistics business.

Thank you very much, Udo. Next question.

A question is relating to Stolt Tankers. Net revenues despite [indiscernible] revenue being down were the step-up in net revenues quarter-on-quarter despite the [indiscernible] being down 5%.

I believe this is partly due to HS4 acquisition. Would it be possible to provide any insight on how much of the gross margin that arrived from HS4 in Q2?

Or was it a onetime effect explaining the quarter-on-quarter development? And maybe that's one for yourself, Jens.

Okay. Thank you very much, Alex.

So I mentioned previously that the EBITDA contribution from the Avenir and Hassel Shipping 4 is in the region of $50 million per year. The EBITDA contribution that is.

We have previously recorded an equity income for Hassel Shipping 4, which has been last year, I think it was in the region of just in excess of $20 million. So the net contribution you're looking at on an annual basis is about $30 million benefit on the margin for tankers from the addition of Hassel Shipping 4.

And of course, with the caveat, it depends on the market level that we're at. It depends on whether there are dry dockings in the Hassel Shipping 4 fleet, et cetera, that would take out earning days.

But if you use that as a rule of thumb, that should be helpful in your estimations.

Thank you very much, Jens. Next question is relating to newbuildings and the newbuild program.

Please, can you give an update on the newbuilding program, including the joint venture ships? Those -- and the amount of committed CapEx -- as the CapEx topic, maybe I can start with you, Jens, and then I'll pass it over to you, Udo for any comments.

Sorry, Jens, I think you're on mute.

Sorry. Thank you, Alex.

If you look at the newbuilding program that we have, that's for ships to be delivered end '26 into 2027. So they won't -- keeping in mind, our fiscal year ends November 30, '26, it won't really hit the '26 CapEx.

The newbuildings without necessarily having gone into great details on the payment profile, it is backloaded. So most of the CapEx related to the newbuildings will come later.

And that also goes for the second order that we have at Nantong, if that answers your question. Udo, do you want to give some more color on the newbuilding program?

Yes, we are super excited, of course, about our newbuilding program. And as you know, to make this successful, you need to strongly collaborate with the yards, in this case, Wuhu and Nantong.

And we have a significant team on ground. And they, of course, work very, very closely together with the yards.

And I'm very excited about what we are seeing there.

Thank you very much. Just a reminder to everybody, we're coming to the end of the last couple of questions.

[Operator Instructions] Question related to TCE rates. At what level do you see TCE per day rate stabilizing into the second half of the year?

Do you want me to comment on that? Yes.

So I think we sort of emphasized it already, but we will, going forward, focus on the group-wide guidance because we think that is more relevant for the group rather than giving divisional guidance. So we prefer not to give you any color on what we think is going to happen to the TCE rates on a stand-alone basis.

There's a lot of indicators out in the market and public information about the directions of the market that you can make use of, whereas there's very little for you to hang your hat on when it comes to the terminals business, the Tank Container business and Sea Farm business. And that is why we think it's more important for us to focus on the group-wide guidance.

Maybe you want to add anything, Alex or Udo.

Yes. I think from my side, again, we are a logistics business.

And I can, of course, understand this is a change. We're like, we are used to getting TCE guidance and that's what we expect today on the call.

But just listen to an earnings call of UPS or DHL or FedEx or Kuehne + Nagel or DSV, and they will not give you any guidance on what is going to be the pricing for the small package shipment or what is going to be the future pricing or GP for airfreight or for ocean freight. They will provide guidance for the overall performance of the logistics company.

And that's what we are doing here, which we believe is by far more helpful so that you understand really the true performance of us as a logistics company.

Last question that we have is relating to tankers and the mix between spot rates and COA. Given tanker spot rates are down whilst COA rates are up, is the year-on-year change in volumes caused by customers changing from contract to spot?

Maybe Udo, a comment for you.

This is a little bit too simplified. This has also to do with what type of products we are actually shipping.

And I think we saw, for example, a slower volume on the asset side. So that has an impact.

So it's a little bit more complex. More relevant for us, however, is that we are not working towards a particular COA rate.

We are working towards what is the best result that we can achieve in the market. And what we are seeing right now is that we can achieve good rate levels with COA agreements.

And if that is the case, then, of course, we'll go for it. But if that is not the case, then we are leaning stronger into spot.

Thank you very much. Okay.

So thank you. I think that completes our questions.

We will post a recording of the call on our website tomorrow. Udo, back to you.

Yes. Thank you for joining us today.

And I really look forward to talking to you again when we present our results for the third quarter of 2025 continuing the story of our logistics solutions to all of you. Again, thank you and wish you all a good day.

And of course, for those of you in the United States, a wonderful 4th of July celebration weekend. Thank you so much.