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Edited Transcript of SNI.OL earnings conference call or presentation 3-Oct-19 1:00pm GMT

Q3 2019 Stolt-Nielsen Ltd Earnings Call

Oslo Oct 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Stolt-Nielsen Ltd earnings conference call or presentation Thursday, October 3, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jens F. Grüner-Hegge

Stolt-Nielsen Limited - CFO

* Niels G. Stolt-Nielsen

Stolt-Nielsen Limited - CEO & Director

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Conference Call Participants

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* Petter Haugen

Kepler Cheuvreux, Research Division - Equity Research Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the Stolt-Nielsen Third Quarter 2019 Results Presentation. (Operator Instructions) Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Niels Stolt-Nielsen, Chief Executive Officer. Please go ahead, sir.

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO & Director [2]

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Thank you. Good afternoon, good morning. Thank you for joining us for the third quarter earnings presentation here in Oslo. Together with me as always, Jens Grüner-Hegge, CFO of Stolt-Nielsen. We will be going through the normal presentation, which is on our website and the agenda we will give you an update on the Stolt Groenland, then we'll go through the third quarter highlights. I will go through each of the businesses. Jens will take you through the financials, and then we'll open up for question and answer at the end.

On September 28, on Saturday, an explosion occurred on the -- followed by a fire on the Groenland -- Stolt Groenland that was berthed in Ulsan, South Korea. I'm very happy to say that all crew are accounted for and are safe. As far as we know, there has been no external pollutions, no cargo has been released into the ocean. Safety is the top priority in our company, and it is always have been and it will continue to be. We will not be able to pursue or succeed with our strategy unless we can operate safely. And we will do everything possible to continuously operate safely. And we are actively cooperating with the investigations to determine the cause of the accident. At this time, it is unknown what happened. The ship is fully insured.

Stolt-Nielsen highlights. I believe the chemical tanker market has bottomed out, and we are -- Stolt Tankers are well positioned for the recovery. And we have done all preparations necessary to make a swift and quick decision or go for an IPO once the market conditions are right. Stolthaven Terminals with the infrastructure investments made over the recent years, we are positioned to significantly grow the free cash flow without any further capacity expansion. STC keeps delivering solid result despite the challenging market and is well positioned for growth as it maintains its leadership position. At Stolt Sea Farm, the market outlook for turbot and sole is very positive, and the 2 new farms that we're building in Spain and Portugal for the sole will further support growth in that segment. We are pursuing exciting project in Avenir LNG, where we are 45% shareholder, as the business plan is put into effect in a growing LNG small-scale LNG market. The Stolt-Nielsen balance sheet and liquidity is strong. Following the refinancing exercise that we have been through, we have raised over $850 million, allowing us to repay more expensive debt and push out our maturity profile. All of our businesses will generate free cash flow by the end of 2020. So the debt will be coming down -- it is coming down.

Then moving on to Slide #6, third quarter 2019 highlights. Stolt Tankers operating profit was $15 million and that's up from $12.8 million, mainly due to a 1.6% decrease in operating expenses.

Stolthaven Terminals operating profit of $19.5 million slightly down from $19.7 million in previous quarter. Utilization was unchanged at around 91%, while the product handled was marginally down. Stolt Tank Containers operating profit was $12.1 million and that's down from $12.6 million due to the market softness and price competition. Shipment decreased approximate 1.2%. In Stolt Sea Farm, the operating profit before the fair value adjustment of inventories was 2.1% (sic) [$2.1 million] and that's slightly up from the second quarter. Stolt-Nielsen Gas, the operating loss of $1.1 million, down from a loss of $1.4 million in the previous quarter, reflecting our share of the development expenses in Avenir. In Corporate and Other an operating loss of $2 million versus $2.1 million in previous quarter. That gives us a meager $3.7 million profit for the quarter, slightly up or basically the same as previous quarter. Far from where we need to be, but still it is in the positive side of -- still positive.

Moving then on to the Slide 7, which is the variance -- net profit variance analysis between the second and the first quarter. We delivered a $3.6 million net profit in the last quarter. We had $2.1 million higher operating profit in Stolt Tankers, slight $200,000 down in Stolt [offshore], $0.5 million down in Stolt Tank Containers and then after the fair value -- valuation in -- of the biomass and Stolt Sea Farm of negative $1.2 million and lower SNG operating loss of $0.3 million positive. That's from the operation -- divisional operation -- operating profit divisions. Then we had financing expenses of $1.9 million, higher than previous quarter and slightly -- and $1.4 million lower tax, bringing it to net profit of $3.7 million for the quarter.

Then moving on to Page 8, Stolt Tankers highlights. The third quarter revenue was marginally down compared to the second quarter. The deep-sea revenue increased 2.2%, and the regional fleet decreased by 8.5%. The decrease in the regional is not driven by -- is more driven by positioning of ships that were going for drydock. So owning expenses decreased 3.9% compared to -- with the second quarter, driven mainly by cost efficiencies programs that we have -- that we're working on. The freight rates, COA renewals in the quarter, were down 1.5% compared to a decrease of 2.5% in the previous quarter. However, the majority of the contracts that we renewed in the third quarter was with an increase. So in reality, only 2 of the contracts, they were big contracts and they were well priced, they -- there they got a reduction. But all other contracts that we renewed were with the profit -- where there was an increase. So we lost some contracts and we won some contracts, but overall, the majority of the contracts that we renewed in the third quarter were up.

Moving on then to Page 9. Tanker market has bottomed out the revenue slightly up, gross profit slightly up, not much to say here. Then moving on to Page 10, which is the variance analysis in operating profit between first and second quarter -- second and third quarter. So slightly lower operating revenue but high -- better operating expenses. So lower operating expenses were $1.3 million, slightly higher depreciation, higher income from our joint venture, A&G expenses, et cetera, bringing us from $19.7 million to $19.5 million. The bunker costs/hedges. The average price for IFO consumed decreased to $407 per tonne in the third quarter, and that's down from $417 per tonne in the second quarter. Year-to-date, COA bunker clause covers 65% of our total volume. So the bunker hedges that we have through our bunker clauses cover 64% of total volume. The $1.3 million loss on the third quarter bunker hedge compared to the second quarter loss of $0.7 million reflects the lower price and increasingly negative forward curve for the HFO, the heavy fuel oil.

IMO 2020, effective, as you know, on January 1, 2020, all ships must consume low-sulphur fuel, 0.5% down from 3.5%. Stolt Tankers' plan is a mix of ships with scrubbers and to buy marine gas oil of 0.1% or new fuels of 0.5% when it becomes available. We have a detailed changeover plan for 104 ships, including a tank-by-tank inventory of steps. Transition time is probably 6 weeks in-service with the cleaning plan. Target changeover date to ensure full consumption of high-sulphur fuel, so of course, you'd like to use up -- it's quite a complex planning to make certain that you consume all of the heavy fuel oil that you have onboard before the end of 2020. But at the same time that you have only the right fuel on board when 2020 occurs. Good progress is being made in passing cost increments to our customers. So of the contracts that have been renewed into 2020, 50% of them have a full pass-through of cost. The remaining are to be renewed for the rest of the year.

So in other words, we have full success in passing on the increased bunker cost to our customers through our bunker -- to our customers in the COAs. There are still some that haven't -- that we renewed early in the year where we decided that we're going to meet up in October to agree upon a bunker clause, and that is in progress. But whatever we have renewed into -- and if you don't come to an agreement, we can move out of that contract, or both parties can walk away. But whatever we have committed to into 2020 have a full pass-through.

Page 13. This is the Stolt Tankers Joint Service Sailed-in Time-Charter index and sensitivity, and here you can see, if you put on your glasses, you can see that there is a small uptick, and let's hope that that is the beginning of the turnaround. And I actually believe it is. I don't think it's going to -- the question is, of course, how fast it will be going, but I don't think that we will see further deterioration. And here, you can also see a 5% percent increase in Time Charter index gives 5.3% impact on net profit.

The -- on Page 14, chemical tanker fleet and order book for the third quarter 2019, unfortunately, order book went from 7.2% to 8.1%. There was a Japanese tonnage provider that ordered some Japanese newbuild 33,000 deadweight. So the order book stands at 8.1%, up from 7.2%. So supply growth will ease to an estimate of 2% per annum in 2020, its lowest level since 2014 and less in 2021 as the order book continues to shrink. So I must say that with this order book and the slowing of new tonnage coming into our segment, and as you can see that the bottom has -- from the contract negotiations and from our results you can see that, as I sincerely believe that we have reached the bottom. Now how quick this market will turn around is -- how quickly we will see a strong market is difficult to say with so much uncertainty going on with the trade war and the impact that trade I will say it's more a political recession that is looming rather than the fundamental. So the glow -- what we're seeing, IMF is predicting that the updated estimate for 2019 growth is 3 -- is lower from 3.2% a year ago, down to 2.9% and in 2021, 2.7% and 2.8% respectively. So still a global GDP. And as long as there is a global GDP and, as you know, the slowing down in supply of new ships coming into the market, I think we will continue to see strengthening of the -- of our segment. For the chemical market, forecast predicted a wider range of outcomes than in recent years. Stolt Tankers see a 2% to 4% demand growth for 2020 as a reasonable assumption. So as long as there is a growth, I think that we will see improvements in our markets. The product tanker operators expect supply and demand balance in 2020 and IMO 2020 regulations starting on January 1. And here are the slides, I think, I believe they're from Clarkson, show also their predictions about the growth in trade of the various products that we carry.

Moving on to Stolthaven Terminals, Page 16, the operating revenue was flat compared to the second quarter, while the -- our expenses decreased by $1.3 million, resulting in $0.8 million improvement in gross profit. Equity income from our joint venture increased by 7.7% to $5.8 million due to higher utilization at our joint venture terminal in Antwerp. Utilization for the wholly owned terminals remained at 91%, while the total product handled decrease 0.8% compared to the second quarter. Non-strategic Stolthaven terminal in Altona, Australia was sold at the end of July for AUD 10 million. And here you can see steady as you like it and it's steady moving in the right direction, both the revenue, the gross operating profits and also the operating profit.

So quickly going through the variance analysis in the operating profit between the third and fourth quarter (sic) [second and third quarter] on Page 18. Slightly lower operating revenue of $0.2 million, $1.3 of lower operating expense, slightly higher depreciation, slightly higher income from our joint venture of $400,000, lower A&G expense of $700,000 and others of $0.6 million, bringing us to $19.5 million.

But more importantly, on Page 19, the team at Stolthaven has really delivered a turnaround as we have talked about for quite a while. The compound annual growth rate of EBITDA since 2015 has been 11%. We estimate that these are the wholly owned, there is $111 million at the end of the year. If we combine it with the joint venture, we will be at $130 million. Without doing anything further, without spending any more additional money, based on the capacity that we have and based on the contracts that we currently have and also that are in the pipeline, we estimate that the EBITDA from this business in 2023 should be $160 million. That is $130 million from the wholly owned and around $30 million from the joint ventures. And the joint ventures not EBITDA, that's, that's equity income. The market for Stolthaven, the U.S. market is slightly weaker, reflecting the impact on the ongoing U.S.-China disputes and the general slowdown in the economy. Europe, demand remains stable for chemicals, the CPP market continues to see storage demand for IMO bunkers and jet fuel, although overall market remains weak with rates reflecting the situation. The Asian market, the Chinese market is generally weak, however, our terminal in Lingang, which was the location where we had the explosion, I'm pleased to see that the utilization there has now reached 75%, which is a great improvement. Also because of the ongoing slowdown in the economy that we also see -- so both the U.S.-China trade dispute and the slowdown in the Chinese economy, we are seeing a general slowdown in the area. The Korean market remains stable for chemicals and also the Brazil market remains generally stable for petroleum and chemicals.

Then moving on to Stolt Tank Containers. STC's operating revenue was unchanged from the second quarter, as a 3.9% (sic) [$ 3.9 million] increase in transportation revenue was mostly offset -- a 3.9% (sic) [$3.9 million] decrease in transportation revenue was mostly offset by increasing demurrage and other revenues. The third quarter saw a 1.2% decrease in the shipment due to the increased competition in some of the regions, the ongoing trade war between U.S. and China and general economic softness. During the quarter, operating expenses increased by 0.9%, reflecting higher repositioning and move-related expenses. The transportation margin per shipment decreased 14.4% from the second quarter, reflecting tougher competitive environment. Utilization decreased to 67% and that's down from 69% in the second quarter, reflecting an increase in intra-regional trade with shorter shipments, change in trading patterns as we see it. Still, the operating -- the revenue was marginally down, our gross profit went from $29.7 million to $28.3 million and the operating profit, as I reported earlier $12.6 million down to $12.1 million. The variance analysis quickly going through from second to third from $12.6 million, lower revenue of $0.6 million, lower freight cost of $0.9 million positive, increase in tank rental cost of $0.9 million, higher equity income from our joint venture of $0.5 million and others of $0.4 million gives us $12.1 million.

The market development. Global slowdown of activity in main market is putting pressure on margin, no doubt. The trade war between USA and China are not affecting trade volumes overall, but we have seen a change in trade flows. Just to give you an example, year-on-year, we have seen a drop of 65% reduction of shipment from China -- yes, from China to U.S, and a 35% reduction from U.S. to China, huge. And that has caused an imbalance of the fleet, not only for us but for everyone. So you have a build-up of tank containers in both China and the United States because of the different trade flows, and that has resulted in huge competition of whatever business is available to reposition those tanks. So one of the reasons that there has been highly competition is that because overall shipments are pretty much the same, but it's the buildup of inventory of tanks in these regions that have caused enormous competition to get whatever cargo is available to reposition the tankers. You also see that we have spent much more on empty repositioning in the last quarter. So that's the negative side. The positive side is that if the market -- if this trade war changes or stops or if it come to some sort of agreement, this can change very quickly. I don't see an underlying fundamental -- I'm not worried about the tank container market, that will quickly pick up again. As long as -- I don't know how long this dispute is going to last but basically, the demand is there to -- yes, there is a lot of supply and a lot of competition, but we will be able to make a proper return even with a strong competition, but this imbalance is making disruption and making it very difficult to plan.

Shift in trade flows is adding margin pressure in some markets where inventories buildup as I just said. And ocean freight rates are expected to increase due to the 2020 for the ocean liners -- for the steam liners and also tighter ocean freight market is certain -- the tighter ocean freight capacity in certain markets.

Sea Farm. The Turbot revenue increased -- on Page 25, the Turbot revenue increased to 24.3% (sic) [$24.3 million] from $21.5 million driven by a 21.6% increase in volume sold, we had much better growth than expected, partly offset by lower average prices as part of the sales promotion. The sole revenue decreased $2.7 million from $3 million, driven by 13.8% decrease in volume sold, while prices increased 3.2%. The fair value adjustment had a negative impact of $2.5 million compared with the negative impact of $1.2 million in the previous quarter. The new state-of-the-art sole farm under construction in Spain and Portugal, using Stolt Sea Farm recirculation technology. Operations in Spain, this is the picture of the one in Spain, it's almost complete. You can see that we have solar panels to help us heat the water. It's total recirculation, and it will be stocked with fish at the end -- towards the end of this year and the beginning of next year. So next year -- if you look Stolt Sea Farm, it's a little disturbance in the whole picture, but Slot Sea Farm, the turbot business makes around 11, 10 -- between $10 million and $12 million per year net profit. The sole, development cost of sole is around $4.5 million per year. And then you have the caviar, which is having extremely tough time that is affecting, which we are working on solving, but the 2 main businesses within Stolt Sea Farm $10 million to $12 million net profit for sole and development and the redevelopment cost of the sole until we get these new farms up and running is around $4.5 million. Next year, it will be the same thing because we will stack up and we will build up the biomass in the sole farm, but then from '20 -- end of '20 or beginning of '21, we should see the revenue coming out of that business, too.

Stolt-Nielsen Avenir. As you know, we are a 45% shareholder in Avenir LNG. We -- ships on order. We have 4 7,500 cubic meter and two 60,000 as well as building a terminal in Sardinia. The first of the ships that are being delivered, hopefully in January of next year, is going on a 3-year charter to Petronas, and we're working on a second ship also to be going on time charter or bareboat to -- at similar terms once that ship is delivered, very close to fixing that. So now we have 2 ships on bareboat. Now the strategy in Avenir is not to be a per tonnage provider. We don't want to be a shipping company. We would like to be a supplier of small-scale LNG. So we would like to ship it. We would like to source it, ship it, store it, distribute it, and sell it and make a margin on the gas. But before you can make a margin on gas, you need to build up necessary offtake and until -- which we're doing in Sardinia now, but until you have that offtake, we would like to time charter or bareboat out the ships to finance this whole operation. And with those 2 time charters or these 2 bareboats, I think actually the company will be making money next year.

The terminal in Sardinia, HIGAS terminal construction and progressing well and operation is expected to commence in August of next year. And we're negotiating a term sheet with a major industrial offtake customer in Sardinia, which will be the largest single customer of 200,000 tonnes plus. That will be a serious good business.

And some nice pictures. Unfortunately, we had the fire on the second ship, so not the one that is going to be delivered to Petronas, but the second ship might be delivered. So instead of being delivered in March, they're looking at somewhere in the -- during the summer. And that brings us to the financial statements. I give the word to Jens.

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Jens F. Grüner-Hegge, Stolt-Nielsen Limited - CFO [3]

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Okay. Thank you, Niels. And good afternoon to everyone here in Oslo, and good morning to those who are listening in from the United States. As normal I will provide some details about the financial results for the third quarter 2019 that we released this morning, and I'll also give some further guidance on certain specific P&L items for the next quarter. I will also want to remind you that we have filed the press release with an interim financial statements with the Oslo Stock Exchange. And you will also find this with -- on our webpage at www.stolt-nielsen.com under the Investor Relations -- investor section there.

Moving onto the net profit. Operating profit, if you look at the top line there, operating profit before one-offs for the third quarter was $41 million, that's slightly down from $41.5 million in the prior quarter. Higher operating profits at tankers as a result of their lower operating expenses were unfortunately more than offset by the higher negative fair value adjustment that we had at Stolt Sea Farm, that Niels mentioned, and lower profits at STC. STC -- sorry, Stolt Tank Containers' decrease was a result of 1.2% fewer shipments and lower transportation margin as mentioned by Niels. During the quarter, we recorded a gain on sale of -- on 2 assets; one was the Stolt Kilauea, where we had a gain of $1.4 million; and then we also sold the Altona Terminal, down in Australia, with a gain of $0.7 million. The net -- the reported operating profit then was $43.1 million, that's slightly up from the prior quarter. Net interest expense was $34.7 million, that's up from the prior quarter. It was mostly due to a partial write-off of some debt issuance cost as we have been refinancing some of our debts and had to expense this. FX losses, as you see there, minus $1.9 million, consisted -- was consistent really with the prior quarter, and that's really reflecting continuous strong dollar. And income taxes were lower and that's really driven by the poor results that we had at Stolt Sea Farm. So net, we came in at $3.4 million or $3.7 million for those attributable to equity holders of SNL, and if you look at the EBITDA, you note that at $106 million and also this is before fair value of biological assets, insurance reimbursements and the other one-time noncash items.

Going over to the next slide, the balance sheet, you'll see that the debt at quarter end was $2.37 billion. That's a reduction of $56 million from the prior quarter as we had excess free cash flow from operations after capital expenditures. And I think that's quite significant to note that even with the market that we're operating in now we were able to produce a positive free cash flow. Our liquidity position also improved by some $189 million to about 6 -- almost $600 million, it's $599 million to be exact. Following the long-term debt issuance that I will touch on later. The current maturity of debt if you look at the liability side of the balance sheet, that was at $434 million. Of this $147 million related to the bond that matured on September 4, just after the quarter end and has been repaid in cash. And other debt that we have maturing within the next 12 months includes the April bond with $160 million, maturing in April 2020 as well as Australasia Terminal loan of some $52 million maturing in the second quarter next year.

So moving on to the covenants then. We had debt to tangible or if you look at the tangible net worth that held steady at $1.6 billion and consequently the debt to tangible net worth went down. So it was at $1.52 billion last quarter and it's now down to $1.48 billion. The EBITDA to interest expense, however, that was down from $3.2 million in the prior quarter to $3.05 million in this quarter. And that is really reflecting the weakening EBITDA, and I'll come a little bit back on how the impact of past EBITDA quarters is impacting the covenants. And likewise if you look down in the bullet points, you will see that we had the net debt to EBITDA of 5.27, and that was up from 5.22 in the prior quarter. We do expect probably slightly higher interest expense for the next quarter and that is again driven by the need to write off debt issuance costs as we continue to draw down on the new financing to replace existing financing.

Going over to the cash flow. Cash flow from operations was positive $84.9 million, as you see those are up from $48.5 million in the previous quarter, and $20 million of this improvement is due to the timing of interest payments. The way that, that is structured, we have a heavy payment of interest in the second and the fourth quarter and also some principal payments as you will see further down. In addition, we had working capital improvements and that's really also because of the timing of accounts payable and voyage expenses and some insurance payments between the quarters. So if you look down to the next section, you see the capital expenditures and they reflect the terminal investments of $19 million, $9 million on drydocking of ships, $12 million on regulatory tanker capital expenditures and $6 million on Stolt Sea Farm. So in total, we were about $48.6 million in capital expenditures. We also had a positive cash flow impact from the sale of the Stolt Kilauea and Altona terminal of $11.4 million, as you see there, so net cash used in investing activities was then net $35.2 million negative.

During the third quarter, we repaid some $104 million of long and short-term debt and we also repaid the full outstanding balance on our revolving credit line that was some $340 million, and this was done with the $409 million that we raised in new debt as well as from free cash flow. So looking at the nets, cash flow for the quarter was a positive $9.4 million after all this, and that resulted in a cash balance at the end of the quarter of $143 million. Very high compared to a historic averages but a lot of that was because we had the bond maturing on September, 4 days after the quarter end.

As a reminder, when you look at the EBITDA on this next slide, this is, again, it's presented excluding any impact of the IFRS fair value of the biological assets, insurance reimbursements and other one-time noncash items. You see here that tankers EBITDA was up slightly but really not much difference from the last 4 quarters and that's really due to the sublet -- lower sublet and M&R expenses, which really offset the lower regional revenue that Niels mentioned earlier. Terminals EBITDA was up and that's consistent with the trend that we have seen for a while now. And STC's EBITDA decreased due to the continued pressure on margins and lower shipment volume.

So as result, the SNL's EBITDA for the quarter was $106 million as you'll see in the bottom right quadrant, not much changed really from the last -- from the previous 3 quarters. But coming back to the covenants, the 2 EBITDA covenants and you will see the impact here more clearly in that -- in this last calculation, we have had the, which quarter was that, third quarter of '18 dropping off -- prior quarter we had the second quarter of '18 dropping off. Those were 2 high quarter -- high EBITDA quarters and that has caused the deterioration of those 2 covenants. Going forward, you will see next quarter, the quarter that will drop off will be the $103 million. So we should not -- we actually expect to see an improvement going forward on those covenants.

Going over to capital expenditures program. Note that this excludes the drydocking of ships, but capital expenditures for the quarter were $40 million. So year-to-date, we have spent $100 million. This was, as I mentioned, a split between terminals with $19 million and tankers $12 million for regulatory CapEx. And in addition, we have spent year-to-date through the third quarter, we spent $21 million on drydockings. As of August 31, you also see that remaining capital expenditures were $117 million. That's a lot to spend in 1 quarter only. So our expectation is really that a good portion of that $117 million will be pushed out to the first quarter of 2020.

Looking at what we expect to come over the next subsequent 4 years, we have about $258 million that's on schedule to be spent between 2020 and 2023. And just a few key items there as about $23 million is expected for ballast water treatment systems. We have some $20 million that are for terminal -- ongoing terminal investments. For tank containers we have some $10 million that's related to Houston facility and wastewater treatment there, and then we have the new farms in Spain and Portugal for Stolt Sea Farm. There is also one item there, the $36 million, that is estimated for the remaining of the year that is related to our investment in Avenir, where the 3 main owners have committed to inject a further $72 million and $36 million is our share of that.

If we can go over the debt maturity profile on the next slide, as mentioned earlier, there's been a lot of financing activity that Julian has been very busy with, first of all, we closed June quarter on the $200 million U.S. private placements, drew down on that on September 17. We also concluded a $416 million sale-leaseback with China Merchant Bank financial leasing, and we drew down $232 million on that prior to the quarter end that we'll continue to receive funds on that. I think $141 million was received now in mid-September and then we have a further $43 million that will be drawn down in mid-October.

So with this 2 new financings that gave us the liquidity to repay the $148 million bond that matured on September 4. And we still have available liquidity to pay off the $160 million bond in April 2020 and the $52 million terminal facility in Australasia, without having to go back to the bond market. And even after this, the aim is that we shall stick with $200 million in available liquidity. So all in all, a very strong debt profile and liquidity position for the company going forward.

And addressing the '21 and '22 bond maturities, we do have unencumbered assets that should in bond market not be very favorable at the time that we can also lean on those.

Looking at some of the key metrics that I've talked about earlier in a more graphic form, the Board has really a self-imposed limit on the debt to tangible net worth of 1.5 to 1 and you see that we have adhered to that more or less as we've stuck to about 1.5 to 1 and been diligent in keeping that where it is. The aim is to of course get that down. EBITDA-to-interest expense has been on a declining trend line, as I explained earlier due to the declining EBITDA. Likewise, the net debt to EBITDA will possibly now flatten out, and we should hopefully see that, that starts decreasing.

On the bottom right, you have our free cash flow and 2018, we had some $300 million in free cash flow before interest, but after capital expenditures. That's come down a little bit this year because of the -- partly the weakened market, but also because of some more capital expenditures. We expect to end up around may be $200 million at the end of the year, and that really depends on how much of the CapEx we're able to do. But it also gives us liquidity to repay after interest to repay on debt. And we would say even if we don't see a recovery in the market, we are still in the position where we will generate sufficient cash to be able to continue to reduce our debt load in 2020.

Moving over to the A&G. For the quarter, we had $51.9 million, and that's down from $52.8 million, as we saw in the second quarter. Our guidance for the third quarter was $55 million, so we ended up a little below that much due to also the continued weak dollar. And our guidance for the fourth quarter of this year is a slight increase of $52.7 million, as you see.

Moving to depreciation and amortization. For the third quarter, this was $64.3 million, slightly up from the $63.8 million that we had in the prior quarter, and that was against the guidance of $65.1 million. The high depreciation from the prior quarter was really driven by an increase in the terminals depreciation, and that was because additional capacity was brought online, this was conclusion of the expansion that we did in Santos, Brazil. So -- hence we have to start depreciating that. Our guidance for the next -- for this quarter, for fourth quarter is $64.7 million, and that's because we expect slightly higher depreciation in tankers due to the hefty drydocking program that we've had and that would be then written off until the next depreciation next -- next drydock, sorry.

Moving over to share of profit of JVs and tax. Profit -- our share of profit from JVs was $6.6 million this quarter, and that was up from $5.3 million in the previous quarter as really all JV results improved, which is encouraging. The 2 deep sea tanker JVs, they improved with higher revenues from the joint service as well as some better -- lower ship owning costs and also for our joint venture with NYK, the NYK Stolt Tankers, we also saw more operating days. At Stolthaven, the increase reflect the high utilization that we saw at our joint venture terminal in Belgium -- in Antwerp, Belgium. Our guidance for the next quarter is $7 million, as you see, and that's a bit -- reflecting a bit of optimism in the tanker markets and continued improvements in terminals and steady going in STC. Tax expense for the quarter was $3.2 million. That's down from $4.3 million, that really reflects the lower income that we saw in -- the decrease was driven by the lower income in Stolt Sea Farm.

Just briefly and this is a repeat of what we said last quarter, but first of all, IFRS 16 does not apply to us yet. That will not apply to us until the quarter starting December 1 of this year. There is no cash impact from the change over to IFRS 16. It will impact our balance sheet by some $189 million on debt side. EBITDA will -- is estimated and this will change, by the time we actually get there. But is estimated to have a positive impact on EBITDA of some $47 million. The covenants will be impacted slightly as we see at the bottom right of the slide but more importantly, with -- in all our bank facilities, we have agreement that we can continue with the old covenants measurement until we mutually -- reach a mutual agreement on the revision of those bank covenants -- on the financial covenants. So with that, I would like to hand it back to Niels.

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO & Director [4]

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The key takeaways, as Jens showed you, $3.4 million net profit for the quarter and EBITDA of $106 million. We started off and we will end by saying that we believe the tanker market has bottomed out, and that we are well positioned with our fleet for recovery, and we have prepared ourselves for an IPO. Stolthaven Terminals is stable and with a promising outlook, again, the free cash flow coming from that business based on the assets that we have should give us $100 million plus of free cash flow. Stolt Tank Containers is seeing an increased competition. A change in trade flows with the slower economic growth causing the pressure on the margin but still delivering solid results. And I am -- yes, it's a challenging market conditions now, but I think the fundamentals in that business in the long run are healthy. Stolt Sea Farm continues to be -- show underlying improvements or promise in both the turbot and the sole business. And as Jens showed, he's done a tremendous job in financing our business, which has given us a ample cash and a competitively priced debt, and we're well positioned to -- yes, for the next 2 years. Thank you guys.

And that completes our presentation. And we will then open up for questions. We will start here in Oslo for anyone that has any questions. Yes.

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Questions and Answers

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Unidentified Analyst, [1]

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I was just wondering about Stolt Groenland, and she's one of your advanced ships and there isn't that many of them around. Is that going to create any issues for you operationally that she's going to be out of service for a while?

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO & Director [2]

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No. It's going to create less supply and probably hopefully higher demand. Let's see what happens. It's -- no, we will be able to service our contracts with our fleet without the Stolt Groenland without any problems. You remember we used to have 80% COA rates of coverage, now we are at 70%. We have lost some but we're also hopefully opening up more spots space for the recovering market. So we do have enough tonnage to be able to service the contracts that we are committed for. She's one of the one that we call the [N43] they build in Norway, 43,000 deadweight, partly stainless steel but also some coated tanks because at that time the stainless steel prices were high. So she is not the most sophisticated but up there. But to answer your questions, we'll be able to handle our sailing schedule and our contract commitments without the ship, while she's out of service.

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Unidentified Analyst, [3]

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And secondly, in terms of scrubbers, you mentioned that you had the mix program. How many ships are you going to install on them and how many are left in terms of installation?

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO & Director [4]

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We have usually not stated, but we will say it's a total of 14 is it? Sorry, 20. But 14 new ones and 6 on new buildings. We have -- I'll have to come back to you how many are -- have been already installed. How many will be installed by the end of '19? And how much we -- so I will come back to you with the exact timing of the installation with scrubbers. So out of a fleet large fleet, 14, that's it. Yes.

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Petter Haugen, Kepler Cheuvreux, Research Division - Equity Research Analyst [5]

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Petter Haugen, Kepler Cheuvreux. Just a quick follow-up on the last one, the 20 vessels. What sort of relative to your total bunker consumption? How much will be scrubbed and how much will be retained in the compliant fuel?

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO & Director [6]

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Jens, will you do the math, please?

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Jens F. Grüner-Hegge, Stolt-Nielsen Limited - CFO [7]

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That's a tricky question to answer because it also depends on when the conversion will be concluded. So -- but we don't have that exact answer now.

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Petter Haugen, Kepler Cheuvreux, Research Division - Equity Research Analyst [8]

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And you -- in the presentation, Niels, you said that 0.5% wasn't available as of yet. At what point do you think you will actually start to do sea trials with...

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Jens F. Grüner-Hegge, Stolt-Nielsen Limited - CFO [9]

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We have started sea trials with -- yes, sea trials. Yes.

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO & Director [10]

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If there is no further questions in Oslo, operator, can you ask if there is anybody on the phone that would like to ask any questions? Operator?

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Operator [11]

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(Operator Instructions) No questions coming through on the line, sir.

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Niels G. Stolt-Nielsen, Stolt-Nielsen Limited - CEO & Director [12]

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If there is no further questions in Oslo, that completes our presentation. Thank you for taking the time to come.

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Operator [13]

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Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.