Norwegian shipowner Stolt-Nielsen feels the market underestimated the advantages of its contract portfolio as third quarter profit surged past the consensus on Thursday.
Ebitda at the company, which also owns tank terminals, hit $144m in the three months to 31 August, against analysts' expectations of $100m.
Chief financial officer Jens Gruner-Hegge told TradeWinds: "I believe the market underestimated the benefit of the contract portfolio and the increases that we have managed to achieve on the commercial front for all our three logistics businesses."
He added: "Consequently we were able to retain the benefit of lower bunker prices without giving away the benefit through lower rates."
The group was also boosted by a "substantial recovery" at its Stolt Sea Farm unit, as the hospitality industry opened up again after a tough second quarter.
The CFO said: "Also, we reacted early and promptly in cutting costs in all of our businesses."
One factor that helped the result was a sharp drop in fuel bills. Stolt-Nielsen used older, cheaper inventories during the period.
The average cost of fuel oil consumed fell to $275 per tonne from $388 per tonne in the second quarter.
Gruner-Hegge said: "We account for our fuel consumed on a FIFO (first-in, first-out) basis, so the lower fuel expense has nothing to do with the quality of the fuel, it is just that the falling bunker prices seen in the second quarter did not trickle through our results until the third quarter."
Will the company repeat the trick in the fourth quarter?
"No. I would assume that with the slight increase we saw in bunker fuel prices towards the end of the third quarter we will see a slight increase in fuel cost going forward," the finance chief said.
Stolt-Nielsen had net debt of $2.35bn at the end of the three months, but liquidity of $500m.
Liquidity buffer in place
Gruner-Hegge told TradeWinds: "We are happy with the liquidity position, and are intentionally keeping this high, as we want to make sure that funds are reserved well ahead of our March 2021 bond maturity and ahead of any possible unforeseen impact from the pandemic."
He added: "With our extensive expansion in all of our businesses over the last 10 years, we have an asset portfolio with enormous earnings potential."
The CFO said the debt level will quickly come down as the current committed capital expense programme ends, and as markets recover in the chemical tanker segment, in addition to the steady cash flow from terminals and tank containers.
Fleet stable for now
Stolt-Nielsen completed a deal to buy five chemical tankers from Peter Georgiopoulos’ Chemical Transportation Group (CTG) in August, at an estimated price of nearly $138m.
Gruner-Hegge told TradeWinds: "Beyond the five-ship acquisition recently announced, we have no concrete plans at the moment."
He explained the focus remains on improving asset utilisation and turnover, as well as driving margin improvement.
Net profit in the company's third quarter was $29.2m, up from $3.4m a year ago.
Revenue dropped to $474m from $518m in 2019, but operating expenses fell to $295m against $367m.
Gruner-Hegge said: "We do not provide earnings guidance, but suffice to say that we are cautiously optimistic about the markets going forward, and longer term the supply/demand balance is expected to develop favourably in the chemical tanker segment.
"The terminal and tank container segment we believe will continue to deliver solid results."
