Stolt-Nielsen Ltd

OSE:SNI

Earnings Call Transcript 2021-Q4

[Niels G. Stolt-Nielsen]

Okay, good afternoon, good morning, thank you very much for joining us on this video conference presentation for our fourth quarter results for Stolt-Nielsen which we're streaming live from London.My name is Niels Stolt-Nielsen; I'm the CEO of Stolt-Nielsen. I'm here together with Jens Gruner-Hegge, our CFO. And together with me from Rotterdam is our person of Stolt Tankers, Lucas Vos.Again, thank you for joining this quarterly call. I'd like to remind you that you can post questions at any time during the presentation by typing them into the question-and-answer window, which should appear on the right side of your screen. And this video conference will be recorded. All questions will be answered at the end of the presentation. So with that, let's move on to our agenda.As always, I will take you through the highlights of Stolt-Nielsen. Lucas will go through Stolt Tankers, and then I'll go through Terminals, Containers and Sea Farm and also Gas. And then Jens will take you through the financials. And then we will move to the -- read up the questions and try to answer them.If we then move to the fourth slide, the highlights for the quarter, positive, mostly in the green. The operating revenue up to $593 million, that's up from $580.9 million, mostly driven by the fantastic earnings that we have seen coming out of STC. Operating profit was down from $79 million, down to $77 million, primarily driven by the $10 million impairment that we took, or it was driven by the impairment that we took in the terminals, our terminal in Newcastle. Free cash flow is down from $106.4 million down to $66.2 million because of increased working capital and increased receivables, which is kind of underlying positive because we're doing more business in STC.EBITDA up $162.9 million, that's up from $147.8 million. Again, primarily driven by tankers. Net profit came in for the quarter at $35 million, that's up from $33.5 million in previous quarter. And our debt level is continuously reduced. But this ratio, net debt to EBITDA is at 4.29. And that is a combination of increasing EBITDA and the steady decline in our debt level. And at the end of the quarter we also have $434 million available of liquidity, which Jens will take you through later.Then taking you through just quickly the net profit analysis from the third quarter of '21 to the fourth quarter of '21. We saw slight lower operating profit from Stolt Tankers. There is lot of big -- a lot of big movement there. The market remains the same. Lucas will talk about that later, but it was driven by slightly lower volume and slightly lower freight rates. In Stolthaven Terminals, the operating profit was done by $1.4 million, lower throughput. However we had high utilization. So lower throughput, lower -- results in lower wharfage which then results in a slightly lower $1.4 million operating profit.STC, we can talk about that later. But we actually had lower shipments in the fourth quarter than the previous quarter, but we had, had the higher margins and higher demurrage. So Sea Farm lower operating profit, that is lower volume. And then lower positive fair value adjustment for the quarter. So still profitable, but lower volumes because of seasonality. I'll remind you, our quarter ends at the end of November. Christmas sales is in December, so we had lower volume, but also a lower positive fair value adjusted for the quarter. Stolt-Nielsen Gas, improved operating profit, primarily driven by sale of land that we have had in Canada, but also more of the ships are coming online or begin delivered and generating earnings.We had lower accrual for profit sharing because I think we had over-accrued in the third quarter. So we had lower accrual for profit sharing in the fourth quarter, by $2.2 million. So lower corporate costs. And then we have the $10 million impairment in Stolthaven Terminal, lower losses on FX and other operating expense of $1 million and also lower income tax for the quarter of $3 million compared to the previous quarter, bringing our annual result to -- at 30 -- sorry, the quarterly result to a $35 million net profit.And then, we go to the next slide. Moving over to Lucas, and then…

[Lucas Vos, President Stolt Tankers]

Yes. Thank you, Niels. When we look at Stolt Tankers in isolation, I think the quarter has been slightly disappointing, primarily driven by the fact that we had lower contract volumes and a weak spot market. The lower COA volumes very much driven by a strong U.S. economy, but I'll come back to that one later. And a weak spot market is still a reflection that a lot of the MR segment is in the chemical trade. So overall, lower results.Our utilization therefore is also down, with 3.4%. I would also have to say it's -- we have also increased our fleet, if you look year-on-year, to be well-positioned for the upturn that we expect to happen in 2022. So we're well-positioned, but utilization for this quarter was down. If you look at the operating days, slightly down to around 7,000. For your information, for comparison, this time last year it was around 6,000. So we've added net a lot of operating days. We're well-prepared for the upcycle. Lower net bunker costs because we have, we're benefiting from the surcharge revenue in that respect. So that is -- that's good.And then there are a lot of one-offs in this slide deck, on this slide, I mean. We had the capital distribution of the Norske Krigsforsikring which is the insurance premium paid throughout 2010 through 2019 of which that has now been redistributed to the equity holders. And $12.5 million is our share. So that counts positively. What counts negatively is that we have decided to dispose of the Stolt Groenland and have an agreement with our insurer on that issue. But it means that we taking a loss of $30 million into this quarter numbers.In these numbers are also the sale of the Sequoia and Spruce, 2 of our ships which again clouds sort of the -- it's a one-off, but it does cloud the overall numbers. I think the last point to mention on this is of course we've had a lot of impact from COVID again on -- in 2021, and specifically also in this quarter. If you look for the year, we carry around $7 million of COVID-related costs, which hopefully in 2022 we won't have to carry anymore.If we go to the next slide on the bunker side, you can see that we are dealing with very high bunker prices. It has again risen from $496 in the third quarter to $530 in the fourth quarter. However you see that our net bunker costs have overall gone down slightly. That is because we get a lot of it back from our customers, but it's also a reflection of that we consume a lot less. We have this internal restructuring program where we can show that year-on-year we have a 10% reduction of our bunker consumption, and -- which is good, but doesn't necessarily come back in these numbers because of the high bunker price.If we look at our SIR index, you can see that that's still on a downward trend. Although we have seen a little uptick in December and January, but it's still very much a reflection that the overall rate levels is very much impacted by the MR market in our market. So our overall SIR has been around 18,400, which is maybe not where we want to be, but you can also see that our average debt rate is going down. It's because some of those bigger vessels are going out and you see a reflection of the fact that we have the J19s now in our fleet from Tufton, which we took you through, I think it was during the last call. And it takes our average sites down.If I look at the current markets, that would be on the next slide. As I mentioned already, there is a -- that will be the next slide, Sergi, yes, thank you. There is of course a strong U.S. economy, which means that a lot of the chemical production is used internally instead of being exported. So the U.S. exports, they have been rather low. We see it coming back right now. And particularly imports from Europe, from India and South America. So that's a good sign.The return markets from Asia are very strong to Europe and U.S. And Europe has become overall chemical importer. And we see that coming back in these numbers. The big unknown still is clearly the oil demand, which is dampened by the resurgence of the Omicron variant, but as it is less serious, we hope it's going to go away. But it does mean that still our -- a lot of MR ships are into our market.If I look at the regional services, I'm very happy with what is happening right now in the markets. Our inter-European setup together with Essberger and a joint venture E&S Tankers is performing quite well. We have around 2 million of synergy savings between the 2 companies, which is higher than we expected, and is also a sign that further consolidation in that market would be a good thing.If I look at the Rhine product that we have, the inland tanker service, very strong clean product demand. And that is also a good indication that our own market is going well. Asia Pacific, congestion, particularly in China, made higher spot rates, which we benefited from. So also there we are quite happy. So we may not have seen the desired improvement on the deep sea side, but we definitely saw them already in the regional markets.Looking forward, that would be the next slide. I feel we're very well-positioned to capitalize on the underlying market drivers. They are very positive. If we look at the chemical trade, it's developing positive around 6% growth, it's driven by the recovery from COVID, but there's also new industrial capacity coming on-stream. There is a change in the flows, particularly with China becoming more independent, but overall underlying growth very good.The supply side may be even better. The picture is already in our favor for quite a long time. I think what is a remarkable difference right now is that the order book is sort of closed, if you want, for 2024 and 2025. The yards are full, and they're not full with chemical tankers necessarily, but with other ships. So the supply side will remain in our favor for quite a long time.And the last one shows you that the market, that will really depend on the oil side, shows that the inventories are at records low these days. So we also expect that product to move again. It of course will depend on an increase of the output which for the time being is sort of not coming along. So we see the Brent right now above the $90, and it hasn't been there for over 7 years. So that's quite something. The other issues clearly that we are monitoring closely is the geopolitical situation around Ukraine, which might have a negative impact again on the oil production. Overall, still very confident about the markets as it is right now. And with our increased fleet, you'll also see that going forward we will have a lower contract ratio, but it's also driven by the fact that we want to be more exposed to the spot markets to benefit from the upcycle when it will take place.Last but not least, let me say something around our sustainability efforts. There we are quite on track. We are 29% more efficient right now than we were in 2008. The target is to be 50% more efficient when we come to 2030. So we have 21% more to go. We have plans in hand to achieve the majority of that, but for the other part, clearly we depend on the breakthrough R&D basically on future propulsion. That's not necessarily where my concern lies. My concern lies more on the supply chain, so if we have the future fuel, will it also be available in the outer ports that we tend to get to? And will we come to a fair distribution of the additional costs that will lead -- that this will lead to in our industry. Overall, very happy with the progress that we've made. And we were showing that Stolt-Nielsen is leading also when it comes to sustainability. That's what I had. Niels back to you. Thank you.

[Niels G. Stolt-Nielsen]

Thank you very much, Lucas. Then going over to Stolthaven Terminals. Again, this is an operating profit variance between the third quarter and the fourth quarter. Here you can see the big impact there is of course the impairment with a lower revenue of $0.8 million, so $800,000. That is our utilization went up, but the -- it was offset by lower throughput, lower Wharfage primarily driven by terminals in Australia, in Singapore and some in Lingang in China, not dramatic changes, but a slight slowdown in the last quarter on throughput there. The other ones are stable or actually some of them increased. Slightly better operating expenses.Then we have the impairment in Australia. The Australian investment has become -- didn't develop as we expected. We really bought the company down there to develop Newcastle thinking -- the strategy was of course that the Australia is closing down more and more refineries, there's going to be needed for bigger and bigger import of these refined products. Newcastle is very well located in regard to the mining industry and also Sydney, closer to the market than the other terminals or the other ports, but that hasn't developed according to plan. So we're still working on it, but we found it prudent to take a $10 million impairment on that investment.Slightly lower depreciation from previous quarter, equity income slightly lower, and slightly higher A&G, bringing back the operating profit for the quarter of $8.4 million. But I think you will just go back next quarter back to normal performance from the Terminal division. The market remains healthy in the U.S. Gulf, high utilization throughput in both in New Orleans and in Houston. However, the throughput reduction, I didn't mention it earlier, but the throughput reduction also came from the softness of the chemical and petroleum market in Brazil, which is a lower utilization and throughput in Santos. The utilization of the European terminals are stable as demand for chemicals remain steady. Asia terminals have been impacted by the slowdown of the chemical market in China, and that is partly due to the chain constraints and restrictions on energy use that we've all read about.Mergers and acquisition. Activity remains high with numbers of international transactions. The latest that we read about was in the mid-teens as a multiple EBITDA, and there's strong demand for chemical storage investments. Moving then over to Stolt Tank Containers. Clearly the star of the show. The operating profit for the third quarter was $24.7 million. We had higher transportation revenue, was up by $10.3 million, driven by an 18.4% increase in transportation rates and rising ocean costs, partially offset by the decrease in shipment of 8.7%. Demand remains -- and then we had high demurrage and other revenues of $6.8 million compared to the previous quarter, offset by higher move-related expenses, lower -- we had low repositioning and slightly higher operating expenses and A&G of $3.1 million, bringing the quarterly results fourth quarter to $36.4 million.Demand remains strong. And we expect both the demand to remain strong in the foreseeable future. It's very much driven of course by what we're seeing in the container line industry, and we really don't see this market going to change for the next couple of years. And if you look at the shipment development per quarter, shipment development annualized is the yellow on the top-right side. We are up at 140,000 shipments for 2021. And you can also see then the historical development of the revenue per shipment and transportation cost per shipment. The yellow being the transportation cost per shipment and the blue being revenue per shipment. So we have nicely been able to get the revenue per shipping up. And the transportation cost per shipment has not gone up as fast as the revenue. And that of course impacts as you see the results from the Stolt Tank Containers. So quite bullish for this segment.Very pleased with how we were able to secure space on the container lines. Team did a tremendous job in securing space. That was really -- the key is the huge demand in -- on the container lines, for us being able to -- as a logistic service provider to go to our customers and say, okay, we can move your product. The discussion really didn't go on what's the cost of moving this product, can you secure space, and we had space. So that's really well done, and I think we will continue to see good earnings coming out of it.The demurrage of course has also increased. That I think may also continue. I think the customers are now a bit worried. They'd like to have a little bit of inventory because of the uncertainty on the logistical side, on the logistics chain. So we're seeing quite significant demurrage coming, so customers using our tank containers for a longer time. And of course that is then reflected in the higher demurrage for us, demurrage income from us.Moving to Stolt Sea Farm. So the third -- the fourth quarter, as you know, our fourth quarter ends just before the Christmas sale. And so it is traditionally a slower month. So we had lower turbot sales because we reduced our harvest. And also lower sole sales in preparation for the Christmas sale. So you saw lower volumes of turbot. On sole we had lower operating expense as a result of lower volume being harvested. A&G approximately the same. And then we had a lower positive fair value adjustment of $3.3 million for the quarter. So operating profit went from $12.8 million down to $11.3 million.So nothing has changed in the market. The demand for the product is seasonal, but the prices are -- have been holding up. We talked about this earlier. The growth plan that we have for Stolt Sea Farm. So we have a well-established turbot organization. They continue to lead with the largest producers of turbot. We have utilized the proven flow-through technology. Relatively stated, there's this very favorable market conditions for that.Sole rollout, we have spent 20 years in developing -- EUR 75 million in developing the sole technology, the land-based recirculation sole technology. And we have -- as we've said earlier, we have 2 purpose-built land-based researchers RAS farms, which are now really starting to show significant improvement in the EBIT cost per kilo. We were able to achieve a 31% reduction in 2021, and we expect to achieve a total of 43% reduction by 2022. Our target is to get to 50%.So we're seeing that the design is working very well where we are able to increase. The growth is phenomenal, and we're managing the farm so that in all forms you manage risk, you manage the disease, and we have -- it's really working out well. And of course once those modules prove themselves as they're now doing, we will then start to add additional module next to the existing parts but also look at expanding in the future. So we have quite an ambitious growth plan for sole for the next 15 or 2035 plan we call. So the total volume ambition of 11,400 tonnes. And we have steps and we're making investments today for the juvenile production boost of investments start to meet this plan going forward. So this is -- these are not only words, these are actions being taken to prepare us for being in a position to develop this growth plan.Moving to Stolt-Nielsen Gas. As you know, we have 2 investments in LNG. One is Golar and the other one is the development of Avenir. We have done -- as you know, we contracted 6 ships and 1 -- and we built 1 LNG terminal. The final vessel of the 6 is scheduled to be delivered in the second quarter of '22, sorry. A fully funded investment program. We have 3 ships on time charter. And we are building up the volume in our Sardinia terminal. So 3 ships on time charter. One is to Shell. Shell just lifted subjects just before Christmas, I think, or just in the New Year. And we have currently 2 ships to -- 1 ship to New Fortress and one to Petronas. Then we have 2 ships that have been delivered, the 2 7,500. One will be in the Med serving the Mediterranean market, and then the other one will be in the Northwest Europe serving the bunkering in Baltic.We are then of course trying to develop the Sardinia terminal, it's up and running. We are selling LNG. But of course with the LNG prices as where they are today, the -- it makes the job more difficult to get. The long-term prospects are still there. Customers are still interested, but we are making the conversion from diesel, heavy fuel oil over to LNG when the LNG prices are where they are, it's a bit of a challenge. But the long-term trend hasn't changed or the outlook for this market hasn't changed. We also took what we -- as I said, we ordered 6 ships, 4 7,500 and 2 20,000. We sold 1 of the 20,000, a bit opportunistic. It also gives us access to the bunkering market. In cooperation with the buyers we will develop the bunkering market in China, but we sold one of these ships with a significant gain. So the company is well-funded to develop the strategy as stated. That completes my part for the time being, and then I'll give the computer to Jens to go through the financials.

[Jens F. Gruner-Hegge]

Thank you. Thank you very much, Niels. I just want to remind you all of a few things. Our fiscal year, as Niels mentioned, runs from December 1 through November 30. Also we have today posted with the Oslo stock exchange the press release with the earnings, the interim -- and the interim financials. And also on our website, www.stolt-nielsen.com we have posted both the press release, the interims as well as this presentation, so you can find them there. In addition, we have today also posted a video that looks at 2021 in review and talks also a little bit about the future. So I encourage you all to go and have a look at that.Niels and Lucas covered really the first -- the fourth quarter financials in great detail. So I will spend a little bit more time on the annual financials. And if you look at the top line, you see the revenue has gone up quite substantially since fiscal year '20 by over $200 million. This is driven predominantly by STC with the success here that they have had, having improved their revenue by $142 million. This is of course driven, as Niels mentioned, by this tightening of the liner market and higher trucking costs which are prompted and passed through to their customers. Shipments were up 8.4% over the year, also supporting that revenue line. Tankers had 2,000 more operating days in 2020 following the acquisition of the CTG ships, and that helped increase their annual revenue by just over $50 million. And last Stolt Sea Farm had a tremendous turnaround from 2020, and so an increase of $30 million, driven by a 6.5% growth in turbot volume and an 82% growth in sole volume following the new farms coming online.Moving down, you will see that we have impairment of assets this year of 10 million. As Niels mentioned, that's the Australasia impairment. Last year we had the $12.4 million where we impaired goodwill also in Australasia. Further down, you have the administrative and general expenses which are quite substantially up from last year, about $32 million, $33 million. And as you will recall, during 2020 the company was preserving cash and we cut expenses. We delayed -- we had a hiring increase. Travel was scaled back significantly, whereas this year we've seen a catch-up in a lot of those expenses, but also with the improved results of the company this year there is an increase in the profit sharing in the long-term incentive plan. That has also been increasing the A&G cost. There's some increase around professional fees due to initiatives that we have been working on during 2021 and also related to the -- at the beginning of the year, the IPO efforts that we did around Stolt Sea Farm. And finally, there's about $5.5 million impact from FX, increasing our cost.Further down, you see net interest expense flat quarter-on-quarter, but actually about $11 million down year-on-year, and this reflects predominantly the reduction in debt, but also the lower interest rates that we have seen, although you will see later they are starting now to turn around a little bit. Also worth mentioning is the income tax impact, which hasn't changed much quarter-on-quarter, but the income tax expense is up from $8.3 million to $24.4 million from last year. This is driven by Stolt Sea Farm's fantastic turnaround during the year. It is also driven by provisions that we've taken at STC. And then there also has been a tax rate increase in the U.K. as well as Netherlands, which has impacted our tax expense. So for the year, that brings us down to $78.8 million, up from -- and looking at continuing operations on it, up from $39.2 million. And as you will see here, there is $13.8 million loss from discontinued operations in 2020 that was related to the sale of the caviar business back in 2020.Now there's a lot of one-offs. So I just want to give you a feel for what is the underlying performance trend of the company by taking out the one-offs. You see the bottom line here shows the net profit line as reported both for fiscal year '20 and '21 as well as the last 2 quarters and the same quarter in 2020. In between you have the one-offs, but -- the positive D&K capital distribution being offset by the Australian impairment and the loss on the Groenland. But then we did have a positive gain on sale of assets. So taking those away, we would have had a higher net profit of $38.7 million this quarter.That compares with a similarly adjusted net profit prior quarter of $30.6 million. So there is a good improvement that we've seen in the run rate of the net profit quarter-on-quarter and also from last year, same quarter last year. From an annual basis, last year most of the one-offs were negatively impacting net profits. So taking them out, we would have ended at $51.3 million. But still we are at $79.2 million, so quite a substantial increase this year. And this really excludes any improvement in the biggest business, which is tankers, which has held steady. So a good underlying performance in our businesses.Moving over to capital expenditures. You see overall year-on-year '20 is at around $190 million, and we're expecting '22 to be pretty much at the same level. Last year when we were cutting expenses and preserving cash, we ended up at around $140 million. So we did see some catch-up this year, which will carry on into next year. For Stolt Tankers specifically, in the first quarter we acquired CTG ships. And that's the bulk of the $100 million spent in 2021, with the rest really being related to Ballast Water Treatment Systems. Dry docking is not included here, and that typical run rate is about $18 million to $20 million for dry docking annually.Stolthaven Terminals is mostly M&R. And in 2022 you will also see more catch-up on M&R as well as jetty construction at our Dagenham terminal, which will spill over into 2023. For Tank Containers this year it was mostly depot work that we were doing. And next year we will see a delivery of about 1,000 new tank containers coming to the fleet as well as further depot work. The $21 million for Stolt Nelson Gas was the last part of our committed equity contribution into Avenir gas. And that concludes the capitalization of Avenir gas at this phase. And then finally, in corporate and other, this really relates to our systems and our ongoing digitalization of the businesses, and we'll see that increase next year.Then moving over to cash flow. Looking at the cash flow generated by the operating activities, Niels already mentioned that the reduction in that cash flow was driven by increased working capital, and we did see our receivables go up during the fourth quarter. And again, emphasizing what Niels said that, that is really positive and that was increased activities and where naturally receivables have been building up. I do expect that this will show a bit of a reversal in the next quarter as we start collecting on those receivables, as we collect on the Groenland insurance settlement and as we collect on the D&K capital distribution.Moving down, you will see that we had capital expenditures of $28.5 million during the quarter. And for the year, we spent $190 million. This actually excludes the joint venture equity injections, but does include the drydocking. So we're doing what we can to confuse you here. But on the line under, you have our actual cash investments net of -- into joint ventures net of dividends that we have received from the joint ventures for the year and for the quarter.So that gave us from investment activity. You see there hasn't been a lot of cash going out in the last quarters, but for the year we were at $180 million. Then on the financing side, we have been busy reducing our debt levels. So not much new financing that has been taken on. Instead, we have paid down quite a bit, and you will see that when I come back to the balance sheet a little bit later, that we have a good reduction in our debt levels year-on-year, a little bit less when you look at it on quarter-on-quarter. And that means we ended the year with cash and cash equivalents of $124 million.If you then look at the graph to the bottom-right, you will see that we also in addition had about $310 million available liquidity under our various credit lines, so for total liquidity of $434 million at the end of the fourth quarter.Looking at balance sheet in graph format. If you look at the top left graph, you will see our debt to tangible network. This is actually one of our bank covenants in our financing covenants, it should be below 2.25:1. And on the top, you will see we ended the quarter at 1.44:1. So there's been a good improvement there since it peaked in the second quarter. That's after we had both the CTG ships and take on debt to acquire them. And since then, we made good progress on reducing our gross debt.And the tangible network has remained mostly stable. But I should add that we have of course paid dividends out, and there's been some adjustments to other comprehensive income, which has impacted the tangible network. So on an annual basis we see that during this year from the end of 2020 we were at $2.5 billion in debt. We saw a peak at the end of the second quarter of 2.6 billion, and we ended the year at $2.4 billion, so with a good reduction.Then if you can jump to the bottom-right quadrant. Here we have a picture of our EBITDA development, starting with the fourth quarter of 2019. And you can see here there's been a positive trend line. You will note that for the last 4 quarters we ended up with $538 million in EBITDA, so just over $0.5 billion in EBITDA. You will also see that there is a clear seasonality where the first quarter every year tends to be the lowest EBITDA. So I would expect that we might see some reduction as we go into the first quarter due to seasonality, but we are on a good positive trend due to the improvement in the STC in Stolt Sea Farm and hopefully in not too distant future also in tankers.Then that improvement in EBITDA, if you go to the top-right quadrant, drives -- and the bottom-left corner, that drives 2 EBITDA-driven covenants. EBITDA to interest expense improved to 4.24x. So that's quite a significant improvement, much due to the EBITDA improvement. And then the net debt to EBITDA, which isn't a covenant, but is a matter of our leverage relative to cash flow generation had a significant reduction down to 4.29x from 4.7x. So that's done -- helped us improve the strength of the balance sheet.Moving to our debt maturity profile. You will see that on this -- the gray boxes are upcoming bond maturities, and the one we're focusing on now is the $175 million bond maturing in the third quarter in September of 2022, so actually the fourth quarter. This -- the financings that we're working on at the moment to deal with these maturities is, one, we're working on a sustainability-linked loan facility, a revolving credit line and combined with a term loan which will replace our existing revolving credit line. It's nice to see that we've come as far on our ESG measurements so that we can actually make the sustainability link.And also in addition to that, we are working on refinancing our Japanese operating leases that are secured by tank containers. That's the $77 million that you see in the second quarter and the $61 million in the fourth quarter. Our expectation is that between those 2 efforts, we will cover the refinancing needs for the group. At least as far as 2022 goes, we expect to have this done by the end of February pretty much and drawn at a later stage when needed, but that should take care of our refinancing needs. It allows us the benefit of watching the bond market and go in and doing refinancings in the bond market at an opportune time as and when that would be needed.The graph at the bottom right has our average interest expense as well as our average cost of debt. It has been on a declining trend. We are seeing interest rates going up. Currently we are about 84% fixed with the maturing of the bond in September and the 2 JOLCOs. We will see that fixed percentage drop. But we are watching this and making sure that we minimize any impact from rising interest rates on the income statement. And with that, I would like to pass it on back to Niels.

[Niels G. Stolt-Nielsen]

Thank you, Jens. I just have one slide talking about the chemical tanker market. And the headlines says, when will the chemical tanker market provide a sustainable return. This market hasn't given a sustainable return in the last 20 years. For us it's been 5% in the last 20 years, return on capital employed. The last 10 years has been 3%. It is not sustainable.Now on the demand side, there is nothing wrong with the demand side. Demand is driven by global GDP. And global GDP or global trade as we know is a multiplier of global GDP. So the demand side is not the issue here. It's pretty damn steady actually, consistent growth. But there's kind of fundamental challenges in the chemical tanker market. We see that when we have a strong market, we beat our breast and are very happy if we can reach $30,000 a day, $30,000 a day on a ship that cost $70 million is nothing kind of. But because we've been beaten down for such a long time, historically, that's what we've been able to achieve.And those cycles, upcycles don't last that long, and then we order too many ships. And then we go into a down period again. Now I have to say that through these contracts the down period is not as dramatic as in other segments. So if you look at the dry bulk or the LNG or the MRs or the -- not the containership -- but you see that these -- when the market collapses there, they go down to $2,000 a day, we don't go down to $2,000. We think the lowest we went down to is around $17,000 a day. So okay, there's a good side, it's that it's more steady. The downside is not as bad, but the upside is not high enough.And then -- we know that -- okay, we know that the market is going to come in the next couple of -- not next -- it's going to come. The order book is low. So that's good. So maybe this next time around, and it will be maybe 3 years because that's the time it would take today to order new ships and the order book is very low. So I think we will have a relatively good market in the next few years. But then we know that when the market strengthens, guess what, we will continue to order new ships and then we'll go into a new cycle again. And then we have the swing tonnage, the MRs that is really affecting our market. And that's really what's holding the market down now, it's because there's no jet fuel or the MR marketing is low. They come in, and I think it was in 2021, there was a record amount of chemicals being moved in these MR tankers. Now think about it, 70% of what we carry, the MR tankers cannot carry. But the MR tanker market is impacting our market. So that's another thought.And then you have the emissions, but that's -- the ESG and the emissions, and that's a good driver, and that's -- but that's everybody fate. All industries are faced with that. The challenge that we have in our segment is okay. So on the revenue side, it's the market that decides. But on the cost side, we -- it's within our control. And I don't think the MR market will come in and out in our segments. But the only way for us to be able to make a sustainable -- this business sustainable is to use, create economy of scale. There's too many small operators out there. You can see it on the top right-hand side, the number of operators. This is above -- yes, I think above 17,000 stainless steel and coated, but suitable to compete in our market. So it's highly fragmented.And the bottom side, I think we got it from somewhere, but how the container line is consolidated. And so the only way we can -- I think that we can create a sustainable business there, knowing that the MR market will come in and out and knowing that there will be ships being ordered is to become a more sufficient industry. We need to create better economy of scales. And I believe to improve our flexibility, the service to our customers and the efficiency will give us a higher return. So I -- the purpose of our IPO, our balance sheet as you see is strong.We haven't ordered ships for a while. Our debt level is rapidly coming down, but we need to further consolidate this industry. We need to build this economy of scale so that we can have a lower cost, more efficiency, and that will provide better flexibility and service to our customers. But living in an industry -- an operating industry and just sitting and waiting for the market to improve is not the solution because we know that the market will improve.We know then that others will continue to speculate and order too many ships. So we need to become, this is what Lucas says the tankers are doing are, really working on digitalization, things that are within our control. But the purpose of the IPO is to make Stolt Tankers standalone, clean chemical tanker company. And then we will use both shares and cash to see if there are acquisition or consolidation opportunities.I'm more and more convinced, if I look at what is happening in the container lines, that this is the way forward, to create economies of scale. What are we doing about it? Well, we are trying in every direction to see if there are consolidation opportunities. And our balance sheet has come down. We made a conscious decision not to order ships in the fall. And as being an industrial shipping company, we always have to order ships. Well, we said, no, no, we're not going to order any more ships now for the time being. We have -- we bought Jo, we bought CTG ships, we had our own new buildings. And we have actually expanded and grown our fleet. But now the market needs to prove itself and then build up a reserve so that we can pursue these opportunities. Yes, I hope the industry is listening. Okay.Then move to the next slide, Page 31. Again, key messages, takeaways. The highest operating profit since 2015. And if I'm not wrong, the EBITDA passed $500 million for the first time. And that's without fair value adjustment and without one-offs, it passed. So that's an achievement. Fantastic performance by STC, Sea Farm and steady performance in Stolthaven even though we had to do the impairment. The chemical tanker market remains soft, but the fundamentals, we are well positioned for the market recovery.Yes, we continue to focus on cash flow generation to reduce our debt. As you see and showed you that, our debt level is coming down. Our capital commitments are limited going forward. And we will continue to provide a return to our shareholders. Over the last 20 years we have given $1.1 billion to our shareholders. So our share price hasn't been too sexy, but our dividend, at least, we have given something a steady return of cash to our shareholders.Improving balance sheet things -- with the improved balance sheet it gives us investment opportunities in all of our businesses. So I'm overall quite optimistic for Stolt-Nielsen in all of our businesses. It's just a matter of time. I mean, this result was without contribution or significant contribution for Stolt Tankers. I'm convinced that Stolt Tankers will also start firing on that cylinder. And if we can fire all at the same time, I think that we could get some good years ahead of us. That completes our presentation. How am I going to see the questions? Should I go, escape?

[Unknown Executive]

I think it is escape.

[Niels G. Stolt-Nielsen]

Yes, why don't you bring it up here.

[Lucas Vos, President Stolt Tankers]

Could we in time take some Stolt Tankers questions which I have in front of me, Niels, if you want to…

[Niels G. Stolt-Nielsen]

Yes, please. Good idea.

[Lucas Vos, President Stolt Tankers]

Yes. So the Stolt Tankers questions are primarily around our coverage and some questions around the numbers where traditionally we have always been around the 70% contract covered. In 2021 it has gone to around 66%, and there has been some conscious walking away of contracts in that respect. And we think in 2022 we are -- will be around the 60% number. So definitely become more exposed to the spot market and therefore benefiting hopefully from that increase. It's always a balancing act.Some trade lanes, you will never get to a lower contract ratio because it's just a contract trade. But we feel quite confident that with this type of level that we gain, gaining from the momentum that is going to take place. There was one other question around the contract increases. What we've seen in 2021 was around a 5% increase. And we see similar numbers coming through for 2022 with one notable distinction, and that is that we are also shortening our contract period.So normally we gave option years away, and now we're not doing that, again, to make sure that we are able to benefit from increases in the coming year. I think that was basically the questions around tankers. There were 3 or 4 questions which I think I sort of captured in one go. Niels?

[Niels G. Stolt-Nielsen]

Thank you. So I have one question. "Is thermal a generally low return on equity industry?" It seems like it. It is quite a capital-intensive industry. So there's a huge investment, and it takes a long time to then build up, so you have a huge upfront investment, and it takes a long time to generate and build up the cash flows. But the return on the terminal industry should be, I think, in the double digit over the long run.Then you have what percentage of time, okay, Lucas, you talked about the tankers and the spot rate. "Are there expansion plans for Avenir gas, in case how?" So Avenir, we ordered 6 ships, we sold one of them, 3 of them are on charter, 2 of them are going to be in the spot market or be servicing our own supply contracts that we have secured. The expansion plan will most likely be in the form of building additional supply points through building terminals and then going forward.So we're looking at various projects. We have no intention at this time to order any more ships, but we are looking at additional terminal in the same kind of formula, same kind of -- the same way as we have done in Sardinia. Then I have Anders Karlsen asking, on the tank containers I was wondering what kind of cost increase you have seen in terms of shipping and whether you have entered into contracts securing the rates for a period. Comments around this would be appreciated.So the cost over both in 2020 and 2021, I can come back to you and get exactly what the container lines have and the trucking. But we are talking about doubling and tripling in some cases. But I remind you that is then passed on to the customer based on -- but with the line because we have commitments towards our customers, but those rates are then on a quarterly basis reviewed with our customers. So that's why it's a lag, both on the way up and also on the way down. We have secured space but not rates. And that's what we did very well in 2021, securing space, and that's an ongoing challenge in these extremely competitive times. The key here is then to secure enough space. Further demurrage revenues up sharply in containers. "Is this driven by customers using containers for storage or pure logistical delays?" Both. But I think it's a usual indicator that with the delays, the unpredictable delays that we see both on the ships on the cost side, them waiting 3 to 4 weeks to discharge or load and then also delays because of limited trucking availability.The customers have built up or needs to build up at the current rate a buffer so that the production doesn't end. So that's why I see -- I think it takes a while for them or they use the containers as storage. "Are you seeing any problems in relocating containers? And is this likely to drive cost?" Yes. So we do empty repositionings. And it's an equal challenge in securing space for empty containers as it is with full. But we have seen basically during the last year, such a huge demand in each market. So we try to -- we always try to reduce the empty repositionings. But yes, it is a challenge to secure space even though they're empty."Are higher rates for container shipments led to volumes going back to tankers?" We have seen several cases where our container customers have -- we have solved their problem by shipping it in our ships. And this is something that we're working on, providing our customers this flexibility that we sold their logistical challenges. But have we seen a big trend? No, we haven't. We have seen a lot of inquiries. But you have to remember, if they want to switch back to ships, they also need to secure storage. And storage is limited availability in the spot market. So it's kind of a long-term decision for the customers to switch from containers to back to ships. Okay. Then we go to, "Can you please comment on your plans for refinancing beyond the $450 million loan agreement?" I think…

[Jens F. Gruner-Hegge]

Yes. So the $450 million loan agreement covers a refinancing of the liquidity tool, the revolving credit line as well as the term loan that we have with China Exim that is secured by the 5 ships that were built in China. So we'll combine those 2, creating that $415 million facility. Then we have about $138 million in the Japanese operating leases maturing as mentioned earlier, and we're looking to put in place a new facility on top of those, which is now almost agreed on all main terms. And that will be probably around $220 million, $225 million refinancing. So between those 2, there is no immediate need, keeping in mind that it is expensive to sit with cash on the balance sheet. What we do want to look at down the road, particularly since this $415 million facility is sustainability linked is also to in the future be able to issue sustainability-linked bonds. Once that -- we see that the next refinancing in the bond market is likely to happen. But I would expect that, that wouldn't happen until much later in the year, if at all this year.

[Niels G. Stolt-Nielsen]

"Ambitious decarbonization target in Stolt Tankers. Should we expect a refinancing of the USD 175 million bond due in September to take the form of a sustainable linked bond?" I think you answered that.

[Jens F. Gruner-Hegge]

I answered that.

[Niels G. Stolt-Nielsen]

"Congratulations on the results. Do you see container shipment picking up in the near term? Or is it dependent upon overall congestion level? Furthermore, how do you see margin for Stolt Tankers that is developed in the near term?" So the first quarter is always a slow quarter. You have Christmas, and you also have Chinese New Year. So there is a slowdown. But as you saw, even though the shipments were down, demurrage levels were up. So we were able to maintain the margin and also the results due to the demurrage.We are seeing a bit of a pickup already now. So again, I expect that the first quarter that in this market to continue. "How do you see margin for Stolt Tankers and development in the near term?" I think that at this level we are -- we should be pretty happy. Of course, we continue to see if we can do more shipments. So holding back, it's not really the margin, but it's more being able to secure enough -- more space on the container ships. So that's the challenge. "4 questions from me, if I may. Tankers. "How is the Sierra portfolio looking for 2020, compared to 2021?" I think you already answered that. "What was the outcome of the renegotiation towards the year-end 2021?" Lucas.

[Lucas Vos, President Stolt Tankers]

Yes. I also answered that one already. So there was negotiations going sort of 5% up in 2021, and we're looking at similar numbers for 2022. I did not answer the follow-up, which was regards the -- to the EU carbon emission tax from 2023. And are we able to put that into our contracts right now. I did mention last time that it has quite a considerable impact on our cost levels, and we see the price for carbon only going up. So where we stand is we have put it into our contracts that it is a point of negotiation when we come to it. However, again, on this we look at a industry-wide approach as well because it's not only our segment, but clearly it's across the whole shipping segment where we need to make sure that we get to a proper split of the cost of decarbonization. So it's -- let's say, it's preliminary in our contract, but we are seeking an industry-wide solution.

[Niels G. Stolt-Nielsen]

And then also a question from the same person regard containers, "How impacted by port congestions are container EBITDA and utilization?" Well, THE reason that we're seeing such a strong market is of course the container, the container lines are experiencing significant port congestion. The ships are waiting 3 to 4 weeks to discharge or to load. And that means of course a lot more tanks are being held up. So there's not only a shortage of space on the ships, but also shortage of containers available. And that has put pressure. So lower shipments but higher margins because of the lack of both space on the ships and on the containers.To give you exactly what EBITDA impact and utilization impact just driven by port congestion, it is difficult to say. But this market is driven by a healthy demand, but it's very much driven by the congestion cost over the strong container line market. "Sea Farm last 2 quarters have been sold. How would you think, Stolt Sea Farm, how should we think about Stolt Sea Farm in 2022?" Now I think that the underlying principles are the same. There is a growing demand for fish. I heard all that story before. But what we have seen is that after the knockdown there are less fishing vessels in the ocean. A lot of them went bankrupt. So there's a big demand. There's less wild catch of fish coming from the oceans, and that has caused a -- yes, that's part of the reason why we've seen the price pick up. And I don't think that's going to change.The biggest impact we've really seen is the lockdown of restaurants which has caused the restaurants which we serve to not buying our fish. But we are now seeing more and more opening, and -- more and more opening of the economies with the reduction of the COVID regulations and more and more restaurants opening up. And I don't think that we will go back to where we were in the form of lockdown. So I'm quite bullish for 2022 and a continued growth in the -- on the sole side of the business. So I am bullish. And I would say that of course there might be quarters where we have to -- or weeks where we have to adjust our price. And that will have a fair value adjustment. And that's a big impact, but that will come up again.So overall, I'm quite bullish that this market will continue for Stolt Sea Farm. And also we're very much focusing on expanding the markets for our products, which hasn't really been our priority in previous years. "Are you worried that some quality might be lost on the way to transitioning work from local offices to a new team formed by new hires at Manila?" Okay. I think this is an internal message. No, I'm not. I'm very convinced that the organization and the shared service center that we built up in Manila will do an outstanding job in whatever positions that we move, the site to move to Manila. And actually I think we will have even more focus on creating these shared services, not only necessary Manila, but also in other locations.Any update on time line for IPO in the Tanker division at Sea Farm? Well, we've talked about this many times. Now the tanker, we will do -- we're ready. We have done the preparation now for a very long time, and we are ready, but we need to have a better momentum in that market to market. We need to show the earnings to the market before we can attempt an IPO. Sea Farms IPO is still on the shelf. That's not a strategic -- that is something that we -- that we have any plans of doing in the foreseeable future. We went into the market last year to check. It's the same also.We saw the pricing of land-based recirculation companies in the market. Some of the pricings were just phenomenal and some of the companies out there has actually a higher market cap and all sort of things. So we felt it was our responsibility to kind of make the value of Stolt even more transparent. And then we went and checked the market, but we didn't achieve good enough feedback or interest. So we decided that Stolt Sea Farm generates its own cash flow. We can leverage that cash flow and build and do that 2035 growth plan without having to raise any equity or separating us.So for the time being, that is on the shelf. There's lots of compliments for STC and especially VM for having secured the needed space this year. Okay, these are internal messages. "Total SG&A expenses went up by $30 million a year. And part of this was due to employee profit sharing. What percentage of the $30 million does this entail?" So the A&G, remember, the A&G compared to 2020 and 2030, it was an exceptional year in 2030. We went into kind of lockdown mode. We went into an emergency mode into the back. So we cut costs. We stopped hiring. We stopped consultants.So we really, really cut down to the bone in preparation for the unknown, the consequences maybe of the pandemic. So the pickup that you see in 2021 is really a catch-up of the hires that we have to do to run the business. So if you look at the $30 million, what percentage of that is attributable to the profit sharing, I would say around 20% of that $30 million. And that I believe completes all the questions. So if there's no further questions that completes our fourth quarter earnings presentation. Thank you for participating. And we will see each other again, hopefully, maybe one day in person during the first quarter earnings release, which is scheduled to be in…

[Unknown Executive]

End March or in April.

[Niels G. Stolt-Nielsen]

End March or in April. Thank you very much for participating.