Stolt-Nielsen Ltd

OSE:SNI

Earnings Call Transcript 2020-Q2

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Stolt-Nielsen Limited Presentation and Conference Call for the Second Quarter Results 2020. [Operator Instructions] And I must also advise you the conference is being recorded today, Thursday, the 2nd of July 2020.I would now like to hand over to your speaker today, Niels Stolt-Nielsen, Chief Executive Officer. Please go ahead, sir.

[Niels G. Stolt-Nielsen]

Thank you. Good afternoon. Good morning. Thank you for joining us for our second quarter's earnings release. I do apologize for the delay in the startup. We have had some technical issue in uploading the presentation that we are about to hold on our web page, but you will be able to see the presentation, which I will be referring to, if you go to our web page, to the section of investor presentations, you will follow it on the webcast. Again, apologies for this.Together with me, as always, Jens Grüner-Hegge is Chief Financial Officer. If we go to Page 3, which is the agenda page, I will go through the second quarter highlights. I'll take you through the actions we have taken in regard to the pandemic, COVID-19. I will go through each of the businesses. Jens will take you through the financials and then we will open up at the end for question and answers.If we then move to Page 4, which says Highlights of Q2 '20 - Better than expected. We reported a net profit from continuing operations of $12.3 million the quarter -- for the quarter and that's up from a loss of $19.3 million in the previous quarter. Stolt Tankers reported an operating profit of $20 million and that is up from $4.7 million. That mainly reflects the increase in deep-sea revenue, which was driven from healthy COA nominations, strong volume from the COA nomination, a strong spot market and also increased number of operating days.For Stolthaven Terminals, we reported an operating profit of $19.2 million and that is up from $18.9 million. I just got a message in here, the presentation is now uploaded on the website also. Again, $19.2 million in the second quarter, up from $18.9 million in Terminals as the market overall remained stable. Utilization rose to 95% in our wholly owned terminals and to 97% in our joint venture terminals.Stolt Tank Containers reported an operating profit of $13 million and that is up from $6.7 million in the first quarter. That is a result of higher demurrage and lower repositioning costs. The total shipments were basically unchanged, though we were able to get higher utilization by 1.7% compared to the previous quarter.Stolt Sea Farm reported an operating loss of $4.7 million, which is -- which includes an impairment of $1.8 million and that compared to an operating loss of $8.8 million in the first quarter, which reflected a $12 million write-down of our biomass in the first quarter. We have classified Sterling Caviar as held for sale and we have taken an impairment of $8.1 million in the quarter. As always, I will go into more detail when I go through each of the businesses. If you go to Page 5, where we compare the net profit from the first quarter to the second quarter for the group. Operating revenue came in at $503 million -- $503.5 million, that is up from $479.1 million in the first quarter. EBITDA, $122.8 million....[Audio Gap] and that is up from $100 million in the first quarter. Operating profit, $49.4 million, that is up from $17.6 million in the first quarter and a net profit for the quarter of $3 million.Now I previously reported in the previous slide that we had a net profit from continuing operation of $12.3 million, the $3 million reflects then the impairment and the write-down we did on our Sterling Caviar. So if you look from ongoing operation, we would actually have had a $12.3 million profit.If you look at the variance analysis, we had a net loss of $20.2 million in the first quarter. We have $15.2 million better operating profit from Stolt Tankers; $300,000 better operating profit from Terminals; $6.3 million higher operating profit from Tank Containers. We had a lower operating loss of $4.2 million in Stolt Sea Farm and $5.7 million improvement in corporate and other operations -- from corporate and that mainly reflects the accruement or a reduction in the accruement of profit-sharing to the organization.We had a lower net finance expense of $1.6 million due to lower interest rates, slightly higher non-OpEx and FX losses of $1.3 million, slightly higher income tax of $0.5 million and again, the $8.3 million Sea Farm loss from discontinued operation. That is, again, the write-down of the Sterling Caviar. And that gives us a $3 million profit for the quarter.Moving to Page 6, COVID-19, the action list update. Our goal is, of course, to preserve cash. As I reported in the first quarter earnings release, immediately when the pandemic hit us, when we went into lockdown, we were very much focused on preserving cash. And we have taken actions and we continue to take action. We canceled our dividend, the final dividend for '19. We cut back on all travel and entertainment and training. The Board and the senior management did a voluntary salary cut. We cut back on professional fees and contractors. The total savings from those actions are, so far, $21 million.In addition, we reviewed all the CapEx in each of the businesses and we identified $62 million, which we can either cancel or delay. So a total of $83 million of cash savings that we have identified in 2020. The target and also was to secure sufficient liquidity to weather a substantial downturn. We went through each of the businesses and we asked them to go through a scenario where we did a 20%, 30%, 40% downside in revenue. Not that we necessarily believe it's going to happen, and this is important to stipulate, is that it is just a preparation. It doesn't mean that we necessarily believe it's going to happen, but we really work under hoping for the best but preparing for the worst. And the market and the world that we live in now is so uncertain. So we want to make certain that we are in a position to ride out whatever comes our way.At the end of the quarter, we had $411 million of available liquidity, very much thanks to Jens and his team of securing the necessary liquidity. We have $65 million financing secured by 2 terminals. The term sheet has agreed upon and credit has been approved. So that's in addition to the $411 million. As you know, we did a successful $132 million bond issue in June and we're also in discussion of topping up an existing terminal facility in Singapore. And we're also considering an additional $100 million RCF, rolling credit facility.As it stands right now, we have approximately $465 million of cash and [ rolling credit ] facility available. That's what we have now. And of course, then we also have the other finances or opportunities that we are pursuing as listed on Page 6. But as you realize, it will put us in a position to have enough liquidity to repay the bond coming due at the end of the -- in the first quarter -- in March of '21. It also, with the additional financing beyond what we have already secured, but listed here, we will have enough liquidity to face a 40% revenue reduction and still be able to meet our obligation and still have liquidity reserves. Again, hoping for the best, but preparing for a prolonged downturn. If you then move to Page 7 -- Page 8, Stolt Tankers, second quarter highlights, I would like to remind you that the first quarter, we had a poor performance in Tankers, not very much driven by the COVID-19, but because of the repositioning of ships and the delays in drydocking due to ballast water treatment installation and also scrubber installation. So we had around 300 -- a little over 300 days less operating days in the first quarter compared to the second quarter. So much of the improvement that we see is, of course, the more operating days, because we didn't have the delays related to the drydockings.The operating revenue came in at $293.9 million, that is up from $280.7 million. The EBITDA went from $49.5 million up to $65 million. The operating profit, again, from $4.7 million up to $20 million; and the operating days rate, it went up from 618 up to -- 6,018 up to 6,329.If we look at the operating profit variance from the first quarter to the second quarter, our operating profit came in at $4.7 million; $50.3 million higher trading results; a $3.6 million higher net bunker cost. And you have to remember that we are over 70% contract of affreightments, and we have a bunker cost in each of the -- lots of those contracts. So when the bunker prices are high, we get a lot of surcharge. When the bunker prices are low, we need to give money back. So that's why under the COAs, we have to basically give most of the benefits back when the bunker prices fall. So our net cost for the quarter was marginally lower, $1.5 million, but because we had a bunker hedge loss in the quarter of approximately $4 million, the net cost for the group came in at $3.6 million.The -- we had $2.3 million lower operating expense, slightly higher depreciation of $1.1 million and higher equity income from our joint venture of $2.4 million, bringing the quarter's operating profits for Tankers to $20 million. If you go up to Page 9, the contract that we renewed for the quarter -- the contracts that we renewed in the second quarter, were on average up 5%. And I would say that under these circumstances, that reflects a relatively strong market, taking the current environment into consideration. It reflects the, I think, the balance between supply and demand as current expanse is working in our favor. The volume were up a total of 9%; COA volume up 15%. When we have a bigger nomination from the COA, we have less spot space. So our...[Audio Gap]The freight rate overall of the volume that we carried was up 1%. The COA rates that we carried during the quarter was up 2%, while the spot volume was down 0.4%. Now we stipulate in the earnings release that the spot market was strong, and it was strong, but the bunker prices fell significantly in the quarter. So we really got the benefit from a lower bunker price, but the spot rates didn't go down.Utilization went up by 3% and the sailed-in revenue for the deep-sea fleet went up 13% for the quarter. The Clarkson -- now, of course, in the second quarter, we had a strong MR market, which then meant that the swing tonnage didn't operate that much in our segment. And as a result, we saw the strong spot market, and then, of course, enjoyed that. If you look at the Clarkson's Spot Chemical Index, you can see that towards the end of the second quarter, the spot index fell and I think that unfortunately reflects the fall also in the MR market. And that may be, of course, an indication of what is to come for the third and fourth quarter.If we go to Page 10, the average price of the IFO and the very low sulfur fuel consumed was $388 per tonne in the second quarter. And that compares to $501 per tonne of the price of what we consume in the second quarter. The average price of IFO and very low sulfur fuel that we purchased in the second quarter was $274 per tonne and that compares to $546 per tonne in the first quarter.As I already mentioned, much of the benefit of lower bunker cost is passed through to the customers, as Tankers was burning older, higher-cost inventory, while bunker surcharge clause rebates based on the lower stock price. So only the net benefit that we had for the quarter was really $1.2 million.If you go to Page 11, which is the STJS, Stolt Tankers Joint Service Sailed-in Time-Charter Index and sensitivity, you can see a nice significant pick-up in the second quarter. And you can read at your convenience the sensitivity. If we have a 5% increase in index, that gives us a net profit impact of $5.6 million. So every 5% is at around $5.6 million at the bottom -- on the bottom line for Tankers.If we go to Page 12, we have a historic low order book in our segment and I think that will continue because of the environment that we live in. The order book stands now at 5.4%. That is slightly up from 5.3% in the first quarter, so there were some, a few ships being ordered, not really big ships, but more smaller size ships. During the same period, we also expect that the older ships, from '20 to '24, approximately the same amount of deadweight will leave our segment, now probably towards the later part of that period, while the new buildings will come in, in the earlier part of this period. The core chemical deep-sea fleet growth will significantly drop. So the growth will drop in 2020 and 2021, as you see on the chart here. We do, however, expect maybe that the pandemic is causing delays in the new buildings, in the orders -- in the ships that are on order.So as I stated earlier, we have had a challenging shipping market for a long time, and finally, the order book started to come down and the balance between supply and demand came into our favor and then this damn pandemic came along. But still, under these challenging circumstances, we are able to get increases in our COAs, which I think is a reflection of this supply and demand being in our favor, definitely so going forward. So if you believe in a V-shaped recovery, I believe we will have a very strong market in chemical tankers going forward.13, and here is the market outlook. It's impossible to predict or it's very difficult to predict. We're hoping for the best but preparing for a downside scenario if that comes. The May sailed-in revenue was the highest we have seen since November of '17 and all trade dates were, of course, boosted by the strong CPP of the MR market and also the lower bunker prices. The U.S. Gulf to Asia and India market was strong, but we saw weaker demand, more weaker shipment demand in the Atlantic, Trans-Atlantic east and west and also in South America. And the MR market is down. It came up to almost $72,000 or $73,000 a day and it's today around $10,000, maybe even lower.What I can say is that nominations continue to be healthy. We are seeing more swing tonnage coming back into our segment because of the weakening of the MR market. However, again, the nomination are relatively healthy in most areas. July nominations looks pretty good. We are a bit worried about what will happen in August and after that.The European fleet, so I will go through the regional fleet. And the region fleet, the European fleet is the one that is suffering the most. We are at extremely low activity. We haven't seen it that slow. Fortunately, we have a relatively small fleet there, so the financial impact is not that big. If you look at all the regional fleets, which we own 100%, which is the inter-European business, the inland barge business, the inter-Caribbean business and the transshipment business in Asia, the actual results went from $1.2 million profit in the first quarter up to $3.5 million in the second quarter. So there was improvement, primarily driven by the inland tanker business, the barge business and the Caribbean business, while the European business was very challenging.If you look at the Asia-Pacific business, that's what we call SNAPS, which is a joint venture with NYK, we saw an improvement there. We went from a $0.5 million loss in the joint venture in Asia to a slight $200,000 profit in Asia. I think that reflects the pick-up of activity in Asia and we expect that SNAPS will continue to see improved performance. If we then move to the Terminal business on Page 15. And here, again, we compare the operating profit between the first quarter and the second quarter. It continues to steadily improve. And this is, again, what I call the steady, long-term steady cash flow coming out of this business. And the team are doing a very good job in managing the situation. We talk about the people that are sitting and working from home, but there are some work that cannot be done from home, those are the seafarers, those are the operators that are on the front line, and they have done a tremendous job in keeping the operation going. My hat's off to the whole team.The operating revenue went from $61.7 million in the first quarter just slightly down to $59.7 million; the EBITDA from $33.4 million up to $35.3 million; and the operating profit from $18.9 million up to $19.2 million in the second quarter. And utilization went from 90.5% to 95.2%. If you look at the operating profit variance, the first quarter was $18.9 million, slightly lower revenue, so -- lower revenue but higher utilization. We were able to secure some trading business for some traders. We filled up our tanks from lower-paying business but higher utilization. So the overall positive benefit because there was lower operating expenses associated with those contracts. Slightly higher depreciation, higher equity income of $0.4 million and lower A&G and other expenses of $0.3 million, bringing the operating profit to $19.2 million for the quarter. Steady as she goes, and this, I think -- this is the segment where we -- I feel the most comfortable because of the complex and the customer base and the locations of our terminal. If you go to Page 16, Stolthaven Terminals' performance. Stable and steady performance throughout the quarter. The terminal -- the U.S. terminals were stable utilization and stayed at above 90% and fully operational during the lockdown. The Brazil and European terminals saw a drop in chemical throughput, but we saw healthy ethanol demand in Brazil. The ANZ, that's the Australian-New Zealand terminal, we have seen the terminals have increased activity during the second quarter, which helped to increase the utilization to 94% -- almost 95%, up from 90%. The equity income from our joint venture went from $5.6 million, up to $6 million to the quarter. If you look at the graph below, it kind of illustrates the steadiness of the performance of this business. And I think it will continue to do so going forward. If you look at the markets, the U.S. market. Going forward, U.S. market overall is steady, but chemical and base oil into automotive industry is still weak. I mean part of our business is, of course, new [ orders ], and of course, those are still being stored, but there's very little throughput. We are seeing still a lot of inquiries and we are pursuing lots of opportunities, both in our Houston and New Orleans terminal.Asia, the Chinese chemical market has showed signs of improvement post lockdown. The Korean market remains stable for chemicals, but Southeast Asia is lagging in recovery. The European market, I think, was probably the most challenging because of the European economy. European market remains steady for chemicals, although the broader market remains weak due to the significant exposure to industries such as car manufacturing and the petroleum storage, which we have at our OTSA terminal in Antwerp, remains strong. The Brazil market is steady. The chemical market continues to show signs of weakness with a pick-up expected once lockdown eases and the petroleum and ethanol markets remain more stable, including on the throughput.If you then go to Page 18 and 19, Page 19 for Stolt Tank Containers. Operating profits, $135.2 million, that's up from $129.4 million in the first quarter. EBITDA increased from $16.5 million to $21.2 million. Operating profit up from $6.7 million to $13 million. And utilization went from 68.5% up to 69.7%. So a very, very good picture. I would like to remind you that we had an issue in the first quarter, where we had some higher...[Audio Gap] charges. We got the IMO 2020, which cost -- had an impact on our results in the first quarter. Also, during the first quarter, we had a lot of empty repositionings because of the uncertainty -- tank containers are always an early reactor to changes in the market.So if we compare the first quarter to the second quarter, we had higher transportation revenue of $0.5 million. We had higher demurrage and additional revenue of $4.3 million. We had higher other revenue of $0.8 million, that's like these add-on charges that we had. We had lower move-related expenses in the second quarter, lower trucking expenses, lower ocean container line expenses. And we had less repositioning expenses. We were hit by repositioning expenses in the first quarter, less so in the second quarter. We had higher repositioning costs in the first quarter and less so in the second quarter. And higher other operating expenses of $3 million, brings the operating profit for the Stolt Tank Containers business to $13 million for the quarter. The tank container market highlights. Demand was firm during the second quarter. Shipments were slightly down, but margins were up due to demurrage revenue. The total shipments were about flat for the quarter -- quarter-on-quarter, but actually tailed off towards the end of the second quarter. Volumes into and out of Europe were weak and continued to be weak, but it was offset by good volumes out of U.S. and South America. Demurrage revenue was up due to strong shipments in February, March. And when the customers receive the tanks, they have been holding on longer on to those tanks, which, again, I guess, reflect that the product is not moving through their factory fast enough and they use our tank containers as storage and then we charge them demurrage, which is good for us. Repositioning costs were down due to well-positioned tanks relative to demand and less intra-regional shipments or more long-haul shipments. The ocean freight, as I said earlier, has come down as container liner market has softened. If you go to Page 21, looking forward. This kind of reflects -- the bottom graph reflects the development of the tank container fleet. And you can see that we have been growing and expanding aggressively for a long time. And we hope that we will continue to do so going forward. This market continues to grow and the fundamentals in this market are very strong. As I said earlier, there are more operators, more competition, but through our platform, we are very well positioned to be able to compete profitably and this market continues to grow. As we see the market now, we see that the Asian markets remain busy and good demand in oil and chemical trade and increase in exports to Europe. So the Asian export business is doing well, looking healthy. The European export is down due to the lockdown and also the European demand is down due to the lockdowns in Europe.The South American exports are strong and a positive outlook for the coming quarter. Demand in North America is holding up, thanks to the diversification of our customer base. And the food-grade business is very strong and we're doing very well. I guess, we tend to consume more alcohol when we sit at home in a lockdown. Of the second quarter, shipments were down. So as we mentioned, we saw a drop in shipments in June, but actually, the July shipments or bookings have been picking up again. So it's too early to say. It's very difficult to predict, but we thought we saw a drop in June. We did see a drop in June, but we're actually starting to see a pickup again in July. And also, this is the summer months, so we usually do see a dropoff. So is it because of COVID-19 or is it because of seasonality? It's difficult to predict. But overall, I'm bullish that Stolt Tank Containers will do well going forward.Then moving to Stolt Sea Farm. That is the business that has been the hardest hit because of the COVID-19. I remind you that the turbot peak volumes, if you recall the Norwegian turbot business, is primarily sold to the retail -- sorry, to restaurants and hotels and all in Europe and most -- all the [indiscernible] are closed down. That has impacted our business quite significantly.On Page 23, we compare the first and second quarter, again, with operating profit. Operating revenue, $13.6 million for the second quarter. That's down from $24 million in the first quarter. EBITDA, negative $1.6 million in the second quarter and that is down from $2.9 million in the first quarter. And the operating loss was $4.7 million, that is down from $8.8 million. And I remind you that we did take a $12 million impairment on our biomass in the first quarter, which we didn't have in the first -- in the second quarter. So operating profit, or actually operating loss, for the first quarter was $8.8 million. Lower turbot sales in the second quarter, so less volume being sold in the second quarter at lower price. Lower sale of sole. We have lower operating expenses because of the actions that we have taken. And also, when you harvest far less volume, of course, the expenses go down. And we had -- we didn't have the impairment that we had in the first quarter. So a less impairment of $11.6 million, slightly higher impairment (sic) [ depreciation ] of $1.8 million and lower A&G of a positive 0.2 million, which brings the operating loss of $4.7 million. If you go to Page 24, the market has been weak for seafood, especially the high-value species like turbot and sole. We have adjusted our prices to the weak demand, which then allowed us to keep the flow of sales going. And we have switched the sales and we've pushed more into the retail segment rather than the restaurant and hotels. Our action plan, as a result of the COVID, we have successfully taken steps to preserve cash. They have secured their own finance, local financing. So Stolt Sea Farm has not been a cash drain on the group. We have been able to get extra credit from our own vendors. We have held back on CapEx and hire freeze and we have achieved grants from the local government. We are very much focused on the working capital and with no relevant bad debt. We reduced OpEx by the reduction of biomass. We have improved the feeding efficiency. We've reduced the energy consumption and we have tight control on the maintenance expenditures.How does the rest of the year look like? Well, we have written down the biomass. So -- and I think that the value of the biomass that we have now in Stolt Sea Farm is at less than EUR 6. We are now selling above EUR 6. For us to go breakeven for the remainder of the year in Stolt Sea Farm, we need to have a price of EUR 7.5 and we have done EUR 6.6 as we speak. So I think we have reached the bottom and the markets are now opening up again, as you most -- most of you know that Spain, Italy, France, they are all opening up. The restaurants are opening up. The hotels are opening up. And we are seeing, actually quicker and earlier than we expected, a recovery in this market. So I believe the bottom has been reached in Stolt Sea Farm. And hopefully, we'll get back to our normal prices quickly.Stolt-Nielsen Gas, not much to report. We have, as you know, fixed 1 ship to Petronas, the first ship for a 3-year time charter. Now the challenge here is, of course, that the ships are being built in China and they are being delayed. But we're working together with our charter, with Petronas, and they understand and we're working together. So we do expect the ships to be delivered at the end of the third quarter so that we will start generating revenue there. We also have 1 ship on bareboat to Golar Power. We believe that, that ship will also be -- that the second ship will also be delayed. But again, we're working together with Golar Power and I expect that, that ship may slip into 2021.There are high -- so there's a lot of activity going on in Sardinia, on Page 27. The terminal that we're building there, it's also been delayed. We now believe that we will be operational at the end of the year, again driven by COVID. But also, we are working on -- and making great progress in selling LNG to the local market. So it overall looks promising. When we get the cash flow from the 2 first ships, it will certainly help. We do not expect that we need any further equity to be able to take delivery or meet the investment that we have committed. That brings me to Page 28. Jens will take us through the financials.

[Jens F. Grüner-Hegge]

Okay. Thank you very much, Niels. Again, good afternoon, and good morning to those of you calling in from the United States. I will, as per normal, provide details about the financial results released today for the second quarter. And considering the COVID-19 pandemic, I'll also give you an outlook of our cash flow forecast going forward. It's something we usually don't do, but we thought it was important to share that with you.I want to remind you that we have today filed our financial statements for the second quarter with the Oslo Stock Exchange. And as per normal, you will find that the press release, the interim financials as well as this investor presentation posted on our website, which is www.stolt-nielsen.com, under the section Reports and Presentations in the Investors section.So moving on to Slide 29. This is the Stolt-Nielsen Limited net profit loss overview. Operating profit before one-offs for the second quarter was $51.2 million, that's significantly up from the $29.5 million that we posted in the first quarter and that's really reflecting the good recovery in both Tankers and Tank Containers, as Niels discussed, and reduced operating loss in Stolt Sea Farm. Also, Terminals had a steady performance, but a strengthening U.S. dollar during the second quarter masked the positive impact of the improvement in utilization that was achieved in Terminals, and that was predominantly in Singapore and Australia.During the quarter, you will see we wrote off capitalized expenses of $1.8 million. That was at our Stolt Farm in Iceland. And consequently, the operating profit for the quarter was $49.4 million, up from $17.6 million in the prior quarter. Net interest expense continued to go down and was $33.4 million for the first -- for the second quarter and that was a decrease of $1.6 million. And we had an FX loss, small asset loss, of $1 million. The group tax charge for the second quarter was $1.7 million, a $0.5 million increase from the prior quarter.Also, as Niels mentioned, in the second quarter, we reclassified the Sterling Caviar business as held for sale. And in the process, we wrote down the assets of the business by $8.1 million. Consequently, we can report a net profit from continuing operations, which now fully excludes the Caviar business. So the continuing operations profit was $12.3 million and that was a good improvement from the loss of $19.4 million in the prior quarter. The loss that we took from discontinued operations was $9.3 million, that is the $8.1 million that we wrote down the business with as well as the quarterly running loss of $1.2 million. And you will see that we have excluded the Caviar business from prior quarters as well. Consequently, the net profit came in at $3 million for the quarter and EBITDA came in at $122.8 million. And again, note that the EBITDA is before the fair value biological assets, insurance reimbursements and other onetime noncash items.We can move on to Page 30, please. This time, we have decided to show you a different view of the balance sheet, where we are focusing more on the covenants. If you look at the top-left quadrant, you will see that the total debt at quarter end was $2.567 billion and that's down from $2.585 billion in the first quarter. Tangible net worth remained flat at $1.58 billion and consequently, we saw that the debt-to-tangible net worth ratio declined slightly from $1.64 billion to $1.62 billion.If you want to look at net debt, subtracting out the cash, net debt was at $2.34 billion at the end of the second quarter, as we had a significant cash balance of $230 million. Total assets for the quarter stood at just over $4.7 billion.Looking at the other column, the EBITDA-to-interest expense to the right, you will see that with the improvement in the EBITDA that we experienced in the second quarter, the EBITDA-to-interest expense ratio improved to 3.18 from 3.05 in the first quarter. And keep in mind, this is calculated over the last 12 months. So likewise, our net debt-to-EBITDA had a significant improvement, from 5.64 to 5.27, as you will see in the bottom left quadrant.Our liquidity position at quarter end stood at $411 million, that's made up of $230 million in cash, as mentioned, and $181 million in availability on the revolving credit line. This is down from the prior quarter, but keep in mind, at the end of the first quarter, we had just raised a $142 million bond to prepare us for the bond maturity -- the bond that matured in April of this year, so during the second quarter.If we move on to Slide 31, please, this is the capital expenditures program. Year-to-date, we have done $73 million. But for the quarter, the second quarter alone, we had about $40 million in capital expenditures. Remind you that this excludes what we pay for drydocking of the tankers. For Tankers, we spent $12 million on non-drydock expenditures; $15 million for Terminals; STC was about $2 million. And interesting enough, we had negative $2 million for Stolt Sea Farm as they received grants on prior -- related to prior capital expenditures done in Spain. We also invested further $10 million into Avenir Gas during the quarter and we had spent $3 million in corporate. That leaves us with about $98 million remaining for the year. And some of the reduction that we had, of the $62 million, have been pushed in over to 2021. So in '21, we expect about $89 million of capital expenditures. Moving on to Slide 32. This is a different view of our liquidity position or cash flow, if you like, than what we normally show you. It's trying to give you a bit more of a visual view. The free cash flow increased to $64 million in the second quarter from $23 million in the first quarter. So if you look at the graph, you start at the left-hand column, you will see we have liquidity available at the end of the first quarter, $511 million. Operating cash flow for the quarter was $108 million. Then, we have capital expenditures of $36 million. That's different from what I show in the prior slide because that does not include the $10 million that we invest in Avenir, but it does include $6 million that we spent on drydocking. And then we had other investments, which included -- was $8 million, that's $10 million invested in Avenir, less $2 million that we received in dividends from our joint ventures. We then had took on additional debt. As I mentioned, we drew down on the revolving credit line during the quarter of $130 million. And also, as Niels mentioned, Stolt Sea Farm took on very advantageous loans of $14 million separately. And during the quarter, we paid down $155 million in debt, and that included $110 million approximately on the bond that matured in April plus further debt maturities of some $45 million. We also paid $9 million on finance leases and FX had a small impact and thus, we ended up at $411 million in the liquidity at the end of the second quarter.Moving to Slide 33. What I want to share with you here is that since we acquired JO Tankers back in 2016 and subsequently took delivery of what was a quite significant new building program, we saw our debt peak within the first quarter of 2018 at $2.448 billion. And since then, we embarked on a program to reduce debt, control capital expenditures, preserve liquidity. And we have since then seen that our debt, net debt, has been reduced by $280 million. And I remind you that this has been through what has been a very weak market for tankers. So even in a weak market for the main business, we've been able to improve on our debt situation.You will see in the first quarter and second quarter of 2020 that there were gray boxes on the top. That's the IFRS 16 treatment of our finance leases, so the debt portion of those leases. Net debt now stands at $2.168 billion at the end of second quarter, so down $280 million. Bottom left, you have our debt maturity profile. And having repaid the April bond, there's not much left in 2020, about $80 million. With the bond that we just issued now in June that actually settled on Monday, we reduced the March 2021 bond from a $232 million outstanding down to $154 million as many of the bondholders rolled from that bond into the new bond, and we have $159 million of regular principal payments. As you see the bonds going forward, the $175 million bond in 2022 is a late '22 maturity. So there's lots of time to prepare for that. As mentioned, we did a bond, NOK 125 billion (sic) [ NOK 1.25 billion ] bond that settled on Monday, June 29, and it was NOK 522 million that we repurchased. We are working on additional financing, as Niels mentioned, $65 million to be secured by the Moerdijk and Dagenham terminals is the one that has progressed the most at the moment.So if you move on to Slide 34. Here we give you a view of the liquidity going forward and this is in light of the bond that is maturing in March and we want to give you comfort that we are in a good position going forward. So we start with the left-hand column, $411 million in liquidity at the end of the second quarter. Then we did the bond now in June, $132 million, that's SNI09. And you see the dotted line going over to the $78 million redemption of the March 2021 bond. We then had credit approval for a $65 million terminal financing and we're working on the documentation. Then over the next 12 months until the end of the second quarter 2021, we have done a conservative, I emphasize conservative, of our operating cash flow of about $350 million. We will have further capital expenditures of $158 million in that same period over the next 12 months. And then we will have debt reductions, regular debt principal payments of $159 million as well as the remaining balance of the March '21 bond of $154 million as well as interest payments, let's not forget, of $131 million. And that leaves us with a liquidity position at the end of the second quarter of 2021 of $280 million with the next sort of more significant maturity being the September 2022 bond coming. This does not include the $100 million RCF that Niels has mentioned. It does not include the terminal top-up financing that we are considering for the Singapore terminal. We also have further unencumbered assets, should that be necessary, that we can also use to finance further -- or to raise further liquidity should that be needed. So I just want to share that with you as a view going forward.And with that, Niels, I would like to hand it back to you.

[Niels G. Stolt-Nielsen]

Thank you, Jens. Before we open for questions, just the key messages that I want to give you is that we -- as we showed you, we've taken early action to improve liquidity, our liquidity position, and to protect our revenue base. We have secured good contracts, contracts in tankers that secures volume. Each business is well positioned within their respective segments. If needed, we have done a downside scenario action plan, where we have established further OpEx savings and cash sources identified. So we have made plans in each of the businesses, as I said. If it should happen, we have actions to be taken. We have unencumbered assets, as Jens said, available for a further $200 million financing. We have ample room under our covenants. And we have, as also Jens showed you, a liquidity to repay the March '21 bond. It's already secured. And I feel then very -- I feel comfortable with the position that we are in. Uncertain times ahead, but I think that whatever comes our way, we will be ready. And also in these times, there will always be opportunities that are raised and I hope to be able to take advantage of that.Operator, that concludes our presentation. We would now like to open up for any questions that the callers may have.

[Operator]

[Operator Instructions] And your first question comes from Eirik Haavaldsen from Pareto.

[Eirik Haavaldsen, Head of Research]

Just first on the opportunities you mentioned there. I mean it's been a crazy 6 months, right? So what if -- if you could be a little bit more specific on what type of opportunities -- maybe which of the segments you would -- I mean is it mostly on the tanker side? Or is it across all of your industries? Is it something completely new?

[Niels G. Stolt-Nielsen]

It's not new. And as I remind you, we are very much focused on reducing our debt and conserving cash to ride out whatever downturn comes our way. But we are seeing fantastic opportunities in the Tanker business -- sorry, in the Terminal business to expand, which we would like to pursue. I don't think those opportunities will run away, but there are opportunities there for further expansion in the Terminal business. Tank Container business, we've always -- we have expanded through buying or building our own tank containers, but we've also expanded by taking over competitors. So if there are competitors or other platforms out there that are suffering, we would like to see and pursue those opportunities.And then, of course, Tankers, I think there is further room for consolidation, and there's many ways of doing that. And I think using our platform and using our balance sheet, hopefully, we will be able to pursue some such opportunities. It doesn't necessarily mean that we acquire, but we can maybe see if there's a way of operating pool agreements. So we would like to -- to answer your question, there are opportunities that are arising in each of our businesses.

[Eirik Haavaldsen, Head of Research]

Understand. And second, when -- you have more than 95% utilization on your terminals this quarter, yet the EBIT increase from the first quarter isn't that substantial. I mean is it fair to say that some of the increase quarter-over-quarter was lower-paying storage products? Or how should -- and second, how has that moved into the third quarter?

[Niels G. Stolt-Nielsen]

So the reason that we had increased in utilization is because we took -- we have -- as we said, we have had a challenging market in Singapore. We were able to secure some 3-month contracts with some traders, which is lower-paying business, lower-margin business. So we -- the core business that we focus is chemicals. That is steady, that hasn't changed. What we saw the pick-up of utilization in Singapore and in Australia is lower-paying business but higher volume. So that's why the utilization picked up. It does not -- so it does not reflect that the core chemical market is weakening. It's actually remaining the same and it's healthy, but we just took the opportunity to secure some trade business in that quarter. We'll see if that lasts in the third and fourth quarter.

[Eirik Haavaldsen, Head of Research]

Okay. But there's nothing on the normal chemical storage business that has changed dramatically over the past -- well, since kind of the craziness of April, I would say?

[Niels G. Stolt-Nielsen]

No, not at all. I would say that, to the contrary, we are seeing steady inquiries for storage of chemicals in our main terminals.

[Eirik Haavaldsen, Head of Research]

Fantastic. Okay. And finally, on the corporate and other operating profit, there is a -- what you say, is the delta there of about $4 million, $5 million positive on corporate and other, reflecting a lower profit-sharing accrual. Can you be -- can you shed some light on that? And how should we model that going forward? Because, obviously, $4 million, $5 million per quarter is a substantial amount? Is it a one-off?

[Niels G. Stolt-Nielsen]

Yes. I think it was $5.7 million in corporate and others. Can you elaborate?

[Jens F. Grüner-Hegge]

Yes. It's actually comprised of a number of small items. But the big one is clearly the profit-sharing we over accrued in the first quarter. If you look at the results, it should not have been done and this was a reversal. I think if you're looking forward, you can sort of keep it, keep it as a very small percentage of the net profit, not to really confuse the results. This was a onetime correction of an over-accrual in the first quarter.

[Eirik Haavaldsen, Head of Research]

Okay. So it should still be -- okay, I understand.

[Operator]

And your next question comes from Anders Karlsen from Danske Bank.

[Anders Redigh Karlsen, Analyst]

Just a question on your contract coverage. You state that you are increasing your contract coverage. Can you say a bit more how much, approximately, we have on the contract or on the COAs now? Or how would you see that going forward?

[Niels G. Stolt-Nielsen]

Yes. I mean that's in our conservative approach, but we want to secure, because it was I think from 70% -- I think 73%. So not that much. But I remind you that most of the contract, because we've been operating in such a weak market for a long period of time, there is not volume guaranteed under these contracts. So it's -- if you do a contract from Houston to Rotterdam for one particular product, the customer is obliged to ship with you at an agreed freight rate from that -- those 2 ports, but they don't guarantee -- they don't have to ship. So there's no minimum guaranteed minimum and maximum volume under the contract. Or there is a maximum volume, but there's no minimum volume guaranteed. So what we have focused on is really to fix additional cargoes where there is a minimum volume guaranteed under the contract to secure the volume that is out there. I am of the opinion that we believe that the market will slow down. We haven't seen the volume slowdown yet. But when you see what is happening in the airline industry, in the car manufacturing, in the construction industry, hopefully -- we haven't seen the impact yet. But if you believe that there's going to be a slowdown in the global economy, we felt it prudent to secure volume, too. So we have -- we have gone after additional business and we've been focusing on business by guaranteed volume. And actually, we've been able to achieve relatively good rates. As we showed, the average rate increase on the contracts that we renewed was 5%. So that's the thinking.

[Anders Redigh Karlsen, Analyst]

Okay. So in terms of your G&A expenses, I mean it came down from about $52 million last quarter to about $45 million this quarter. How much of that is temporary effects following COVID-19, no traveling, no entertainment, whatever? And how much of that could actually be translated into permanent savings?

[Niels G. Stolt-Nielsen]

Well, it's -- I think that we can't continue to have no traveling. We can't continue forever to not hire people. So we have taken dramatic action -- there's a hiring freeze. So even if people retire or people leave us, we have stopped all hiring and that can't go on forever. So that will most likely come back again. It's probably going to take a while before we go back to normal. But from, I would say, from $45 million back up to -- I'm discussing here, Jens, but back to $50 million, most likely. And also, we did a volunteer -- we volunteered to cut our, the senior management, to take a salary cut and to -- and the Board to take a cut, et cetera. So once we feel that we are through the storm, I think that it's only fair to compensate for the sacrifices that we've made and go back to normal again. On the permanent savings, I would say, as you know, working from home works. We are, of course, keeping an eye on productivity, but working from home works. So going forward, with the systems, with the technology and all the things that we've done, there are savings. There are permanent savings that we can achieve. So less office space, I think that we will never go back to the same sort of traveling that we did. We find out that having these Teams meetings works very well. So it will be a difference, but it's too early to identify, but it's very much in our focus to create permanent savings from the experience that we've had in this pandemic.

[Jens F. Grüner-Hegge]

Niels, maybe I can add, in the second quarter, we also saw that the U.S. dollar strengthened, which also had the impact of reducing the A&G in foreign currency locations in U.S. dollar terms.

[Anders Redigh Karlsen, Analyst]

Okay. And then one final one. In the U.S., I mean you have the ITC terminal that is probably still out, as far as I know, in Houston. Are you fully utilized there? Or is there more to add on to utilization and revenues in the Houston and in the U.S. area on the chemical side?

[Niels G. Stolt-Nielsen]

So in both Houston and New Orleans, we have a lot of space to expand, which we are looking at projects. So even though we have capital expenditure restraints right now, there are projects that we are pursuing and looking at. And we have additional space to build additional tanks. So we've put in place all the infrastructure, as you probably know, we built a new jetty in Houston. And we have the east property, which is not full. So there's plenty of room for expansion there. And also in New Orleans, within our wall, this protective wall that we built, we have plenty of space for expansion there. And really, on top of the priority list, on spending or capital expenditure, once we open up again, is to develop and pursue these opportunities that we consistently see in the U.S. Gulf. Utilization is high, both in Houston and New Orleans. We are building additional -- there are some tanks still being built in New Orleans, but it's all contracted out. So what we've been focusing on now, since basically utilization is at the max, we have been renewing -- calling low-margin business and replace it with higher-margin business and that is ongoing. So that's why I say that without further capital expenditure, I think that we will still continue to see improved earnings from the Terminals division because we've been focusing on: one, getting our operating costs down, but also getting higher-margin business into the terminals. So we have expansion for additional land both in Houston, New Orleans. But the growth that you will see in the short run is coming from lower operating cost but also higher-paying -- higher-margin business that we're replacing low-margin business when the contract expires with higher-paying business, taking advantage of the relatively strong market in the U.S. Gulf. Operator?

[Operator]

Thank you. And we have no further questions at the moment.

[Niels G. Stolt-Nielsen]

I guess that completes our presentation. I would like to thank you for taking the time and we'll talk to you again when we release our third quarter results. Keep well and thank you for participating. That completes the presentation.

[Operator]

Thank you for joining. You may now all disconnect.