Stolt-Nielsen Ltd

OSE:SNI

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to today's Stolt-Nielsen Limited Presentation and Conference Call First Quarter 2020 Results. [Operator Instructions] I must advise you that your conference is being recorded today on Thursday, the 16th of April 2020. I would now like to hand the conference over to your speaker today, Niels Stolt-Nielsen, CEO of Stolt-Nielsen Limited. Please go ahead, sir.

[Niels G. Stolt-Nielsen]

Thank you. Good morning, good afternoon. Thank you for joining us on this audio conference for our first quarter 2020 results presentation. I will be referring to a presentation, which you could either download or follow from our website. If you go to our website, www.stolt-nielsen.com, and hit the latest presentation on the front page, you will be able to get our earnings presentation, which we will be going through. Together with me on the line is Jens Grüner-Hegge, our Chief Financial Officer. If you move to the second page, forward-looking statement, which I usually don't go through, but I would like to highlight the second paragraph. The following financial statements are not in accordance with IFRS as the COVID-19 pandemic is a triggering event for review of impairment, which has not yet been performed. Jens will explain why in his part of the presentation. Moving then to Page 3. The agenda this time will be, again, the Stolt-Nielsen first quarter highlights. Then I will take you through a COVID-19 update, really starting off with what we are seeing right now in the markets, in each of the businesses; and also talking about -- a little about the actions that we have been taking. Then I'll go through each of the businesses and review the first quarter performance. Jens will take you through the financials, and then we will move on to Q&As. Moving to Page 4. I regret to show you the loss. That's the first loss that we have had after 64 consecutive profitable quarters. The operating revenue, basically flat, but the EBITDA down, $99.6 million, and that's down from $116.6 million. Operating profit also down to $16.6 million, and that's down from 48 -- $46.8 million in the previous quarter. And net profit, $5.5 million in the fourth quarter, down to $20.2 million loss in the first quarter. If you look at the net profit variance analysis, and again, I will go through each of the business segments in detail later. Again, we delivered a $5.5 million net profit in the fourth quarter of '19, $9.9 million operating profit for Tankers, a $7.1 million higher operating profit for Stolthaven. Stolt Tank Containers, $9 million lower operating profit. Stolt Sea Farm, almost -- slightly higher, almost the same, but we did a big impairment of $12 million on the biomass in the first quarter. And Other and Corporates of $6.8 million, negative. Higher net finance expense is slightly higher of $0.5 million, higher FX of $1.5 million and lower income tax as a result of the impairment that we did on the biomass. So a lower tax -- income tax of $6.4 million, bringing us to $20.2 million loss for the first quarter. Moving on to Page 5. And I'll take you through each of the businesses. And again, this is really what we are currently seeing right now in the market, what operational -- things that we're seeing operational-wise and also initiatives that we have been taking in each of the businesses to be able to endure or ride out a prolonged downturn. So just talking about the market right now in Tankers. The ships are trading with minimal operational delays. Yes, there are new procedures in port, but -- and there are some delays, but delays are hours, not days. The spot market and the COA remains mostly stable. But some weaknesses in -- are emerging in some markets. So overall, spot markets have been holding up. The COA nominations have been relatively healthy. And as you all will later see and what we also presented in the earnings release, the contracts that we renewed in the first quarter was up some 4.7%. So the momentum that we saw in the fourth quarter is carrying on into the first quarter, even after the pandemic really started having its full impact. And I think also that is driven by a relatively healthy MR market, which we are seeing at around $25,000 a day. So right now, the markets are holding up relatively well and it looks like that is same in March and also going into April. Operational update. The biggest challenge we have is, of course, being able to change the crew of all the ships, and that's a quite a big challenge, not only us, but for the whole industry where the borders are closed and the airplanes are canceled. It's difficult to change crew. However, our technical platform across the business has proven very well. We are receiving great feedback from our customers that -- with the systems that we have in place and even working from home. We have really not lost any operations because of this new environment that we live in. On the saving initiatives in Tankers, and this is applied all across all of the businesses. We are looking at cutting back as much capital expenditure as possible, A&G savings. The capital expenditure on the Tanker side has primarily -- we don't have any new buildings on order. So the CapEx there is primarily driven on the scrubbers. And where we have the opportunity to cancel scrubbers, we will. And there we have identified -- I'll show you the summary later, but we've identified approximately $30 million of savings from Tankers on CapEx. And the A&G savings, we've gone through hiring freeze. We have terminated all nonprofessional -- all nonessential professional fees, contract workers, temp workers. And we have kind of stopped both travel and entertainment. And of course, hiring freeze, as I said earlier. We have also gone through an OpEx -- taken out again to all of the businesses. We have prepared a plan for a 20%, 30%, 40% downside scenario, which has been developed in each of the businesses with the associated savings initiatives. So not only A&G and CapEx, but also looking at OpEx savings under those scenarios. Moving to Page 6. Terminals, high utilization globally, although the throughput was slightly down. So what we're seeing is high inquiries for storage of products. But of course, the throughput is down as consumption falls. Most contracts are fixed storage contracts, but some revenues, of course, linked to the additional throughput. But of the business that we're in, I mean the Terminal business is the one that is I'm not worried about. That is quite secure for the -- at least for the next couple of years. And refined products, Contango has resulted in increased demand for storage, especially for CPP, both in Europe and in Korea. Operational update. All terminals impacted by the "stay at home" regulations, able to achieve critical infrastructure approval, which allows work to continue with split work teams being implemented and identified vulnerable workers being removed from work. So we have kind of gone into 2 shifts, so that if one shift has a case, we still have another shift that can carry on the operations. So again, operations are continuing as normal, if you call -- can call it normal. Saving initiative. This is really where we have identified most of the CapEx savings. I think we identified close to -- a little over $30 million of capital expenditure. The instructions has really been across the businesses to hold back on all CapEx unless it's committed to third party or it is a regulatory requirement. So for example, in Tankers, we have a lot of ballast water treatment systems, which we have to proceed with because of regulatory requirement. We have also in Tankers looked at delaying drydocking and talking to [ clients ] to see if that's possible just again to conserve cash. Going back to Terminals. A&G through hiring freeze, termination of nonessential professional fees and contractors. And again, also here, T&E has stopped. And again, here, we also have a 20%, 30%, 40% scenario plan in place if that develops. Moving to Tank Containers. Here also, we're seeing a very active market as we saw relatively the shipments in the month of March is at the record levels. So -- and utilization is over 71%. So the markets are holding up. And interestingly, we're also seeing an increased inquiries for storage as we're using the Tank Containers for storage. And of course, we're going out aggressively and securing as much business and long-term business as possible. Operational update. All markets still operational, but impacted by the "stay alone -- at home" regulation and restrictions locally, but all operation teams are working as usual. Our platform is really showing -- it's fantastic. We are getting fantastic feedback from our customers that we are not losing any business from staying at home or working from home. Systems are working very well. So really, I think we are doing a tremendous job in continuing to move the Tank Containers under these circumstances. Saving initiatives. Very capital-intense and light, this business, and very little capital expenditure, too. There's -- mostly what we've been able to identify where we hold back is the development of the systems. What makes Stolt Tank Containers as market leaders is that how good they are at developing these fantastic systems. So we haven't stopped them, but -- we haven't canceled them, but we have freezed them. And here also, A&G and all the other things we continue -- we have implemented. OpEx savings also, we have done the exercise of the 20%, 30%, 40% scenario. So if that happens in this segment, we're ready to implement it, if necessary. Stolt Sea Farm on Page 8. That is really the one that has been hit the hardest. I remind you that the turbot, which is our main product, most of that is being sold to the restaurants and the hotels and the catering business, and that market is no longer there. Our biggest market is Spain, Italy and France. And that has fallen off a cliff. So that's a huge challenge. But we have taken the hit. We have taken and written down the biomass, which -- the challenge is, of course, initially 3 weeks ago, the volume has dropped dramatically. We have to continue to harvest because it's a growing biomass, and we have to harvest. So in the first weeks, we just have to push the products out. But now gradually, people even though they're at home, they still want to have -- enjoy their fish. So now we're starting to see again a pickup in retail sales, and we're developing new products, so it's easier for people to prepare the fish themselves. Operational-wise. Since March 13, Farm employees are split in shifts and following all protocols to prevent -- and preventive measures. So again, we have the shifts, so that -- so if one shift gets it, we can continue. And we have a continued contingency plan in place for feed is being delivered, oxygen, vaccines and logistical supports. We're also implementing slowing the biomass growth, so we have reduced the feeding. And now of course, when you have a lower biomass, our production per unit goes up. So that's going to affect us. But without -- we're continuing for the time being to put out the same amount of fish. So if the market picks up and we have taken a hit, and we expect the market to be slow for the next 2, 3 months. But when that picks up, we can quickly start feeding the fish again more, and the growth in the biomass will pick up quite quickly. And saving initiatives. They have looked through everything. And again, they have held back on CapEx and the same is on the business hiring freeze, temporary layoffs. And in all of the businesses, in all of the regions where we operate, we look at the support that we can get when we look at these layoff scenarios and take the advantage of what the various governments have to offer. We are moving to Page 9, the action list. So in summary, we have identified the total savings from both A&G cutbacks, OpEx savings and CapEx savings, we have identified a total of $83 million. We also took the dramatic step of -- the board volunteered to take a 50% hit on their fees and the senior management, me and my direct reports are taking 20% cuts. On the financing side, as you've seen on the front page, at the end of the first quarter, we have $519 million of available liquidity. Some of that has already been used to repay the bond that came due in April. So we have -- short term-wise, we have -- or at least for 2020, we have sufficient liquidity. And Jens will take you more in detail what we have. But in addition, we have done various scenarios. As I said, we have done 20%, 30%, 40% under the tougher scenario, and that's what -- in the scenario in which we operate. We want to make certain that we have enough liquidity. And we have 5 terminals unencumbered with a potential borrowing capacity close to $200 million. We also have significant additional value in shares in joint venture terminals, which we believe we will easily or relatively easily be able to borrow in the region of $200 million. So very much the focus is on the short term. The last 3 weeks, we've been looking at cutting back and saving what is within our control. And then now we're working on securing additional liquidity so that we can ride out a storm. Now the target is, of course, to be able to have enough liquidity in place so that if the bond market is not back in March of '21, we have that liquidity. That's what we're planning on. We have ample headroom under all of our financial covenants. So even if we have to take an impairment in the second quarter, I think that we are within our covenants -- we will be within our covenants. And again, plans are being implemented to -- for raising an additional $250 million of liquidity, which will cover the 2021 -- March 2021 bond payment. Then moving to Page 10 and 11. And this now, I'll go through each of the businesses, the first quarter results. The operating revenue in Tankers was up, to $280 million, up from $274 million. The EBITDA was down, $49.5 million, down from $53.5 million. The operating profit, unfortunately, was down to $4.7 million and that's down from $14.6 million. And operating days at sea in the quarter was basically the same as the previous quarter. If you look at the waterfall, the analysis, and this is an operating profit analysis. We had $14.6 million of operating profit in the previous quarter. And that we had a lower trading results of $3.9 million. And that is very much driven by the repositioning that we have to do because of the delays in drydocking that we had as a result of the installation of the scrubbers and the ballast water and also the repositioning that we need to do to serve our contracts because of the Grønland incident we had to work around that. So we had a lot of expensive ballast legs, which hit us in the first quarter. We also had a transition cost going into IMO 2020. It's very difficult to get it totally right. So we have $4 million of expensive fuel that we bought, which we'll not be able to recover, basically which we burnt in the fourth quarter, which we won't be able to retrieve from our contract customers. Even though we are very successful, we're able to implement the new bunker costs, the fuel that we bought in 2019. We have $4 million, which we won't be able to recover. Then overall, the bunker costs were higher in the first quarter compared to the fourth quarter. And we have some higher owning expenses, that's primarily driven on timing, but also higher insurance costs of $2.1 million total. We had some higher equity income of $0.9 million and other positive contribution of $2.1 million, which gave us an operating profit of $4.7 million. So I'd say that most of these differences were one-offs in Tankers. Moving to Page 12. The average price of the IFO and the very low-sulfur fuel consumed was $506 in the first quarter, and that's compared to IFO consumed during the fourth quarter of $384. The average price of the IFO and the VLSF fuel was $545 per tonne, which was purchased compared to an IFO of $401 -- the price of $401 in the fourth quarter. So the stuff that we bought in the first quarter was still quite high. But every day, we will start improvement because of the cheaper fuel that we are buying and consuming now. But it will take time for that to come to our bottom line. Again, the IMO transition cost us an extra $4 million, which is not recoverable from our customers. The year-to-date COA bunker surcharge clauses covered 67.5% of our total fuel consumption. Unfortunately, we have a hedge in place, which is out of the money, which we have 36,000 tonnes from April 2020 until December 2020, which as of April 16 had a negative value of $4.2 million.Moving to Page 13. You can see our STJ Stolt Tankers Joint Service Sailed-in Time-Charter Index and Sensitivity. And unfortunately, we started to see a pickup, but the market has changed or the issues that we had in the first quarter caused it to drop further. The positive news is that the COA rate renewals in the quarter were up 4.74%. So of the contracts that we did renew, they were up 4.74%. The order book on Page 14. The order book now stands at 5.3%, which is -- it keeps on falling. There will be some delays in deliveries because of the corona. But I question if there's any new ships going to be ordered anytime soon. So as -- I expect that once we are out of this storm, the market will continue to -- will be quite strong. But it's up to anybody's guess how long this will last. Moving to Page 15, market outlook. I wish I could predict. We haven't seen the fall yet. As I've said in -- many times to the team, to the organization, is that we're hoping for the best, but we are planning for the worst. Moving chemicals around the world, which is the feedstock for manufacturing, of course, it's going to impact us. But to what extent? You also have to remember that we are also carrying a lot of stuff, which is essential. Fertilizers, detergents, all the chemicals, which are useful for detergents. So not everything is going to be dropped off. But of course, there is going to be an impact. I'm not going to speculate how this is going to develop. It depends on how long this lockdown is going to last. I hope it's not going to last forever. We can't -- I think that the economic meltdown or the economic collapse that -- from an extended lockdown will have a bigger mortality than the virus. So we have to open up. And hopefully, once all the countries have enough hospital beds and enough ventilators that they will start gradually to open up again. Again, we are hoping for the best, but preparing for the worst. You can say that what we're seeing in Terminals, we're seeing a high inquiry for storage. And of course, that is products that are not being consumed. So I wonder if the chemical manufacturers, like the oil producers, they are continuing to produce because it's very expensive to close down the production entities. And so instead of closing down, and if we believe it's going to be a 2 to 3 to 4-month slowdown, it's more economical to keep the factories going or keep the processing plants operating. Just at the lower volume, but keep them running instead of closing it down. That means that they will still produce, they will still have to find storage for it. And the storage on the loading -- when the storage on the loading side and on the discharge side is full, and when all the inventory is full, maybe then they will start looking for floating storage. That's an optimistic thought. But we are seeing it on the Terminal side. We're seeing on the Tank Container side. Maybe we can also see it on the shipping side. Moving to Terminals on Page 17. The operating profit, basically the same. EBITDA, slightly down. Operating profit up 62%. And utilization up to 90.5%, that's up 1%. The operating revenue was flat while utilization increased by -- to 90.5% due to the higher utilization in New Orleans, Singapore and Australia terminals, although at lower rates. The operating expenses, excluding the one-offs of $1.3 million for insurance costs in the fourth quarter, decreased by $1.7 million mainly due to lower costs -- lower-cost facilities and maintenance expenses. The EBITDA decreased by $1.2 million, impacted by the lower equity income and the higher A&G expenses. Operating profit increased because of prior quarter impairment of Newcastle terminal of $5.5 million and Port Alma, Bundaberg and Wynyard assets being fully depreciated in the fourth quarter. If you move to Page 18, where we have the waterfall. The fourth quarter operating profit was $11.7 million, slightly higher operating revenue of $0.1 million, lower operating expenses of $0.4 million and a lower appreciation because of the impairment within the fourth quarter in Australia. Slightly lower equity income and higher A&G expenses, bringing the operating profit of $18.9 million. Moving to Page 19. The markets remain strong. In the United States, we're seeing lots of inquiries. Europe is -- for our terminal is full. Of course, our big terminal in Antwerp is primarily -- a big part of it is CPP. And because of the contango in the market, it's high demand for storage. The Chinese market remains weak, although storage inquiries increased due to inventory needing to be -- again, people need to store the product. And we're seeing a relatively strong Korean market, too. And then Brazil remained stable for petroleum, ethanol and chemicals although initial signs of weakness due to the ongoing lockdown due to corona. Again, the contract portfolio in the Terminal business secures that business for at least the next 2 years, which gives me comfort. Tank Containers on Page 21. Operating revenue is down 3%, down to $129.4 million. EBITDA is down to $16.5 million, operating profit down to $6.7 million and utilization up to 68.5%. Subsequently, in the recent months, we have seen actually that going all the way up to 70 -- over 70%. If you look at the waterfall, the fourth quarter operating profit was $15.7 million, 3.1% (sic )[ $3.1 million ] higher transportation revenue. So what we saw in Tank Containers is high levels of activity, but it was more expensive to move the products and move the tanks. And that is really driven by several factors. We have lower demurrage of $3.2 million, lower other revenue of $4 million. That's a $4 million that we had one-off with our customers in -- one of our biggest customers in the fourth quarter. Higher move-related expenses related to the IMO 2020 implementation, which we weren't able to pass through. So again, one-off and also higher repositioning costs. And that has been a challenge, but the rapidly changing trade flows and the buildup of Tank Containers in China during the outbreak of the corona, we saw that we had to reposition tanks, which comes at a cost. Lower operating expense of $2.4 million and lower equity income of $6.7 million -- sorry, lower equity income of $0.6 million, giving an operating profit for the quarter of $6.7 million. Moving to Page 22. Again, demand is firm in Tank Containers. The Asian markets remain busy, and China is picking up pace. In Europe, demand has slowed for Benelux countries, but it's still strong in France for both chemicals and food grades. Demand in both North and South America remains steady. And the food grade business continues to grow. As we are drinking and sitting at home, the goods that we transport is -- we're seeing a big pickup in activity. So continue with that, please. After the quarter end, the utilization rates are slowly improving compared to the first quarter and that we produced a record number of shipments. However, the margin continued to be under pressure, not only from competition, but also because of the additional costs associated with the movements. Stolt Sea Farm on Page 24. This is really where we have taken the biggest hit. We had an operating profit of $1.7 million in the fourth quarter. Lower turbot sale of $0.1 million, lower sole sales of $0.9 million, slightly higher caviar sales, lower operating expenses of $1.2 million, but then we did take the impairment at the end of the quarter based on the prices that we saw because of the corona of $12 million. Lower fair value adjustment of $0.3 million, lower depreciation of higher -- lower depreciation of $0.3 million and lower A&G of $0.3 million and other of $0.1 million coming in at negative $9.8 million for Stolt Sea Farm. So really taking the hit in the adjustment of our inventory value in the first quarter. Moving on to Stolt-Nielsen Gas on Page 26. I just would like to remind you that with the first ship to be delivered, there are big delays, but the first ship that we are delivering will go to Petronas on a bareboat -- on 3 years bareboat and we expect the delivery to be in June of 2020. We also have a second ship, which are being chartered out to Golar Power on 3-year bareboat at similar terms and the delivery for that ship is expected in 2020. And we are at -- term sheets have been agreed for the financing for the first 4 ships. The Terminal, the HIGAS terminal should commence operations in the fourth quarter. That is also being delayed because of the corona. But operations are expected to happen in 2020. And we continue to negotiate supply agreements for customers that will be going through HIGAS, but we're also looking at additional agreement with a major industrial offtake customer in Sardinia, which has not yet been announced. That completes my part. I'll give the word over to Jens, and I'll come back during the question and answers. Thank you. Jens?

[Jens F. Gruner-Hegge]

Yes. Thank you, Niels. As Niels mentioned, I will provide a bit further details on the financial results as they were released today for the first quarter. Now due to the uncertainty that we're facing going forward, we will not provide the normal P&L guidance on the A&G, depreciation, amortization and share of profit for JVs for the next quarter like we normally do. Also, this is the first quarter that we're reporting as per IFRS 16. So that has impact on the debt level as well as assets, interest expense and EBITDA, and only a minor impact on the net profit. Furthermore, as we stated in our earnings release earlier today, I want to remind that the financials reported today are not strictly as per IFRS. Under IFRS, the coronavirus or the COVID-19 pandemic is an event that triggers an impairment review of the company's balance sheet. However, the company -- we have so far been unable to quantify the possible impairments of long-term assets due to the difficulties really in determining how this pandemic will evolve and the effects it may have, both on the value of the company's assets and our ability to continue as a going concern. We will come back and perform the full impairment analysis ahead of the release of our second quarter results, which are scheduled for July 2. When we did the impairment analysis for the full 2019 year -- 2019 results, we had ample headroom on most of our assets, so it's a good cushion. The press release is issued. Analyst/investor presentation is available on our website, as Niels mentioned, under the section of Reports & Presentations. Moving on to Slide 29. The operating profit before one-offs for the first quarter was $28.5 million, quite a bit down from the $52.8 million in the end of fourth quarter. As explained by Niels, this was really driven by the low results in Tankers, which was down some $10 million, driven by scheduling issues, unrecoverable bunker costs and higher ship-owning costs. STC was $9 million lower due to lower demurrage revenue and move-related expenses, including repos and lower other revenue relating to prior quarter. Stolt Sea Farm and Stolthaven Terminals were both mostly flat when we exclude the one-offs. The major one-off this quarter was, as mentioned already, the write-down of the biomass volume, reflecting the difficult market situation that Stolt Sea Farm is facing right now, following the shutdown of restaurants and hotels after the COVID-19 outbreak. Net interest expense was slightly below the guidance of $35.3 million, but also slightly above the prior quarter. We also had a small loss in FX, down from a gain in the prior quarter. And income tax was down significantly due to the lower results in Stolt Sea Farm as well as in the fourth quarter, we booked a provision for uncertain tax positions in relation to the Stolt Tank Container division. The net result, therefore, is a loss of $20.2 million for the quarter, as Niels mentioned, our first loss-making quarter since 2003. EBITDA came in at $99.6 million, and note that the EBITDA is before the fair value of biological assets, insurance reimbursements and other onetime noncash items. If we can move on to Slide 30. As a reminder, one of our main objectives from a balance sheet perspective is to continue to focus on reducing debt while maintaining a strong liquidity position. Now as we applied IFRS 16, the debt increased and the increase related to IFRS 16 was $184 million. And with that, we saw it increase to $2.58 billion, and that's up from $2.34 billion. Our liquidity position was also marginally up from the prior quarter at $519 million. And if you recall, in early February, we did a bond issue of $142 million to raise cash, took the opportunity while the market was there. And that was also to help us prepare for the repayment of the bond SNI06, which was repaid last week. And you'll see that bond was reflected in the current maturity of debt on the balance sheet of $278 million. Tangible net worth slipped slightly from $1.6 billion to $1.58 billion. And if you combine that with the slight debt increase due to IFRS 16, you see that the debt to tangible net worth ratio increased to 1.64 from 1.47 in the fourth quarter of '19. Now if you exclude the IFRS impact from that increase, measured on a like-for-like for the fourth quarter, it would have been 1.52. It's also important to note that in our bank covenants, we have the ability to continue to measure these covenants per pre-IFRS 16, i.e., so it's the lower numbers that apply to us. The EBITDA to interest expense ratio for the quarter was 3.09, slightly down from 3.12. But also here, you had an IFRS 6 impact, but this time in the opposite direction. Ratio would have been 2.92 without the IFRS 16 impact, and that's reflecting the lower EBITDA that we had this quarter. The jump in net debt-to-EBITDA also reflected the impact of IFRS 16 as well as the slightly weaker EBITDA that we had in the quarter. Moving to Slide 31, to the cash flow. Cash flow from operations was positive $60.8 million, down from $68.9 million, again reflecting the weaker results this quarter, and this was partly compensated for by the higher demurrage. The increase in cash used in investment activities predominantly reflects the cash received from our divestment of our shareholding in Avance Gas Holding, was about $25.9 million in the prior quarter. During the first quarter, as I mentioned, we raised about $142 million in new bond proceeds. About $50 million or so of this was used to retire part of the April 2020 bond, SNI06. So we retired that early. And we also had some further scheduled principal payments, making up the total of $93.2 million in debt repayments. And also note that the dividend that is referred to here was the interim dividend paid in December. Net cash for the quarter was a positive $55.3 million, resulting in a cash balance at quarter end of $191.3 million. Moving on to Slide 32. Here's a slightly different view from what we have shown you earlier. I want to share with you the quarterly view of our debt maturity profile. As you see, the SNI06 is the one I referred to, which was repaid last week. So our focus now is on securing our position with regards to SNI05 maturing in March of 2021. And therefore, we have taken a number of actions, as mentioned by Niels, to strengthen our position. And we continue to test the balance sheet and our cash flow in downside scenarios, and that's reforming our action plan as we go forward so that we can be prepared for whatever eventuality is thrown at us. And if you go to next Slide 33. You will here see the capital expenditures program and the reductions that we have so far earmarked. That's in total $62 million, split between Tankers with $13 million, Stolthaven with $30 million, Stolt Sea Farm has reduced their capital expenditures by $9 million and then corporate and other on BT projects with a further $9 million, so total $62 million. And if you subtract that from the remaining CapEx, you will get to just under $100 million remaining for 2020. And that's mostly comprised of safety and environmental-related CapEx as well as committed or close to completion projects. If we move on to Slide 34. Here on top, I have summarized the initiatives already put in place amounting to cash savings of $83 million that Niels went through. As mentioned, it includes the cancellation of dividends that would have been payable in May, the reduction in Board fees by 50% and the management pay by 20% and other initiatives. We are also in the process of developing the downside plans where we will effect significant OpEx savings should we see a negative impact on our markets. Now importantly for our liquidity position is to highlight assets where we can take out further loans. We have been in discussions with our banks to secure liquidity for the eventuality that this will be needed in the future. And I must say, we have received a fantastic support from our bank so far. We want to secure our position early so that we're in a strong position should the market slow down. In addition to the -- in excess of $500 million that we had at the end of the first quarter, we also sit on 5 unencumbered terminals that are generating good EBITDA. And in addition, we have investments in joint venture terminals that are strategically positioned in hub areas, which have generated significant and continue to generate steady EBITDA. And that provides us in total with further borrowing capacity in excess of $400 million. So if you look at the savings, combined with the financing possibilities, we have further in excess of $500 million in liquidity-enhancing measures. That should put us in a strong position and could also put us in a position to take advantage of opportunities that might arise at the other end of the COVID pandemic. Moving to Slide 35. It's really to give you a show of development of various key financial metrics. Keep in mind, this now reflects the IFRS 16, whereas the covenants are actually measured against pre-IFRS 16 measures. Again, I'll leave that to you to read through. There is not much to say at this at the moment. A&G, on Slide 36, was higher this quarter due to a fourth quarter adjustment for profit sharing and also inflationary salary increases and the increase in depreciation and amortization that was mainly due to IFRS 16 being applied this quarter. Moving on to Slide 37. Our share of profits in JVs was $5.1 million. It was in line with the prior quarter. The improvement in Tankers was really due to a loss taken on an asset held for sale in the fourth quarter. Income taxes were lower due to the impairment in Stolt Sea Farm and also a nonrecurrence of fourth quarter adjustment at STC. So moving on to Slide 38. As a reminder, again, the EBITDA figures, as presented here, exclude any impact of IFRS fair value adjustments and impairment of Stolt Sea Farm's inventory gain or loss on sale of assets and other noncash onetime events. Tankers EBITDA was down due to lower results, while Terminals remained flat, however, the operating margin improved. STC's EBITDA decreased due to the higher operating costs. As a result, SNL's EBITDA for the quarter decreased to $100 million from $117 million. With that, I'll hand it back to you, Niels.

[Niels G. Stolt-Nielsen]

Thank you, Jens. On Page 39, the key messages from our presentation for 2020. As Jens showed you, over $500 million of liquidity at the end of the first quarter. We have taken aggressive and early action to reduce cash burn in all of our businesses, and we continue to work on a downside plan in case the -- or when the market slows down, that we really -- so we have a plan in place to trigger once we see that downside. We have unencumbered assets for -- available for further financing, as Jens showed you, believing that we can raise the potential for -- additional $400 million. We have a strong and good relationship with our core banks. And we also have ample room under our bank covenants in -- even in the downside scenarios that we have taken. I must say that the team and the organization has really stepped up and understands the seriousness of the situation, and working very hard in achieving all these savings and are very committed on keeping the operations going and very admirable. And I hope that in these types of crisis, if you're able to navigate through this crisis, there will be opportunities arising from it. That concludes our presentation. Operator, now we will open up for any questions that are out there.

[Operator]

[Operator Instructions] We seem to have no questions at this time. [Operator Instructions] And we have one question, and it comes from Eirik Haavaldsen from Pareto Securities.

[Eirik Haavaldsen, Head of Research]

Just 2 questions really. The first being, I mean, if we take a step back and look at your financial numbers now and really the comments around what's happening in the market and what we're seeing, and compare that to what you're saying, it seems perhaps to us, as outsiders, that what you're doing and the focus you're having on liquidity is a little bit [ pragmatic ]. I mean can you maybe give an indication on what you are expecting in terms of volume drops? What you're seeing in the second and maybe third quarter both in terms of volumes, what your clients are saying? And perhaps also a little bit on the cost side in terms of bunkers and further IMO 2020 transition costs? Because to us, it sounds a little bit like your world is about to fall apart, but we can't really see that right from your numbers.

[Niels G. Stolt-Nielsen]

Thank you for the question. I would just start by saying that we're hoping for the best, but preparing for the worst. And the numbers are starting -- when half the population is sitting inside, I do expect that there is going to be a significant drop in economic activity, in global manufacturing, in global GDP. I hope I'm wrong. And if I'm wrong, well, we can handle it. But we would like to prepare and we would like to be early so that we have that necessary liquidity in place. Again, as we are saying right now, we are not seeing a significant drop. We're starting to see weaknesses in some markets. But we haven't seen a dramatic drop anywhere yet except for Stolt Sea Farm. But on the logistics business, it continues. But we are preparing for it. And I think it's prudent to prepare for it so that you are ready. Our customers, they don't know -- nobody knows what is going to happen. So the customers are -- very difficult to get information out of them. I think what -- as I said during the presentation, what I think is happening is that they would like to continue believing that this is going to be a 3, 4 months lockdown that they would like to keep production going. And even though they don't have -- maybe don't have customers for it, they produce it so that they can keep the plant going. So either they store it or they ship it at the end destination, and that's what we're seeing now. But eventually, if it's an extended lockdown or a slow economy, that is going to impact the demand for transportation. So I hope you're right that we are overreacting, but at least we are planning for the worst, hoping for the best. I don't expect to see any further IMO 2020. That's a transition from '19 to '20. It's very difficult to get the timing totally correct. So I think that we won't see any further IMO 2020 issue. We will cancel as many scrubbers as possible. Again, that's primarily to preserve cash. But where we -- where the contractor or the supplier is late and we can get out of the contract, we will.

[Eirik Haavaldsen, Head of Research]

It's, of course, prudent. On the Tank Containers, it seems a little bit like the increase in volumes and activity and hence you almost had a negative effect because it did raise the cost base by more than what you got the benefits. Is that something that has continued? Or was that also a little bit of a one-off sales?

[Niels G. Stolt-Nielsen]

Your line is pretty bad. But I think your question is if the one-offs or -- what happened in Tank Containers was the Chinese New Year was extended and as a result, customers kept on shipping containers into China. It was a buildup of containers in China, which caused an unbalanced supply of containers around the world, which caused us to have to reposition the tanks. So -- and repositioning costs were quite high during the first quarter as a result of it. And I think we will continue to see repositioning costs high going forward. The underlying market, the shipments were subsequents of the first quarter. Subsequently, we have seen utilization at 71%, and we have seen high number of -- record number of shipments. So the moves are there, but the cost of doing those moves and the work needed to get the moves done because of the cancellation of sailings by the liners has put an additional. So the margins are under pressure, not only from competition, but the cost of doing the move has gone up. And I think we will continue to see that for a while. But the positive thing is that, for the time being, activity is high in Tank Containers. We are seeing signs of weakness in some markets. But although -- again, on the positive note, we're seeing an increased demand for -- request for using Tank Containers as storage. Now I know if that's -- that's good news for us because that's a rental income for us. But -- yes. So I think that what we saw in the first quarter, Tank Containers was -- the poor results there are primarily driven by the effects that we saw from the low-sulfur fuel, the repo costs. And the repo cost was very much driven by the corona outbreak in China and also the costs associated with each of the moves because of the uncertainty and the change of trade flows.

[Operator]

And your next question comes from Dennis Anghelopoulos from ABG.

[Dennis Anghelopoulos, Research Analyst]

First question, you guys might have answered it. But can we fully assume that you guys have cost pass-through for the bunkers that there is nothing sort of outlying?

[Niels G. Stolt-Nielsen]

Can you repeat the question? Because your line was also breaking up. What was that -- that one?

[Dennis Anghelopoulos, Research Analyst]

Can we now assume that you have 100% fuel pass-through?

[Niels G. Stolt-Nielsen]

Yes. The bunker clauses in our COAs, 99% of them, we have full pass-through of the increased bunker costs.

[Dennis Anghelopoulos, Research Analyst]

And on the spot market, with some of your business, have you seen pass-throughs there?

[Niels G. Stolt-Nielsen]

Well, the pass-through, the form that -- the bunker prices have fallen -- recently have fallen and the rates have not been falling. If we ask -- if we have seen an increase -- we started to see an increase in the spot rates before the coronavirus. We saw a positive momentum. We were able to get both the contract rates and the spot rates up. And since then, as you've seen recently, the spot rates -- the bunker prices have fallen dramatically, and we have not seen the same fall in spot rates. So that's a positive.

[Dennis Anghelopoulos, Research Analyst]

And then just a follow-up. From your Tanker space, it seems that there's a lot of one-offs that are negatively affecting the tankers in Q1. But when we look at the Sailed-in TC Index, it's fallen in Q1. Can you add some color as to why that's happening? Because right now, it looks like it's the weakest quarter ever on your historical time series.

[Niels G. Stolt-Nielsen]

Jens?

[Jens F. Gruner-Hegge]

Yes. Yes. Well, those one-offs are driving the fall as well in that spot -- as we talked about on the Tanker, Slide 11. The lower trading results were partly related to scheduling issues, et cetera, and that's a negative on the sailed-in revenue index. Likewise, the bunker-related costs were -- are also directly impacting the sailed-in revenue index. So that's why you see that significant drop from, I think, it was 0.54 last quarter, down to 0.50 this quarter.

[Niels G. Stolt-Nielsen]

So really -- in Tankers, really 3 things happened. It was an early transition to low-sulfur fuel, which was around $4 million that we weren't able to pass on. Then we had low utilization there because of the ballast legs. And the ballast legs were due to the dry-docking related to scrubbers and the ballast water treatment systems. And also, we had the incidence on the Grønland, which caused us to reposition ships to discharge Grønland, which again caused scheduling issues for the whole fleet. And the third part -- and that was also around $4 million. And the third part was ship-owning expenses. That's more driven by timing, but also slightly higher insurance premium, and that was a total of $2.5 million. So I think the majority of the drop that you see in Tankers was one-offs.

[Dennis Anghelopoulos, Research Analyst]

So we can safely assume that quarter-on-quarter, it would remain approximately the same, adjusting for the one-offs?

[Niels G. Stolt-Nielsen]

Yes. Actually, I think, Jens, it was slightly better, wasn't it?

[Jens F. Gruner-Hegge]

Yes. Would have been probably marginally up to -- without guessing, but yes.

[Operator]

We have no further questions at this time. [Operator Instructions]

[Niels G. Stolt-Nielsen]

Okay. Everyone, thank you very much for participating in our first quarter earnings release. That concludes the presentation. Thank you very much, and keep well.

[Operator]

That does conclude our conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.