Norwegian chemical tanker owner Stolt-Nielsen will suffer a big coronavirus hit in its second quarter, but long-term prospects are much brighter, according to Norne Research.
The company reports its first quarter results next Thursday.
Analyst Mindaugas Cekanavicius said he has reduced estimates for the period due to coronavirus, but it has slashed second quarter estimates much more, as the company adds the figures starting in March.
"Nevertheless, long term estimates had less adjustments as we still anticipate the worsened situation to pass soon and the chemical tanker market to recover if not towards the end of 2020, then in 2021," he added.
Norne's buy recommendation remains, with a lower target price of NOK 110 ($10.75) per share, against NOK 78.40 in Oslo on Thursday.
Cekanavicius said disruptions in the sector in 2019 were thought to be over until Covid-19 came along.
Recovery curtailed
"2020 was supposed to be the continuation of recovery for the company after some disruptions in 2019 caused by the US-China trade war and the explosion and fire onboard Stolt Groenland in September, but, as for most businesses, the coronavirus mixed all the plans," he added.
Norne sees the first wave of the impact - ie the China outbreak - hitting Stolt's figures from December to February.
But the second wave affecting the rest of the world "should have a much more significant impact" for the company’s March to May result, it said.
"On the other hand, reduction in bunker prices should have a positive impact on tanker margins."
Norne is forecasting Ebitda in the first quarter to be slightly below the $100m mark, while the bottom line is projected to be at around breakeven level.
But it admits it is almost impossible to predict the exact impact.
Supply picture still positive
Looking further ahead, it said the newbuilding orderbook is still very low for 2021 and 2022, giving a favourable supply/demand balance.
Stolt-Nielsen has said it believes in a quick recovery for its markets, although uncertainty towards the virus development remains.
"This of course means that IPO of the [tanker] segment is postponed once again until the conditions stabilise," Cekanavicius said.
In March, the Stolt-Nielsen board voted to withdraw the second and final dividend for 2019 previously announced in late February.
A payout of $0.25 per share had been scheduled to be distributed on 6 May upon shareholders’ approval.
Chief executive Niels Stolt-Nielsen said at that time: “While the coronavirus pandemic has had a modest impact on our markets to date, we believe this precautionary measure to cancel the final dividend for 2019 is a financially prudent decision, given current external circumstances.”
In early February, Stolt-Nielsen raised NOK 1.3bn via selling senior, unsecured bonds that will expire in 2024.
The company recorded a net profit of $19.1m for the financial year ended on 30 November, down from $54m in the previous year.
Revenue decreased to $2.04bn from $2.13bn.
